Question 1

Concerns about increased globalization include:

Accepted Answer

A)   concern with the loss of domestic jobs to foreign (cheaper)  labor.
B)   environmental concerns.
C)   concern about exploitation of underdeveloped nations.
D)   All of the items listed are concerns about globalization.

Question 2

If a tariff on steel is imposed:

Accepted Answer

A)   the price of steel will fall.
B)   domestic steel workers will suffer employment losses.
C)   domestic steel production will fall.
D)   employment opportunities in the construction industry will fall.

Question 3

A group opposed to free trade concludes that if free trade is adopted, the total number of domestic jobs will decrease because the group estimates that 20,000 jobs will migrate abroad. The actual total loss is:

Accepted Answer

A)   greater than 20,000 because of the tariff effect.
B)   equal to 20,000 because of the import effect.
C)   greater than 20,000 because of the multiplier effect.
D)   less than 20,000 because the estimate ignores the jobs created in the industries that benefit from increased exports.

Question 4

Trade restrictions occur because the benefits of protection to the affected industry and its employees are _____, and costs to consumers are _____.

Accepted Answer

A)   small and diffused; small and diffused
B)   visible and concentrated; diffused and individually small
C)   small and diffused; visible and concentrated
D)   large and diffused; diffused and individually large

Question 5

A foreign firm sells its product in the United States for $50 per unit. Its cost per unit is $60. Based on this information, we can assume that:

Accepted Answer

A)   the foreign firm is dumping.
B)   the foregin firm may possibly be dumping.
C)   the cost-price difference is enough evidence to prove predatory pricing.
D)   the best policy in similar cases is always to impose a tariff.

Question 6

Econia implements strict laws that require companies to use production methods that do not harm the environment, forcing the companies to change to more expensive production techniques to comply with the law. The companies then ask the government to impose trade restrictions against imports produced in countries that do not have similar environmental protection laws. Which of these is NOT a rationale for such trade restrictions?

Accepted Answer

A)   The trade restrictions will raise the cost of imported goods for Econia's consumers, eliminating the bias toward foreign production that the law created.
B)   The trade restrictions will eliminate the bias against Econia's products abroad that had been created by the law by effectively raising the price of foreign-produced goods in world markets.
C)   The trade restrictions may save Econian jobs in the industries whose production methods were impacted by the environmental protection law.
D)   The trade restriction will help Econian producers feel that the environmental protection law does not put them at a disadvantage against foreign producers in Econia's product markets.

Question 7

Which argument is one typically used in the United States to justify restrictions on free trade?

Accepted Answer

A)   Without proper protection from international competition, an established industry in the United States will not be able to develop into a mature, internationally viable firm.
B)   By charging higher prices in U.S. markets, foreign firms can engage in predatory pricing in their own markets to drive U.S. competitors out of business.
C)   Foreign companies in countries with cheap labor can pay their workers pennies an hour and flood the U.S. market with low-cost products.
D)   Some key industries require protection during peacetime to ensure that they are well established, in order to prevent a national crisis from occurring in the United States.

Question 8

One reason economists are generally in favor of free trade is that there are no losers from it.

Accepted Answer

A) True 
 B)False

Question 9

Both Germany and India produce gadgets. Germany sells gadgets for $200 each and India sells them for $100 each. If there was free trade between the two countries, then:

Accepted Answer

A)   Germany would sell some of its gadgets in India, which would lower supply in Germany and Germans would end up paying a price above $200.
B)   India would sell some of its gadgets in Germany, which would lower supply in India and Indians would end up paying a price above $100.
C)   Both Germany and India should abstain from trade, since it would be detrimental to both countries.
D)   India would sell all of its gadgets in Germany, pushing down the supply in India to zero.

Question 10

A tariff placed on imported foreign vehicles will have what effect?

Accepted Answer

A)   It will cause foreign car producers to produce more.
B)   It will entice domestic consumers to buy more foreign vehicles due to lower costs.
C)   It will cause foreign producers to generate higher revenues on the imported vehicles.
D)   It will entice domestic consumers to buy more domestic vehicles due to the higher price of foreign vehicles.

Question 11

As tariffs have been lowered throughout the world, trade has _____, leading to _____ standards of living around the world.

Accepted Answer

A)   expanded; lower
B)   expanded; higher
C)   fallen; lower
D)   fallen; higher

Question 12

With no trade, the equilibrium price of grapes is $2 per pound in Macroland and $4 per pound in Econoland. Government leaders in Macroland are negotiating a free trade agreement with Econoland to increase trade between the two countries. Who among consumers and producers is likely to support and who is likely to oppose the free trade agreement?

Accepted Answer

A)   All consumers and grape producers in both countries are likely supporters because free trade typically provides a net gain in welfare for a country.
B)   All consumers in both countries would likely be supporters and all grape producers in both countries would be likely to oppose the agreement because of the direction of price changes that would result.
C)   Grape producers in Econoland and consumers in Macroland would likely be supporters, while grape producers in Macroland and consumers in Econoland would be likely to oppose the agreement because of the direction of price changes that would result.
D)   Consumers in Econoland and grape producers in Macroland would be likely supporters, while consumers in Macroland and grape producers in Econoland would be likely to oppose the agreement due to the direction of price changes that would result.

Question 13

The key reason for trade restrictions is that the affected industry/firm/employees feel the costs without restrictions much more than consumers feel the benefits of lower prices when the restrictions are lifted.

Accepted Answer

A) True 
 B)False

Question 14

Tariffs and quotas lead to _____ prices of imported goods and _____ levels of imports.

Accepted Answer

A)   increased; increased
B)   decreased; decreased
C)   decreased; increased
D)   increased; decreased

Question 15

Suppose an Italian shoe manufacturer wants to sell a pair of shoes to a U.S. customer, but the U.S. government adds a 10% tax to the price of that pair of shoes at the U.S. border. This is an example of:

Accepted Answer

A)   a quota.
B)   a unit tax tariff.
C)   dumping.
D)   an ad valorem tariff.

Question 16

When there is no trade between Econostan and Macroland, the price of orange juice is $1 per cup in Econostan and $0.50 in Macroland, while the price of shoes is $40 per pair in Econostan and $45 per pair in Macroland at current exchange rates. Assuming there is no change in exchange rates, which result could be expected regarding terms of trade if trade opened up between the two countries?

Accepted Answer

A)   The price of juice will fall and the price of shoes will rise in Econostan.
B)   The price of both juice and shoes will fall in Econostan.
C)   The price of juice will rise and the price of shoes will rise in Macroland.
D)   The price of shoes will fall and the price of juice will rise in Econostan.

Question 17

(Table)  Referring to the table, we see that England will be able to consume _____ units of wine after trade.

Accepted Answer

A)   15
B)   20
C)   40
D)   60

Question 18

Which statement is correct?

Accepted Answer

A)   International trade lowers global production.
B)   Tariffs encourage international trade.
C)   It is always in the producers' interest to open borders to trade.
D)   There are both winners and losers from international trade.

Question 19

Which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

Accepted Answer

A)   Wages offered by foreign companies are generally higher than wages offered by local companies.
B)   Foreign companies generally pay lower wages in developing countries than they do back home.
C)   Working conditions, although often less pleasant than in developed nations, are generally improved with foreign investment.
D)   Foreign companies tend to reduce the overall number of jobs available in developing countries.

Question 20

Protection of industries that may be displaced because of cheap foreign labor is an argument that has not proved valid.

Accepted Answer

A) True 
 B)False

Exam 15: International Trade

The key reason for trade restrictions is that the affected industry/firm/employees feel the costs without restrictions much more than consumers feel the benefits of lower prices when the restrictions are lifted.

Correct Answer
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Concerns about increased globalization include:

Correct Answer
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Correct Answer
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Correct Answer
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One reason economists are generally in favor of free trade is that there are no losers from it.

Correct Answer
verified

Suppose an Italian shoe manufacturer wants to sell a pair of shoes to a U.S. customer, but the U.S. government adds a 10% tax to the price of that pair of shoes at the U.S. border. This is an example of:

Correct Answer
verified

A tariff placed on imported foreign vehicles will have what effect?

Correct Answer
verified

Both Germany and India produce gadgets. Germany sells gadgets for $200 each and India sells them for $100 each. If there was free trade between the two countries, then:

Correct Answer
verified

Tariffs and quotas lead to _ prices of imported goods and _ levels of imports.

Correct Answer
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A group opposed to free trade concludes that if free trade is adopted, the total number of domestic jobs will decrease because the group estimates that 20,000 jobs will migrate abroad. The actual total loss is:

Correct Answer
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(Table) Referring to the table, we see that England will be able to consume _____ units of wine after trade.

Correct Answer
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As tariffs have been lowered throughout the world, trade has _, leading to _ standards of living around the world.

Correct Answer
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Trade restrictions occur because the benefits of protection to the affected industry and its employees are _, and costs to consumers are _.

Correct Answer
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Which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

Correct Answer
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If a tariff on steel is imposed:

Correct Answer
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A foreign firm sells its product in the United States for $50 per unit. Its cost per unit is $60. Based on this information, we can assume that:

Correct Answer
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Correct Answer
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Which statement is correct?

Correct Answer
verified

Protection of industries that may be displaced because of cheap foreign labor is an argument that has not proved valid.

Correct Answer
verified

Which argument is one typically used in the United States to justify restrictions on free trade?

Correct Answer
verified

Exam 15: International Trade

The key reason for trade restrictions is that the affected industry/firm/employees feel the costs without restrictions much more than consumers feel the benefits of lower prices when the restrictions are lifted.

Correct AnswerverifiedShow Answer

Concerns about increased globalization include:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One reason economists are generally in favor of free trade is that there are no losers from it.

Correct AnswerverifiedShow Answer

Suppose an Italian shoe manufacturer wants to sell a pair of shoes to a U.S. customer, but the U.S. government adds a 10% tax to the price of that pair of shoes at the U.S. border. This is an example of:

Correct AnswerverifiedShow Answer

A tariff placed on imported foreign vehicles will have what effect?

Correct AnswerverifiedShow Answer

Both Germany and India produce gadgets. Germany sells gadgets for $200 each and India sells them for $100 each. If there was free trade between the two countries, then:

Correct AnswerverifiedShow Answer

Tariffs and quotas lead to _____ prices of imported goods and _____ levels of imports.

Correct AnswerverifiedShow Answer

A group opposed to free trade concludes that if free trade is adopted, the total number of domestic jobs will decrease because the group estimates that 20,000 jobs will migrate abroad. The actual total loss is:

Correct AnswerverifiedShow Answer

(Table) Referring to the table, we see that England will be able to consume _____ units of wine after trade.

Correct AnswerverifiedShow Answer

As tariffs have been lowered throughout the world, trade has _____, leading to _____ standards of living around the world.

Correct AnswerverifiedShow Answer

Trade restrictions occur because the benefits of protection to the affected industry and its employees are _____, and costs to consumers are _____.

Correct AnswerverifiedShow Answer

Which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

Correct AnswerverifiedShow Answer

If a tariff on steel is imposed:

Correct AnswerverifiedShow Answer

A foreign firm sells its product in the United States for $50 per unit. Its cost per unit is $60. Based on this information, we can assume that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which statement is correct?

Correct AnswerverifiedShow Answer

Protection of industries that may be displaced because of cheap foreign labor is an argument that has not proved valid.

Correct AnswerverifiedShow Answer

Which argument is one typically used in the United States to justify restrictions on free trade?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Tariffs and quotas lead to _ prices of imported goods and _ levels of imports.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

As tariffs have been lowered throughout the world, trade has _, leading to _ standards of living around the world.

Correct Answer
verified

Trade restrictions occur because the benefits of protection to the affected industry and its employees are _, and costs to consumers are _.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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