Verified Test Bank Ch11 International Trade Of Goods

c11; Chapter 11: International Trade of Goods

Learning Objectives:

1. Discuss the extent of U.S. international trade
2. Explain the concepts of comparative advantage and absolute advantage
3. Analyze the costs and benefits of international trade
4. Describe the distribution of the costs and benefits from international trade
5. Assess the arguments for and against limiting international trade
6. Describe the costs, benefits, and mechanisms of limiting international trade
7. Describe some of the forms of trade liberalization

Multiple Choice

1. Goods and services produced domestically but sold abroad are
   1. Exports
   2. Imports
   3. Elastic
   4. Inelastic

LO-1

Level: Easy

1. Goods and services produced abroad but sold domestically are
   1. Exports
   2. Imports
   3. Elastic
   4. Inelastic

LO-1

Level: Easy

1. You order a bottle of wine from France to be served at your dinner party in Denver, Colorado by the caterers. The bottle of wine is a(n) __________________.
   1. Import
   2. Export
   3. Complement
   4. Personal consumption expenditure

LO-1

Level: Easy

1. Seventy-seven percent of total world exports are conducted by __________________ countries.
   1. Five
   2. Ten
   3. Fifteen
   4. Twenty

LO-1

Level: Easy

1. The largest category of U.S. goods exported is
   1. Capital goods
   2. Labor
   3. Services
   4. Labor and services combined

LO-1

Level: Easy

1. You buy a bottle of wine produced in France. Which of the following is true?
   1. The wine is an import for France and an export for the United States
   2. The wine is an export for France and an export for the United States
   3. The wine is an import for France and an import for the United States
   4. The wine is an export for France and an import for the United States

LO-1

Level: Moderate

1. When a country’s imports is greater than its exports, the country is experiencing a
   1. Trade deficit
   2. Trade surplus
   3. Trade balance
   4. Trade residual

LO-1

Level: Easy

1. A trade surplus is expressed as
   1. Exports > Imports
   2. Exports < Imports
   3. Exports = Imports
   4. (Exports – Imports)m

LO-1

Level: Moderate

1. The top international U.S. trading partners are
   1. Canada and India
   2. Mexico and China
   3. India and China
   4. Canada and Mexico

LO-1

Level: Easy

Reference: Use the graph below to answer questions 10-11.

1. Refer to the graph showing the production possibilities for two countries, A and B. Which statement is correct?
   1. Country A has comparative advantage in producing coffee
   2. Country A has absolute advantage in producing coffee
   3. Country B has comparative advantage in producing tractors
   4. Country B has absolute advantage in producing tractors

LO-2

Level: Medium

1. Refer to the graph showing the production possibilities for two countries, A and B. Which statement is correct?
   1. Neither country would benefit from trade
   2. Country A would benefit from trading coffee to Country B
   3. Country B would benefit from trading tractors to Country A
   4. Both countries would gain if Country A specialized and traded tractors to Country B and Country B specialized and traded coffee to Country A

LO-2

Level: Moderate

1. A country has absolute advantage in production of a product if
   1. It can produce more of the product than another country
   2. It can produce at a smaller dollar cost than another country
   3. It can produce at a smaller opportunity cost than another country
   4. It can consume more of a product than another country.

LO-2

Level: Easy

1. A country is said to have _____________________ when it can produce a product at a smaller opportunity cost.
   1. allocative efficiency
   2. productive efficiency
   3. absolute advantage
   4. comparative advantage

LO-2

Level: Easy

1. The reason why countries trade can best be summarized by which of the following statements?
   1. International trade allows countries that are labor intensive to employ their labor force.
   2. International trade allows countries that are capital intensive to employ their manufacturing plants.
   3. International trade generates benefits to the trading partners who have comparative advantage in production.
   4. International trade generates benefits to the trading partners who have absolute advantage in production.

LO-2

Level: Moderate

1. International trade allows countries to
   1. Specialize in the production of one good over another based on comparative advantage
   2. Specialize in the production of one good over another based on absolute advantage
   3. Specialize in the production of capital goods based on absolute value
   4. Specialize specifically in labor intense products based on comparative advantage

LO-2

Level: Moderate

1. You and your neighbor both can bake bread and change the oil in your vehicle. You determine that you can change the oil in 10 vehicles or bake 30 loaves of bread in a day. Your neighbor can change the oil in 18 vehicles in a day or bake 25 loaves of bread. Based on this information
   1. You should produce both the loaves of bread and change the oil
   2. Your neighbor should produce both the loaves of bread and change the oil
   3. You should produce the bread and let your neighbor change the oil
   4. You should change the oil and let your neighbor bake the bread

LO-2

Level: Difficult

1. According to the graph which of the following statements is true?

• 1. Alpha has an absolute advantage in the production of both wheat and tractors and will receive no gain from trade.
  2. Epsilon has an absolute advantage in the production of both wheat and tractors and will receive no gain from trade.
  3. Alpha has an absolute advantage in the production of both wheat and tractors. However, it has a comparative advantage in the production of tractors and should produce tractors and import wheat.
  4. Epsilon has an absolute advantage in the production of both wheat and tractors. However, it has a comparative advantage in the production of tractors and should produce tractors and import wheat.

LO-3

Level: Difficult

1. The slope of the production possibilities frontier is equal to
   1. The opportunity cost of the good measured on the horizontal axis
   2. The opportunity cost of the good measured on the vertical axis
   3. The marginal cost of the good measured on the horizontal axis
   4. The marginal cost of the good measured on the vertical axis

LO-3

Level: Easy

1. The terms of trade reflects
   1. How imports affects the net benefit of international trade
   2. The costs of limiting international trade
   3. The rate at which economies will trade two goods
   4. The currency exchange differentials

LO-3

Level: Moderate

1. Terms of trade is
   1. The marginal cost of producing one good for another
   2. The marginal benefit of one producing one good for another
   3. The rate of exchange of one good for another
   4. The absolute advantage of production of two goods

LO-3

Level: Easy

1. Refer to the graph which illustrates the impact of exports on a domestic market. The amount of exports is represented by

• 1. The distance between P_E and P₀.
  2. The distance between Q_D and Q_E
  3. The distance between Q₀ and Q_E
  4. The distance between Q_D and Q₀

LO-4

Level: Difficult

1. A domestic market exporting goods and services would
   1. Generate an increase in demand and higher prices for suppliers
   2. Generate a decrease in demand and higher prices for suppliers
   3. Generate an increase in demand and lower prices for suppliers
   4. Generate a decrease in demand and lower prices for suppliers

LO-4

Level: Moderate

1. Exporting goods and services for the domestic market would result in
   1. Higher prices for suppliers and a decrease in demand for consumers
   2. Higher prices for both suppliers and domestic consumers
   3. Lower prices for domestic consumers caused by an increase in quantity demanded
   4. Lower prices for suppliers and domestic consumers

LO-4

Level: Moderate

1. Imports on a domestic market
   1. Increase demand and prices for consumers
   2. Increase demand and prices for domestic producers
   3. Increase supply and prices for domestic producers
   4. Increase supply and lower prices for consumers

LO-4

Level: Moderate

1. One argument for limiting international trade is
   1. That benefits are received by the domestic producers facing imports
   2. That domestic producers lose from international trade
   3. That domestic consumers lose from international trade
   4. That only the foreign suppliers lose from international trade

LO-5

Level: Moderate

1. Of the following all are forms of trade restrictions except
   1. A tariff
   2. A quota
   3. A regulation requiring certain standards for an imported good
   4. A control on currency exchange

LO-6

Level: Easy

1. Which of the following statements represent an accurate assessment of the net effects of international trade
   1. Benefits from trade are greater than costs
   2. Benefits from trade are equal to costs
   3. Costs are greater than benefits
   4. Not possible to determine benefits and costs

LO-5

Level: Moderate

1. This refers to a policy that limits free trade between countries.
   1. Liberalism
   2. Socialism
   3. Protectionism
   4. Privatization

LO-6

Level: Easy

1. Arguments for limiting free trade include(s)
   1. Protecting Jobs
   2. Protecting competition
   3. National security
   4. A and C

LO-6

Level: Easy

1. A tariff is
   1. A tax on exports
   2. A tax on agricultural products
   3. A tax on imports
   4. A subsidy to domestic firm

LO-6

Level: Easy

1. Losers of tariffs include
   1. Foreign producers
   2. Domestic consumers
   3. Government
   4. Both foreign producers and domestic consumers

LO-6

Level: Easy

1. Quotas:
   1. Is a restriction on the quantity of a good that can be imported into a country
   2. Contributes to the revenue flow of the domestic government
   3. Contributes to the revenue flow of the foreign government
   4. Contributes to the elimination of the producer surplus

LO-6

Level: Easy

1. Which of the following is an example of a quota?
   1. A domestic government pays a subsidy for foreign production of a melons
   2. A limit of 23 million melons can be imported
   3. Foreign methods of production of melons must be made more humanitarian for laborers
   4. All of the above are examples of quotas

LO-6

Level: Moderate

1. One effect of a quota is
   1. A reduction of producer surplus
   2. An increase of producer surplus
   3. A reduction of consumer surplus
   4. An increase of consumer surplus

LO-6

Level: Difficult

1. A characteristic of trade liberalization includes
   1. Regional trade agreements
   2. Tariffs
   3. Quotas
   4. Embargos

LO-7

Level: Easy

1. The official arbiter of trade disputes between countries is
   1. The World Trade Organization
   2. The World Bank
   3. UNICEF
   4. USDA ERS

LO-7

Level: Easy

1. A regional trade agreement formed between the US, Canada, and Mexico is
   1. CAFTA
   2. SAFTA
   3. NAFTA
   4. EUFTA

LO-7

Level: Easy