ECON 201
Updated: Aug 15, 2022
Refer to the diagram, where Sd and Dd are the domesticsupply and demand for a product and Pc is the world price of that product. Sd +Q is the product supply curve after an import quota is imposed.A tariff of PcPt will
A. lower domestic price and increase domestic consumption.
B. increasethe revenues of domestic producers by areas E + F + K.
increase the revenues of domestic producers by areas G + H.
increase the revenues of domestic producers by areas E + F + G + H + J.
AACSB: Analytical Thinking
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriersand Export Subsidies
Type: Graph
111.
Refer to the diagram, where Sd and Dd are the domesticsupply and demand for a productand Pc is the world price of that product. Sd + Q is the productsupply curve after an import quota is imposed. A quota of wy will
A. lower domestic price and increase domestic consumption.
B. increasethe revenues of domestic producers by areas E + F + K.
increase the revenues of domestic producers by areas G + H.
increase the revenues of domestic producers by areas E + F + G + H + J.
AACSB: Analytical Thinking
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriers and Export Subsidies
Type: Graph
Which of the followingstatements is false?
A. Studies show that developing nations that have relied on import restrictions toprotect domestic industries have had higher growth rates than similar nations pursuing more open economic policies.
The U.S. Constitution forbids individual states from levying tariffs.
The high tariffs of the Smoot-Hawley Act of 1930 and the retaliation they caused worsened the Great Depression.
The European Union has enhanced prosperity in WesternEurope.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyzethe economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriers and Export Subsidies
Graphical analysis of tariffs reveals that
they benefit domestic consumers at the expense of domestic producers.
revenue gains outweigh the costs to domestic consumers.
C. they increasedomestic production of the good for which imports face tariffs.
D. although the benefits are not shared equally,everyone in the domestic economy benefits from tariffs.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyzethe economic effects of tariffs and quotas.
Test Bank: I Topic:Trade Barriers and Export Subsidies
Studies show that
it is impossible to estimate the benefits of trade barriers.
costs and benefits of trade barriersare about equal.
benefits of trade barriers exceed their costs in developing nations.
D. costs of trade barriersexceed their benefits,creating an efficiencyloss for society.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriersand Export Subsidies
Research studies indicate that
U.S. producers gain more from tariffs than U.S. consumers lose.
the costs of trade restrictions are proportionately higher for high-income groups than for low-income groups.
the revenue from tariffs equals the total cost that tariffs impose on consumers.
D. U.S. consumerslose more from tariffs than U.S. producersgain.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriersand Export Subsidies
A high tariff on importedgood X might reduce domestic employmentin industry Y if
A. X is an input used domestically in producing Y.
X and Y are substitute goods.
X is an inferior good.
Y is an inferiorgood.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriers and Export Subsidies
The increased-domestic-employment argument for tariff protection holds that
domestic inflation is a desirablepolicy goal because it stimulates exports.
domestic deflation is a desirablepolicy goal because it stimulatesimports.
an increase in tariffs will reduce net exports andstimulate domestic employment.
D. an increase in tariffs will increase net exports and stimulatedomestic employment.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validity of the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A Critical Review
Which of the following arguments for trade protection contends that new domestic industries need support to establish themselvesand survive?
the increased domestic employment argument
the cheap foreign labor argument
the diversification-for-stability argument
D. the infant industry argument
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validity of the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A Critical Review
Which of the followingarguments for trade protection is based on the premise that a nation should have a wide enough range of domesticindustries to be self-sufficient if necessary?
the increased domestic employment argument
the cheap foreign labor argument
C. the diversification-for-stability argument
D. the infant industry argument
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validity of the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A Critical Review
Which of the following arguments contends that certainindustries need to be protectedinthe interest of national security?
the increased domestic employment argument
the cheap foreign labor argument
the diversification-for-stability argument
D. the militaryself-sufficiency argument
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validityof the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A CriticalReview
A major difficultywith the argumentthat trade barriers are necessary because foreign workersare paid low wages is that
labor costs andproduct prices are not related.
there is no discernible relationship between wage rates and labor productivity.
C. wage rates and labor productivity are directly related.
D. wage rates and labor productivity are inversely related.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validityof the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A CriticalReview
As it relates to international trade, dumping
A. is a form of price discrimination illegal under U.S. antitrustlaws.
B. is the practice of sellinggoods in a foreignmarket at less than cost.
constitutes a general case for permanent tariffs.
is defined as selling more goods than allowed by an import quota.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validityof the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A Critical Review
Dumping of goods abroad
A. constitutes a general case for permanent tariffs.
B. may be part of a firm's price discrimination strategy.
may be part of a nation's strategy torectify its trade deficit.
drives up prices of the dumped goods.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validity of the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A Critical Review
The World Trade Organization
is also known as the International Monetary Fund (IMF).
is also known as NAFTA.
C. was established to resolve disputesarising under world trade rules.
D. enhances world trade by providinginterest rate subsidies to foreign borrowers who buy exports on credit.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
The number of countries belonging to the World Trade Organization (WTO), as of 2015, is about
A. 161.
B. 125.
C. 80.
D. 202.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
The organization created to oversee the provisions of multilateral trade agreements, resolve disputesunder the international trade rules, and meet periodically to consider further trade liberalization is called the
A. International Monetary Fund (IMF).
B. World Trade Organization (WTO).
Common Market Organization (CMO).
International Trade Commission (ITC).
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
The World Trade Organization was established as a successorto
A. GATT.
NAFTA.
the EU.
the Doha Development Agenda.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Which of the followingwas not one of the principleson which the General Agreement on Tariffs and Trade (GATT) was established?
the elimination of import quotas
equal, nondiscriminatory trade treatment for all member nations
C. the formationof international trade contractsto alleviate global poverty
D. the reduction of tariffs by multilateral negotiations
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
The "eurozone"
is another name for the European Union.
refers tothecommon currency used by all European Union members.
is a geographicregion in Europe with no national sovereignty,where free trade between European nations is allowed tooccur.
D. is the subset of the EU that uses a common currency.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
As of 2015, how many European nations belonged to the EuropeanUnion (EU)?
All of the nations of Europe automatically belong to the EU.
17
C. 28
D. 10
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Which of the followingstatements about the EuropeanUnion (EU) is true?
A. All members of the EU use a common currency(the euro).
B. The EU has abolishedmost trade barriers among participating countries and has common tariffs appliedto non-EU goods.
The EU has eliminated most barriers to the trade of goods and services among participating nations but largely restricts the movement of labor and capital.
Trade within the EU is liberalized, but EU nations set most of their own policies with regard to trade with non-EUnations.
AAC
SB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
"NAFTA" stands for
A. North African Free Trade Area.
B. North AmericanFree Trade Agreement.
North Asian Free Trade Agreement.
New Zealand-Australia Free Trade Agreement.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
NAFTA has increased the standardof living in the North African member nations.
benefits workers in the participating nations but hurts consumers by raisingprices.
allows completely unrestricted movement of goods, services, and resources betweenthe member nations.
D. has reduced most trade barriersbetween Canada,Mexico, and the United States.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Critics of the World Trade Organization (WTO) say that liberalized worldtrade does all of the followingexcept
produce environmental degradation.
allow producers to circumvent labor protections such as workplacesafety, child labor restrictions,andcollective bargainingrights.
C. helpdeveloping nations escape from poverty.
D. promote the interests of multinational corporations.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Which of the U.S. industries below has not seen major shutdownsand layoffs because of free foreign trade?
A. textiles
B. financialservices
steel
apparel
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Trade adjustment assistance
provides financial assistance to all unemployed workers in the United States.
guarantees jobs for all workers displaced by imports or plant relocations abroad.
provides assistance to about 20 percent of unemployed U.S. workers each year.
D. provides cash assistance for workers displaced byimports or plant relocations abroad.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Economists who criticize trade adjustment assistance argue that
A. it only benefits a small fractionof all unemployed workers.
money spent on the program overstimulates aggregate demand and threatens to causeinflation.
benefits are too low to provide unemployed workers with a livable wage.
it distorts patterns of foreigntrade, reducing the gains from trade.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discuss offshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
"Offshoring" refers to
importing goods, services, and resources.
stashing money in offshoreaccounts for the purpose of avoiding taxes.
C. shiftingwork overseas that was previouslydone domestically.
D. exporting key resources.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
Which of the followingbest describes economists' general assessment of the impacts of offshoring?
A. Offshoring has an overall negative impact on the U.S. economy because of the significant domestic job losses it causes.
B. Offshoring benefits the U.S.economy by promoting greater specialization and exchange of goods and servicesbased on comparative advantage.
Offshoring provides some cost advantages but generallyresults in much-lower-quality goods for consumers.
Job losses from offshoring are magnifiedby job losses in complementary industries.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-06 Identifyand explain the objectives of GATT, WTO, EU, eurozone,and NAFTA, and discussoffshoring and trade adjustment assistance.
Test Bank: I Topic: Multilateral Trade Agreements and Free-Trade Zones
(Consider This) The greatest benefit to an economy from international trade is
greater employment in the export sector of the economy.
the economic power it gives a nation over other countries.
full employment of its labor force.
D. consumption beyond domestic production possibilities.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: The EconomicBasis for Trade
(Consider This) Madison, the CPA, is faster than Mason, the house painter, at both accounting servicesand painting. This means that
A. there is no reasonfor them to trade services.
B. Madisonshould trade her accounting servicesfor Mason's painting services, so long as Madison is relatively more efficient at accounting services.
Madison should trade her accounting services for Mason's paintingservices, so long as Madison is relativelymore efficient at painting.
Madison has the comparative advantage in both services.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The Economic Basisfor Trade
(Consider This) According to Dallas Federal Reserve economistW. Michael Cox, taken toitsextreme, the logic of "buying American" impliesthat
A. we should buy everything from abroad.
B. people should only consume what they can produce themselves.
consumers should only buy goods from other states.
the best quality goods are found in the United States.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The EconomicBasis for Trade
(Last Word) Frederic Bastiat'ssatirical argumentagainst protectionism called for protecting domestic producers from
A. fire.
B. the sun.
other European countries.
invention of the electric light.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validity of the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A Critical Review
(Last Word) Frederic Bastiat's"Petition of the Candlemakers" most directly refutes which of the following arguments for protectionism?
A. increaseddomestic employment argument
infant industry argument
cheap foreign labor argument
diversification-for-stability argument
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-05 Analyze the validityof the most frequently presented arguments for protectionism.
Test Bank: I Topic: The Case for Protection: A CriticalReview
True / False Questions
The percentage of the United States' domestic output that is derived from international trade is higher than that for any other industrially advancednation.
FALSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-01 List and discuss several key facts about international trade. Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: Some Key Trade Facts
Topic: The Economic Basis for Trade
In 2015, the United States had its first-ever trade surplus with OPEC.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-01 List and discuss several key facts about international trade.
Test Bank: I Topic: Some Key Trade Facts
It is impossible for a nation to have a comparative advantage in producingeverything.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The Economic Basisfor Trade
The nation that has a comparative advantage in a particular product will be the only world exporterof that product.
FALSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The EconomicBasis for Trade
International trade based on the principle of comparative advantage creates a more efficientallocation of world economic resources.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: The EconomicBasis for Trade
The law of increasing opportunity costs limits international specialization.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The Economic Basisfor Trade
Assume that by devotingall its resourcesto the production of X, nation Alpha can produce40 units of X.Bydevoting all its resourcesto Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and40Y.Therefore, Alpha should specialize in Y and Beta in X.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: The EconomicBasis for Trade
Assume that by devotingall its resourcesto the production of X, nation Alpha can produce40 units of X.Bydevoting all its resourcesto Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. The terms of trade will be at or within the 1X = 1½Y to 1X = ⅔Y range.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: The EconomicBasis for Trade
Assume that by devoting all its resourcesto the production of X, nation Alpha can produce 40 units of X. By devoting all its resourcesto Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Alpha wouldprefer terms of trade at, or close to, 1X = 1½Y.
FALSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The Economic Basisfor Trade
Assume that by devotingall its resourcesto the production of X, nation Alpha can produce 40 units of X. By devoting all its resourcesto Y, Alpha can produce60 Y. Comparable figures for nation Beta are 60 X and 40 Y. Beta wouldprefer terms of trade at, or close to, 1X = 1½Y.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Test Bank: I Topic: The EconomicBasis for Trade
Assume that by devoting all its resourcesto the production of X, nation Alpha can produce 40 units of X. By devoting all its resourcesto Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. If Alpha had produced20X and 30Y and Beta had produced30X and 20Y before specialization and trade, then we can say that the gains from specialization and trade are 10X and 10Y.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output.
Learning Objective: 20-04 Analyzethe economic effects of tariffs and quotas.
Test Bank: I Topic: The Economic Basisfor Trade Topic: Trade Barriersand Export Subsidies
Assume that by devoting all its resourcesto the production of X, nation Alpha can produce 20 units of X. By devoting all its resourcesto Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. There is no basis for trade betweenAlpha and Beta, because Beta has an absoluteadvantage in the production of both goods.
FALSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: The EconomicBasis for Trade
Assume that by devotingall its resourcesto the production of X, nation Alpha can produce20 units of X.Bydevoting all its resourcesto Y, Alpha can produce 30Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at,orclose to, 1X = 2/3Y.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 20-02 Define comparative advantage,and demonstrate how specialization and trade add to a nationsoutput.
Test Bank: I Topic: The EconomicBasis for Trade
A nation's exportsupply curve is downsloping, and its import demandcurve is upsloping.
FALSE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output. Learning Objective: 20-03 Describe how differences between world prices and domesticprices prompt exports and imports.
Test Bank: I Topic: Supply and Demand Analysis of Exports and Imports
Topic: The Economic Basis for Trade
The equilibrium world price of a product equates the quantitiesof exports suppliedand imports demanded.
TRUE
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 20-02 Define comparative advantage, and demonstrate how specialization and trade add to a nations output. Learning Objective: 20-03 Describe how differences between world prices and domesticprices prompt exports and imports.
Test Bank: I Topic: Supply and Demand Analysis of Exports and Imports
Topic: The EconomicBasis for Trade
Economists prefer free trade to tariffs and prefer tariffs to import quotas.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriersand Export Subsidies
Tariffs create larger gains to domestic producersthan losses to domestic consumers.
FALSE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 20-04 Analyze the economic effects of tariffs and quotas.
Test Bank: I Topic: Trade Barriers and Export Subsidies
A side benefit ofinternational trade is that it links nationalinterests and increasesthe opportunity costs of war.
TRUE
AACSB: Analytical Thinking Accessibility: Keyboard Navigation