Ch16 International Trade Verified Test Bank - Essentials of Economics 11e Schiller Test Bank by Bradley R. Schiller, Karen Gebhardt. DOCX document preview.
Chapter 16 Test Bank KEY
1. Goods and services purchased by Americans from foreign sources
A. are classified as imports.
B. decrease the trade deficit, ceteris paribus.
C. increase the size of GDP.
D. represent 35 percent of GDP.
2. Goods and services purchased from foreign sources are known as
A. exports.
B. imports.
C. net exports.
D. the trade deficit.
3. Which of the following does the United States import?
A. video-game machines, cell phones, and steel
B. cell phones, but not steel
C. steel, but not video-game machines
D. video-game machines, but not cell phones
4. Imports account for approximately ___ percent of U.S. GDP.
A. 5
B. 10
C. 15
D. 25
5. Exports
A. are goods and services sold to foreign buyers.
B. account for 35 percent of U.S. GDP.
C. are greater than imports for the United States.
D. decrease the size of GDP.
6. Goods and services sold to foreign sources are known as
A. exports.
B. imports.
C. tariffs.
D. quotas.
7. Which of the following does the United States export?
A. computers, but not wheat
B. wheat and corn, but not automobiles
C. computers, corn, wheat, lumber, and automobiles
D. automobiles, but not lumber
8. Which of the following does the United States export?
A. soybeans, tobacco, aircraft, and chemicals
B. tobacco but not aircraft
C. soybeans, but not chemicals or tobacco
D. aircraft and chemicals, but not soybeans
9. Exports account for approximately ___ percent of U.S. GDP.
A. 5
B. 15
C. 20
D. 25
10. When comparing the ratio of imports or exports to GDP, the United States, relative to other countries, has
A. higher ratios for both imports and exports.
B. a higher ratio for imports but a lower ratio for exports.
C. a lower ratio for imports but a higher ratio for exports.
D. lower ratios for both imports and exports.
11. Which of the following statements is correct?
A. Export sales are not important to U.S. industries because U.S. GDP is so large.
B. Many U.S. industries are very dependent on export sales.
C. The United States is increasingly dependent on exports, but not on imports.
D. The United States would not be affected if it quit importing goods.
12. Which of the following countries has the highest export ratio?
A. United States
B. Japan
C. Belgium
D. Great Britain
13. Which of the following countries has the lowest export ratio?
A. Canada
B. Kuwait
C. Sweden
D. United States
14. Which of the following countries has the lowest export ratio?
A. Myanmar
B. Belgium
C. Germany
D. United States
15. The trade balance is found by calculating
A. the sum of exports and imports.
B. the difference between exports and imports.
C. how much exports and imports are used.
D. the ratio of exports to imports.
16. If the United States has a trade deficit
A. exports exceed imports.
B. the U.S. economy produces more than it consumes.
C. the trade balance is negative.
D. the export ratio is high.
17. If a country has a trade deficit, it
A. imports more than it exports.
B. does not export any goods.
C. is more dependent on trade than other countries.
D. sells more goods to foreigners than it buys from them.
18. The amount by which the value of imports exceeds the value of exports in a given time period is a
A. trade surplus.
B. trade deficit.
C. consumption possibility.
D. trade embargo.
19. Over a given period of time, if exports exceed imports, the result is
A. a trade war.
B. a trade deficit.
C. an embargo.
D. a trade surplus.
20. The amount by which exports exceed imports is a
A. quota.
B. trade deficit.
C. trade surplus.
D. comparative advantage.
21. A trade surplus occurs when
A. the dollar value of exports exceeds the dollar value of imports.
B. the gains from trade are not fully realized.
C. a country does not have a comparative advantage in any goods.
D. the cost of goods is so high that imports exceed exports.
22. Which of the following statements about trade is ?
A. On a global scale, exports are greater than imports.
B. The United States has a trade deficit with all of the countries it trades with.
C. The United States typically has a modest trade surplus in services.
D. The United States has a high export ratio.
23. Which of the following is NOT currently?
A. The United States has an overall trade surplus.
B. The United States has a low export ratio.
C. The United States has a merchandise trade deficit.
D. The United States has a services trade surplus.
24. Which of the following is ?
A. Large countries achieve a higher standard of living if they do not trade.
B. With trade, world consumption possibilities decrease.
C. Typically, countries with a large GDP experience a trade surplus.
D. On a global scale, total imports must equal total exports.
25. If there are only two countries in the world and one has a trade deficit, the other country must
A. also have a trade deficit.
B. have a trade surplus.
C. have a comparative advantage in all goods.
D. have trade restrictions in place.
26. Which of the following is about trade?
A. It increases production possibilities for a country.
B. It reduces the standard of living for a country.
C. It increases the standard of living for a country.
D. It raises the price level for a country.
27. Specialization and trade
A. reduce consumption possibilities.
B. increase the prices of goods.
C. make workers lazy.
D. increase the standard of living.
28. Which of the following is a gain from trade?
A. a higher standard of living for all trading countries
B. a shorter workweek for all trading countries
C. a higher price level for all trading countries
D. a decrease in consumption possibilities for all trading countries
29. Which of the following explains why world output is greater as a result of trade?
A. specialization in production
B. reduced terms of trade
C. imported technologies
D. protection of infant industries
30. World output of goods and services increases with specialization because
A. the world's resources are used more efficiently.
B. the production possibilities curve shifts outward for each country.
C. the workers in each country work fewer hours per week.
D. the infant industries in each country are protected.
31. The alternative combinations of goods and services that can be produced in a given time period with the available resources and technology is the
A. production possibilities.
B. consumption possibilities.
C. international trade balance.
D. comparative advantage.
32. Consumption possibilities refers to the
A. maximum amount of imported goods and services that a country can consume.
B. amount that a country can expand its production possibilities by because of trade.
C. alternative combinations of goods and services that a country can consume.
D. maximum amount that a country can produce if it engages in trade.
33. In the absence of trade, a country's consumption possibilities are
A. more than its domestic production possibilities.
B. equal to its domestic production possibilities.
C. less than its domestic production possibilities.
D. unlimited, since the terms of trade are not a constraint.
34. International trade
A. raises the prices that consumers pay.
B. reduces competition.
C. makes a country weak.
D. increases consumption possibilities.
35. If a country specializes in production and trades, its _____ possibilities exceed it _____ possibilities.
A. consumption; production
B. production; consumption
C. production; standard of living
D. consumption; monetary
36. Assume a country is initially operating on its production possibilities curve. If it specializes in the production of a good and trades, the country will
A. move to a level of production outside its production possibilities curve.
B. shift its production possibilities curve outward.
C. move to a level of consumption outside its production possibilities curve.
D. shift its production possibilities curve inward.
37. International trade
A. benefits rich countries but not poor countries.
B. allows all countries to consume beyond their production possibilities.
C. forces poor countries to consume exactly what they produce.
D. requires poor countries to import more than they export.
38. Specialization and trade benefits
A. both rich countries and poor countries.
B. rich countries but not poor countries.
C. poor countries but not rich countries.
D. large countries but not small countries.
39. The most desired goods and services that are given up in order to obtain something else is the
A. comparative advantage.
B. absolute advantage.
C. opportunity cost.
D. advantage cost.
40. Comparative advantage refers to the
A. total amount of resources needed to produce a good.
B. gains from trade that some countries are able to experience.
C. comparison of production processes in two different countries.
D. relative opportunity costs of producing a particular good.
41. Comparative advantage refers to a country's
A. ability to produce a specific good with fewer resources than another country.
B. monopoly power in the world market for a specific good.
C. ability to sell a specific good for a higher price than another country.
D. ability to produce a specific good at a lower opportunity cost than another country.
42. If a country has a lower opportunity cost in producing a good than its trading partners, then it has
A. a comparative advantage in producing the good.
B. favorable terms of trade in producing the good.
C. an absolute advantage in producing the good.
D. lower labor costs in producing the good.
43. When a country pursues its comparative advantage
A. world output is minimized.
B. potential gains from trade are minimized.
C. potential gains from trade are maximized.
D. imports and exports are equal.
44. If a country pursues its comparative advantage
A. prices will rise throughout the world.
B. total world population will increase.
C. market power will rise throughout the world.
D. total world output will increase.
45. If a country can produce cars with a lower opportunity cost than its trading partners, then it must have a
A. low market price for cars.
B. comparative advantage in cars.
C. a trade deficit.
D. a trade surplus.
46. If a country can produce rice with a lower opportunity cost than its trading partners, then it must have
A. an absolute advantage in the production of all other goods except rice.
B. a comparative advantage in the production of all other goods except rice.
C. an absolute advantage in the production of rice.
D. a comparative advantage in the production of rice.
47. If a country has a comparative advantage in the production of paper
A. its opportunity cost of producing paper is lower than its trading partners.
B. it can produce paper with fewer resources than its trading partners.
C. its opportunity cost of producing paper is greater than its trading partners.
D. the relative price of paper is higher in that country than its trading partners.
48. If the United States has a comparative advantage in the production of computer software, then
A. it can produce computer software with fewer absolute resources than another country.
B. it can produce computer software with a lower opportunity cost than another country.
C. it is relatively expensive for the United States to produce computer software.
D. the United States will import computer software.
49. Suppose the United States has a lower opportunity cost in producing corn than Japan, and Japan has a lower opportunity cost in producing motorcycles than the United States, then the United States has
A. an absolute advantage in producing both corn and motorcycles.
B. a comparative advantage in producing both corn and motorcycles.
C. a comparative advantage in producing corn, while Japan has a comparative advantage in producing motorcycles.
D. a comparative advantage in producing motorcycles, while Japan has a comparative advantage in producing corn.
50. Suppose Chile has a lower opportunity cost in producing salmon than South Korea, and South Korea has a lower opportunity cost in producing cars than Chile, then Chile has
A. an absolute advantage in producing both salmon and cars.
B. a comparative advantage in producing both salmon and cars.
C. a comparative advantage in producing cars, while South Korea has a comparative advantage in producing salmon.
D. a comparative advantage in producing salmon, while South Korea has a comparative advantage in producing cars.
51. Suppose Brazil has a comparative advantage in coffee production and Mexico has a comparative advantage in tomato production. If these two countries specialize and trade, which of the following is ?
A. Brazilian tomato producers are worse off.
B. Coffee makers in both countries will be worse off.
C. Mexican tomato producers are worse off.
D. Mexican coffee producers are better off.
52. Suppose Nigeria has a comparative advantage in oil production and the U.S. has a comparative advantage in soybean production. If these two countries specialize and trade, which of the following is ?
A. Nigerian oil producers are worse off.
B. Nigerian soybean producers are worse off.
C. U.S. soybean producers are worse off.
D. U.S. oil producers are better off.
53. If a country has the ability to produce a specific good with fewer resources than other countries, then it has
A. a comparative advantage.
B. a trade surplus.
C. favorable terms of trade.
D. an absolute advantage.
54. If a country has an absolute advantage, it has
A. the ability to produce a specific good at a lower opportunity cost than its trading partners.
B. total market domination in the production and sales of a specific good.
C. the ability to produce a specific good with fewer resources than its trading partners.
D. the ability to guarantee itself very favorable terms of trade at the expense of its trading partners.
55. When Country A can produce a good using fewer absolute inputs than any other country, then Country A
A. has an absolute advantage in producing the good.
B. has a comparative advantage in producing the good.
C. should specialize in producing the good.
D. should import the good.
56. Terms of trade refer to
A. negotiations made by the Minister of Trade.
B. the rate at which goods are exchanged for one another.
C. the ratio of imports to exports.
D. protectionist policies.
57. Terms of trade refers to
A. credit arrangements for financing exports and imports.
B. the degree to which one country has a comparative advantage.
C. the balance of payments.
D. the rate at which goods are exchanged in international trade.
58. The terms of trade between two countries depend on
A. which country has an absolute advantage in the good.
B. negotiations by the Federal Reserve.
C. each country's domestic opportunity costs.
D. which country pays the transportation costs.
59. The terms of trade for a specific good will lie between the respective
A. opportunity costs for each country.
B. trade barriers for each country.
C. import quotas for each country.
D. absolute costs for each country.
60. Which of the following is used to determine the terms of trade?
A. absolute costs
B. opportunity costs
C. export ratio
D. per capita GDP
61. The terms of trade between two countries should always
A. be set to favor the country with the least comparative advantage.
B. be set to favor the larger country.
C. be between their respective opportunity costs in production.
D. allow each country to develop its area of absolute advantage.
62. A country will only trade if
A. it has an absolute advantage.
B. the terms of trade are superior to domestic opportunities.
C. its balance of trade is in a surplus position.
D. its export ratio is low.
63. If the terms of trade are superior to domestic opportunities, then a country is likely to
A. participate in trade.
B. impose a tariff.
C. impose a quota.
D. request U.N. sanctions.
64. When the terms of trade are between the opportunity costs for two countries, then both countries benefit if they
A. consume inside their production possibilities curves.
B. specialize in production but do not trade.
C. impose trade barriers.
D. specialize in production and trade.
65. As the terms of trade approach the domestic opportunity costs of a product, a country will experience
A. smaller gains from trade.
B. greater comparative advantage from trade.
C. greater absolute advantage from trade.
D. greater balance-of-trade surpluses.
66. Which group is most likely to be adversely affected when foreign steel is imported?
A. consumers of products for which steel is an input
B. domestic steel producers
C. domestic workers in industries where steel is an input
D. foreign steel producers
67. Which group does not benefit from trade when the United States imports baseballs?
A. U.S. spectators who attend baseball games
B. U.S. major league baseball players
C. U.S. baseball manufacturers
D. foreign baseball manufacturers
68. Which group does not benefit from trade when the United States imports cotton?
A. U.S. cotton growers
B. U.S. cotton shirt producers
C. U.S. consumers who buy cotton shirts
D. foreign cotton growers
69. Which group does not benefit from trade when the U.S. imports leather?
A. workers in the foreign leather industry
B. U.S. consumers who purchase leather products
C. foreign leather producers
D. workers in the U.S. leather industry
70. As trade restrictions are eliminated, increased imports
A. reduce the competition in product markets.
B. leave the composition of GDP unchanged.
C. redistribute income away from import-competing industries.
D. benefit the workers in import-competing industries.
71. Which of the following groups does NOT have an interest in restricting free trade?
A. people who buy the imported product
B. producers in import-competing markets
C. communities where workers in import-competing markets live
D. workers in import-competing markets
72. Trade restrictions provide
A. greater consumption possibilities through greater specialization.
B. protection for import-competing industries.
C. protection of comparative advantage.
D. protection of absolute advantage.
73. Which of the following is concerning trade?
A. It reduces consumption possibilities.
B. All groups benefit from free trade.
C. It shifts the production possibilities curve to the right.
D. It redistributes income away from import-competing industries.
74. Which of the following is if a country specializes in producing the goods for which it has a comparative advantage and then trades?
A. Output increases, and everyone in the economy benefits.
B. Income is redistributed toward import-competing industries.
C. There are winners and losers, but the country as a whole is better off.
D. Losers may outweigh the winners, and a country may be worse off.
75. When countries specialize in production and trade, all of the following are except
A. total world output increases.
B. microeconomic losses outweigh the gains.
C. the standard of living increases.
D. resources are used more efficiently.
76. Which of the following is NOT referred to as a barrier to trade?
A. tariffs
B. nontariff barriers
C. quotas
D. the market mechanism
77. A tax imposed on imported goods is a
A. tariff.
B. nontariff barrier.
C. quota.
D. supply restriction.
78. Which of the following is the result of a tariff?
A. lower domestic prices
B. a more efficient allocation of resources
C. greater domestic production
D. a higher standard of living
79. Tariffs on imported coffee will result in all of the following except
A. higher prices for imported coffee.
B. higher prices for domestic coffee.
C. gains for workers in the domestic coffee industry.
D. gains for workers in the foreign coffee market.
80. Tariffs on imported sugar will result in
A. lower prices for imported sugar.
B. higher prices for domestic sugar.
C. gains for foreign sugar producers.
D. gains for domestic cookie producers.
81. Tariffs tend to reduce the volume of imports because they
A. set maximum allowable import limits.
B. place severe quality restrictions on imported goods.
C. make imports more expensive to domestic consumers.
D. reduce prices of domestically produced goods.
82. The impact of a tariff is to _____ imports and _____ the market price.
A. reduce; raise
B. reduce; lower
C. increase; raise
D. increase; lower
83. A tariff on imported goods will cause
A. an increase in imports and an increase in domestic sales.
B. a decrease in imports and an increase in domestic sales.
C. an increase in imports and a decrease in domestic sales.
D. a decrease in imports and a decrease in domestic sales.
84. A limit on the quantity of a good that may be imported in a given time period is a
A. trade restriction limit.
B. tariff.
C. quota.
D. price effect.
85. A quota limits
A. imports and allows domestic producers to raise the price.
B. domestic output and allows import producers to raise the price.
C. imports and reduces the domestic price.
D. domestic output and reduces the domestic price.
86. A quota limits how far market _____ can shift to the right and causes price to _____.
A. supply; fall
B. supply; rise
C. demand; fall
D. demand; rise
87. If product standards are used to limit imports, this is an example of a
A. tariff.
B. nontariff barrier.
C. quota.
D. subsidy.
88. If licensing restrictions are used to limit imports, this is an example of a
A. nontariff barrier.
B. tariff.
C. trade deficit.
D. quota.
89. The exchange rate is the
A. price of one country's currency expressed in terms of another country's currency.
B. export ratio of one country expressed in terms of another country's ratio.
C. difference between the price of a good in one country versus another country.
D. price of a good in the country that has a comparative advantage in the good.
90. How expensive an imported good is depends on the foreign price of the good and
A. comparative advantage.
B. absolute advantage.
C. the price of gold.
D. the exchange rate.
91. When a French tourist traveling in Mexico asks "How many pesos can I get for these euros?" he wants to know the
A. terms of trade.
B. exchange rate.
C. currency quota rate.
D. import exchange ratio.
92. An increase in the value of one currency relative to another is referred to as
A. currency appreciation.
B. currency depreciation.
C. terms of trade.
D. comparative advantage.
93. An appreciation of the euro relative to the U.S. dollar will cause
A. the cost of European imports to fall for U.S. consumers.
B. the cost for a U.S. student to study in Europe to rise.
C. the price of European exports to the United States to fall.
D. a trade conflict to erupt between Europe and the United States.
94. When the U.S. dollar appreciates relative to the Mexican peso
A. Mexican goods imported by the United States are more expensive for U.S. consumers.
B. U.S. goods exported to Mexico are cheaper for Mexican consumers.
C. Mexican tourists to the U.S. are worse off.
D. U.S. tourists traveling in Mexico are worse off.
95. If one currency decreases in value relative to another currency, this is known as
A. currency depreciation.
B. absolute advantage.
C. protectionism.
D. supply restriction.
96. If the U.S. dollar depreciates relative to the Chinese Yuan
A. U.S. citizens find it cheaper to visit China.
B. Chinese imports are cheaper for U.S. consumers to buy.
C. U.S. exports to China are cheaper for the Chinese to buy.
D. Chinese citizens find it more expensive to visit the United States.
97. Exchange rates are affected by changes in
A. the supply of a currency only.
B. the demand for a currency only.
C. both the demand for and supply of a currency.
D. the export of goods only.
98. Which of the following will NOT cause an increase in the demand for the Euro?
A. More foreigners travel to Europe.
B. More foreigners buy real estate in Europe.
C. Foreigners buy more European exports.
D. Europeans buy more imported goods.
99. The General Agreement on Tariffs and Trade (GATT)
A. encouraged trade restrictions.
B. committed GATT members to pursue free-trade policies.
C. has not been effective in eliminating trade barriers.
D. has eliminated all nontariff barriers to trade.
100. The WTO functions as
A. the enforcer of trade rules for the world.
B. an international informant on terrorism.
C. an international weapons inspector.
D. the international authority on currency exchange.
101. Assume Russia and the United States each produce only two goods, tanks and automobiles. The values in the table Full-Employment Output of Goods 1 represent the maximum amount of each good that can be produced using existing resources.
Full-Employment Output of Goods 1
Country | Tanks | Automobiles |
Russia | 100 | 400 |
United States | 200 | 400 |
The opportunity cost of producing 1 tank in the United States is
A. 1/2 of an automobile.
B. 1 automobile.
C. 2 automobiles.
D. 3 automobiles.
102. Assume Russia and the United States each produce only two goods, tanks and automobiles. The values in the table Full-Employment Output of Goods 1 represent the maximum amount of each good that can be produced using existing resources.
Full-Employment Output of Goods 1
Country | Tanks | Automobiles |
Russia | 100 | 400 |
United States | 200 | 400 |
The opportunity cost of producing 1 tank in Russia is
A. 1/4 of an automobile.
B. 1 automobile.
C. 2 automobiles.
D. 4 automobiles.
103. Assume Russia and the United States each produce only two goods, tanks and automobiles. The values in the table Full-Employment Output of Goods 1 represent the maximum amount of each good that can be produced using existing resources.
Full-Employment Output of Goods 1
Country | Tanks | Automobiles |
Russia | 100 | 400 |
United States | 200 | 400 |
The opportunity cost of producing 1 automobile in the United States is
A. 1/2 of a tank.
B. 1 tank.
C. 2 tanks.
D. 4 tanks.
104. Assume Russia and the United States each produce only two goods, tanks and automobiles. The values in the table Full-Employment Output of Goods 1 represent the maximum amount of each good that can be produced using existing resources.
Full-Employment Output of Goods 1
Country | Tanks | Automobiles |
Russia | 100 | 400 |
United States | 200 | 400 |
This table indicates that
A. Russia has a comparative advantage in tanks.
B. Russia has both an absolute and comparative advantage in automobiles.
C. the United States has a comparative advantage in both goods.
D. the United States has a comparative advantage in tanks.
105. Assume Russia and the United States each produce only two goods, tanks and automobiles. The values in the table Full-Employment Output of Goods 1 represent the maximum amount of each good that can be produced using existing resources.
Full-Employment Output of Goods 1
Country | Tanks | Automobiles |
Russia | 100 | 400 |
United States | 200 | 400 |
The opportunity costs imply
A. Russia should specialize in the production of tanks.
B. Russia should specialize in the production of automobiles.
C. the United States should specialize in the production of automobiles.
D. neither country will benefit from trade.
106. Assume Russia and the United States each produce only two goods, tanks and automobiles. The values in the table Full-Employment Output of Goods 1 represent the maximum amount of each good that can be produced using existing resources.
Full-Employment Output of Goods 1
Country | Tanks | Automobiles |
Russia | 100 | 400 |
United States | 200 | 400 |
The output of automobiles and tanks will increase if
A. Russia specializes in producing tanks, and the United States specializes in producing automobiles.
B. both countries attempt to become self-sufficient.
C. Russia specializes in producing automobiles, and the United States specializes in producing tanks.
D. the United States produces both goods and exports them to Russia.
107. Assume Russia and the United States each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in the table Full-Employment Output of Goods 2 represent the maximum amount of each good that can be produced.
Full-Employment Output of Goods 2
Country | Tanks | Automobiles |
Russia | 100 | 300 |
United States | 200 | 900 |
The opportunity cost of producing 1 bushel of corn in the United States is
A. 9/2 of a bushel of wheat.
B. 1/2 of a bushel of wheat.
C. 1/3 of a bushel of wheat.
D. 2/9 of a bushel of wheat.
108. Assume Russia and the United States each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in the table Full-Employment Output of Goods 2 represent the maximum amount of each good that can be produced.
Full-Employment Output of Goods 2
Country | Tanks | Automobiles |
Russia | 100 | 300 |
United States | 200 | 900 |
The opportunity cost of producing 1 bushel of corn in Russia is
A. 2/9 of a bushel of wheat.
B. 1/3 of a bushel of wheat.
C. 1/2 of a bushel of wheat.
D. 3 bushels of wheat.
109. Assume Russia and the United States each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in the table Full-Employment Output of Goods 2 represent the maximum amount of each good that can be produced.
Full-Employment Output of Goods 2
Country | Tanks | Automobiles |
Russia | 100 | 300 |
United States | 200 | 900 |
The opportunity cost of producing 1 bushel of wheat in Russia is
A. 2/9 of a bushel of corn.
B. 1/3 of a bushel of corn.
C. 1/2 of a bushel of corn.
D. 3 bushels of corn.
110. Assume Russia and the United States each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in the table Full-Employment Output of Goods 2 represent the maximum amount of each good that can be produced.
Full-Employment Output of Goods 2
Country | Tanks | Automobiles |
Russia | 100 | 300 |
United States | 200 | 900 |
Based on the table, which of the following statements is ?
A. Russia has a comparative advantage in wheat.
B. The United States has an absolute advantage in both goods.
C. The United States has a comparative advantage in both goods.
D. Russia has an absolute advantage in corn.
111. Assume Russia and the United States each have the same amount of resources with which to produce wheat and corn and they produce no other goods. The values in the table Full-Employment Output of Goods 2 represent the maximum amount of each good that can be produced.
Full-Employment Output of Goods 2
Country | Tanks | Automobiles |
Russia | 100 | 300 |
United States | 200 | 900 |
Based on the table, the output of corn and wheat would be greatest if
A. both countries prohibited trade.
B. the United States specialized in producing corn and Russia specialized in producing wheat.
C. Russia specialized in producing corn, and the United States specialized in producing wheat.
D. the United States produced both goods and exported them to Russia.
112. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
If the countries do not trade, what is the total number of motorcycles produced per day?
A. 1,000 motorcycles
B. 2,000 motorcycles
C. 3,000 motorcycles
D. 4,000 motorcycles
113. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
If the countries do not trade, what is the total number of DVD players produced per day?
A. 1,000 DVD players
B. 2,000 DVD players
C. 3,000 DVD players
D. 4,000 DVD players
114. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
What is the opportunity cost of a DVD player in Japan?
A. 1/2 of a motorcycle per DVD player
B. 1 motorcycle per DVD player
C. 2 motorcycles per DVD player
D. 1/3 of a motorcycle per DVD player
115. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
What is the opportunity cost of a motorcycle in Japan?
A. 1/2 of a DVD player per motorcycle
B. 1 DVD player per motorcycle
C. 2 DVD players per motorcycle
D. 3 DVD players per motorcycle
116. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
Which of the following best describes the comparative advantage of the two countries?
A. Japan has a comparative advantage in both goods.
B. Japan has the comparative advantage in DVD players; the United States in motorcycles.
C. Japan has the comparative advantage in motorcycles; the United States in DVD players.
D. The United States has a comparative advantage in both goods.
117. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
Suppose both countries specialize completely in the good they produce with the lowest opportunity cost. What is the total production of DVD players?
A. 2,000 DVD players
B. 3,000 DVD players
C. 3,500 DVD players
D. 4,000 DVD players
118. Suppose the United States and Japan each produce only two goods and have the production possibilities shown in the figure. Without trade, Japan produces at point A and the United States produces at point B.
Suppose both countries specialize completely in the good they produce with the lowest opportunity cost. What is the total production of motorcycles?
A. 2,000 motorcycles
B. 3,000 motorcycles
C. 3,500 motorcycles
D. 4,000 motorcycles
119.
What does S3 most likely represent?
A. U.S. supply under tariff-restricted trade
B. U.S. supply under quota-restricted trade
C. the result of a foreign country dumping this good on the U.S. market
D. production possibilities under conditions of free trade
120.
If sugar imports are not restricted in any way and the prevailing world price is P2, the price charged by domestic producers is
A. P1.
B. P2.
C. P3.
D. Cannot be determined with the given information.
121.
Suppose the world price is P2. The domestic price paid by the nation's consumers after the imposition of a tariff will be
A. P1.
B. P2.
C. P3.
D. Cannot be determined with the given information.
122.
In the absence of trade, the domestic price and sales of sugar will be determined by the intersection of D and
A. S1.
B. S2.
C. S3.
D. Cannot be determined with the given information.
123.
In the absence of trade, the domestic price of sugar will be
A. P1.
B. P2.
C. P3.
D. Cannot be determined with the given information.
124. A News Wire article in the text focuses on the barriers to trade imposed by the Trump administration in the steel market. The kind of protectionism described is
A. a tariff.
B. an industry subsidy.
C. worker assistance.
D. a price ceiling.
125. In the market for U.S. sugar, U.S. producers favor a quota on imported sugar. Enforcement of a sugar quota will cause the price of sugar to _____ and quantity to _____.
A. increase; decrease
B. increase; increase
C. decrease; decrease
D. decrease; increase
126. Exports are the goods and services bought from foreign sources.
Goods and services not produced in the U.S. are imports.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
127. The United States exports goods such as wheat, computers, and lumber.
U.S. exports include farm products (corn, wheat); machinery (computers, automobiles); and raw materials (lumber), among other items.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
128. A trade deficit means that imports exceed exports over some relevant time period.
Trade deficit is the amount by which the value of imports exceeds the value of exports in a given time period.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
129. The United States is less dependent on foreign trade, as measured by the ratio of exports to GDP, than most other nations.
The U.S. export ratio represents a relatively modest fraction of total GDP.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
130. Some U.S. industries are very dependent on sales of goods to other countries.
Even though the U.S. has a low export ratio, many American industries are very dependent on export sales.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
131. If the United States has a trade deficit with the rest of the world, then the rest of the world must have a trade deficit also.
If the U.S. has a trade deficit with the rest of the world, then other countries must have an offsetting trade surplus.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
132. Since one country's imports are another country's exports, overall world trade must balance.
Any imbalance in a country’s trade must be offset by reverse imbalances elsewhere.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-01 Describe U.S. trade patterns.
Topic: U.S. Trade Patterns
133. Specialization and trade means more output throughout the world.
Specialization increases total output.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
134. Specialization decreases total world output.
The gain from trade will be increased world output.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
135. The United States buys large quantities of goods and services from other countries, but foreign countries buy very few U.S. goods and services.
The United States typically has a merchandise trade deficit and a services trade surplus.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
136. Since world resources are limited, when two countries trade, one country is better off and the other country is worse off.
The gain from trade will be increased world output and a higher standard of living in both countries.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
137. Countries choose to specialize and trade with one another because the gains from trade are greater than the losses.
Specialization and trade increase total output and increase standards of living.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
138. If every country specializes in what it produces best, more will be produced than if each country tries to produce everything for its own needs.
Specialization and trade increase total output and increase standards of living.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
139. Even with trade a country must continue to consume inside or on its production possibilities curve.
International trade breaks the link between production possibilities and consumption possibilities.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
140. Without trade it is impossible for a country to consume a mix of goods and services beyond its production possibilities curve.
When nations specialize in production, not only does the mix of consumption change, but the quantity of consumption increases as well. If a country chooses not to trade, it can only consume what it is able to produce given the constraints of its prodcution possibilities.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
141. If the opportunity cost of producing a good is the same in two different countries, there is no incentive to trade.
A country without a competitive advantage will not benefit from trade.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Comparative Advantage
142. World output will be maximized if each country pursues its comparative advantage.
World output, and thus the potential gains from trade, will be maximized when each country pursues its comparative advantage.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Comparative Advantage
143. Even if the terms of trade are inferior to domestic opportunity costs, a country will benefit from trade.
A country will not trade unless the terms of trade are superior to domestic opportunity costs.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-03 Tell how the terms of trade are established.
Topic: Terms of Trade
144. A quota is a tax on specific goods.
A quota is a limit on the quantity of a good that may be imported in a given time period.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Discuss how trade barriers affect market outcomes.
Topic: Barriers to Trade
145. The exchange rate is the ratio at which a currency can be exchanged for gold.
The exchange rate is the price of one country’s currency expressed in terms of another country’s currency.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how currency exchange rates affect trade flows.
Topic: Exchange Rates
146. When the U.S. dollar appreciates in value, the United States will export fewer goods, ceteris paribus.
When the value of the dollar increases, it costs more to foreign nations to buy exports.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-05 Describe how currency exchange rates affect trade flows.
Topic: Exchange Rates
147. A friend of yours recently lost a job and is now blaming foreign trade. Your friend claims that foreign trade costs jobs. Although you cannot soften the blow of a lost job, what might you tell your friend about the benefits of foreign trade?
Although jobs may be lost, new ones will be created by the opportunities opened up with trade. When countries specialize and trade, some particular workers and firms may be hurt by imports, but the economy as a whole gains by trade. In addition, your friend will likely end up paying lower prices as increased competition exerts downward pressure on prices.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 16-02 Explain how trade increases total output.
Topic: Motivation to Trade
148. Discuss the difference between comparative advantage and absolute advantage. Must a country have an absolute advantage in order to participate in trade with other countries?
A comparative advantage is the ability of a country to produce a specific good at a lower opportunity cost than its trading partner. An absolute advantage is the ability of a country to produce a specific good with fewer resources (per unit of output) than other countries. An absolute advantage is not necessary to trade. A country may have an absolute advantage simply because they have produced a product for a longer period of time and are more experienced in production. In trade, however, the potential gains to an economy will depend on opportunity cost as these allow a country to effectively compare the costs of trade (terms of trade) and costs of production (opportunity cost) to acquire more of a product at the lowest cost.
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 16-03 Tell how the terms of trade are established.
Topic: Comparative Advantage
149. Why do countries enter into trade agreements for products that could be produced within their own country?
Countries may enter into a trade agreement to products they could produce themselves because of relative costs. If the cost of labor for an item might be prohibitive, a country will look for another country to supply the good. Countries also are better off specializing in goods for which they have a comparative advantage.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 16-03 Tell how the terms of trade are established.
Topic: Terms of Trade
150. Which of the following would be a U.S. imported service?
A. French wine
B. Italian cheese
C. AeroMexico flights from Puerto Rico
D. German mad automobiles
151. Gains from trade are mainly due to
A. businesses only producing products for their countries.
B. countries producing what they can produce more efficiently and trading with countries for other goods.
C. countries that produce all the products for the entire world.
D. All of these choices are correct.
152. Canada has an absolute and a comparative advantage over Scotland in producing natural gas and an absolute advantage over Scotland in salmon production. Scotland can produce both products, but only has a comparative advantage in producing salmon. Because Canada has a comparative advantage in natural gas production, it should
A. produce both natural gas and salmon and sell to Scotland.
B. produce salmon and trade with Scotland for natural gas
C. produce natural gas and trade with Scotland for salmon.
D. let Scotland decide what Canada should produce.
153. If the US Dollar becomes weaker against the Canadian Dollar, which of the following scenarios are likely to occur?
A. U.S. imports of Canadian lumber are likely to increase.
B. More Canadian tourists will visit American cities.
C. Fewer Canadian tourists will visit American cities.
D. U.S. exports of chocolate candy to Canada will decrease.
154. U.S. exports
A. have tended to decrease over time as a percentage of GDP.
B. constitute a relatively low share of GDP compared to most other nations.
C. make up about 12% of GDP.
D. are typically negative each year.
155. Total U.S. consumption possibilities will increase if the United States
A. imports a product for which the exporting country has the comparative advantage.
B. never imports a product that can be produced by American workers.
C. as consumers who join together and adopt a "Buy American" policy.
D. agrees to subsidize imports of products, such as computers, that represent the comparative advantage of domestic U.S. manufacturing firms.
156. Which of these is NOT a result of sugar quotas imposed by the United States?
A. Domestic sugar prices decreased.
B. U.S. sugarcane and beet farmers have benefitted.
C. Some U.S. soda and candy producers have moved their plants outside of the United States.
D. The number of lost domestic jobs in sugar-dependent industries is greater than those saved in the sugar industry.
157. Because trade increases a nation's consumption possibilities, it is clear that
A. all workers and industries will act to promote free trade.
B. industries with a comparative advantage will join with their workers to fight against free trade activities because the activities would act to erode their advantage.
C. industries with a comparative advantage would tend to support free trade, while industries with a comparative disadvantage would tend to fight free trade.
D. economic theory is off the mark because all imports hurt American workers.
158. A tariff ______ the domestic price of a good and ______ the quantity sold.
A. increases; increases
B. decreases; decreases
C. increases; decreases
D. decreases; increases
159. A country will NOT trade unless
A. it has an absolute advantage in production.
B. the value received is greater than its domestic opportunity cost.
C. domestic industries are protected from harm.
D. the other nation is a close ally.
160. Which groups would support a U.S. tariff on Chinese-produced solar panels?
A. U.S. consumers
B. U.S. solar panel producers
C. U.S. solar panel installers
D. Chinese manufacturers
161. The United States typically has a merchandise ______ and a service ______.
A. deficit; deficit
B. surplus; surplus
C. deficit; surplus
D. surplus; deficit
162. The ability of a country to produce a good with fewer resources than another country is called
A. comparative advantage.
B. absolute advantage.
C. competitive advantage.
D. efficiency advantage.
163. Quotas can be a greater threat to competition than tariffs because
A. quotas apply to specific goods.
B. quotas preclude additional imports at any price.
C. tariffs can be negotiated.
D. All of these choices are correct.
164. If the value of a nation’s currency decreases, its exports become ______ and the goods it imports become ______.
A. cheaper; cheaper
B. more expensive; more expensive
C. cheaper; more expensive
D. more expensive; cheaper
165. When the dollar appreciates, its value compared to other countries’ currencies
A. increases.
B. decreases.
C. stays the same.
D. more information is needed to predict the change in relative value.
166. A limit on the quantity of a good that may be imported is called a(n)
A. tariff.
B. quota.
C. tax.
D. externality.
167. The organization that is in charge of policing world trade and resolving trade disputes today is called the
A. GATT.
B. WTO.
C. SEC.
D. FBI.
168. Import restrictions make domestic consumers _____ off, foreign producers _____ off, and domestic producers _____ off.
A. better; better; better
B. worse; worse; worse
C. better; better; worse
D. worse; worse; better
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Accessibility: Keyboard Navigation | 168 |
Blooms: Analyze | 50 |
Blooms: Apply | 2 |
Blooms: Remember | 35 |
Blooms: Understand | 81 |
Difficulty: 1 Easy | 35 |
Difficulty: 2 Medium | 81 |
Difficulty: 3 Hard | 52 |
Learning Objective: 16-01 Describe U.S. trade patterns. | 36 |
Learning Objective: 16-02 Explain how trade increases total output. | 61 |
Learning Objective: 16-03 Tell how the terms of trade are established. | 16 |
Learning Objective: 16-04 Discuss how trade barriers affect market outcomes. | 39 |
Learning Objective: 16-05 Describe how currency exchange rates affect trade flows. | 16 |
Topic: Barriers to Trade | 25 |
Topic: Comparative Advantage | 24 |
Topic: Exchange Rates | 16 |
Topic: Motivation to Trade | 41 |
Topic: Policy Perspectives | 2 |
Topic: Protectionist Pressures | 12 |
Topic: Terms of Trade | 12 |
Topic: U.S. Trade Patterns | 36 |
Document Information
Connected Book
Essentials of Economics 11e Schiller Test Bank
By Bradley R. Schiller, Karen Gebhardt