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Terms in this set (40)
Many economists support trade agreements, maintaining that the agreements improve economic efficiency because they result in goods being produced
A)
with zero producer surplus.
B)
with maximum deadweight loss.
C)
at the highest profit margin.
D)
at the lowest opportunity cost.
D
Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because
A)
politicians lobby to convince workers the restrictions will make them better off.
B)
they believe the restrictions will protect their jobs.
C)
they do not want to offend their employers who want them.
D)
they don't understand that the restrictions will threaten their jobs.
B
A tariff is a tax imposed by a government on
A)
exports.
B)
imports.
C)
services.
D)
luxury items.
B
Goods and services bought domestically but produced in other countries are referred to as
A)
transfer payments.
B)
imports.
C)
foreign consumption.
D)
exports.
B
Exports are domestically produced goods and services
A)
sold to the government.
B)
which are used to produce other goods and services.
C)
sold to other countries.
D)
sold at home.
C
A tax imposed by a government on imports of a good into a country is called
A)
an import fine.
B)
an import levy.
C)
a tariff.
D)
an import quota
C
Imports are goods and services bought domestically
A)
and produced domestically.
B)
and not subject to tariffs.
C)
and resold at a profit.
D)
but produced in other countries
D
Domestically produced goods and services sold to other countries are referred to as
A)
transfer payments.
B)
exports.
C)
capital outflow.
D)
imports.
B
Absolute advantage is
A)
the ability to produce a good or service at a higher opportunity cost than one's competitors.
B)
the ability to produce more of a good or service than competitors when using the same amount of resources.
C)
the ability to produce higher quality goods compared to one's competitors.
D)
the ability to produce more of a good or service than competitors that have fewer resources.
B
________ is the ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.
A)
Autarky
B)
Comparative advantage
C)
Absolute advantage
D)
Specialization
B
An economic principle that explains why countries produce different goods and services is
A)
trade as a percentage of GDP.
B)
absolute advantage.
C)
NAFTA.
D)
comparative advantage.
D
If the opportunity costs of production for two goods is different between two countries, then
A)
trade cannot benefit either country.
B)
mutually beneficial trade is possible.
C)
only one country can be made better off by trade.
D)
trade will only benefit both countries if one can lower its opportunity costs.
B
If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden, which of the following would explain this pattern of trade?
A)
Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.
B)
The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden.
C)
Sweden has a higher opportunity cost of producing cell phones than Denmark, and Denmark has a higher opportunity cost of producing butter.
D)
Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter.
A
A situation in which a country does not trade with other countries is called
A)
autarky.
B)
independence.
C)
autonomy.
D)
self-actualization
A
Autarky is a situation in which a country
A)
only exports products.
B)
only imports products.
C)
has no absolute advantage in any production.
D)
does not trade with other countries.
D
A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a
A)
barricade.
B)
quantity floor.
C)
tariff.
D)
quota.
D
Which of the following is the best example of a tariff?
A)
a tax placed on all residential air conditioners sold in the domestic market to help offset the impact of emissions on the environment
B)
a limit on the quantity of residential air conditioners that can be imported from a foreign country
C)
a $150 fee imposed on all imported residential air conditioners
D)
a subsidy from the U.S. government to domestic manufacturers of residential air conditioners to enable them to compete more effectively with foreign producers
C
Which of the following is the best example of a quota?
A)
a 40% fee imposed on all imported tires
B)
a limit on the quantity of tires that can be imported from a foreign country
C)
a subsidy from the U.S. government to domestic manufacturers of tires to enable them to compete more effectively with foreign producers
D)
a tax placed on all tires sold in the domestic market to help offset the impact of lost jobs in the domestic tire industry.
B
Refer to Figure 9-2. The tariff revenue collected by the government equals the area
A)
B + D + E + F.
B)
E.
C)
D + E + F.
D)
C + D + E + F.
B
Refer to Figure 9-2. Without the tariff in place, the United States produces
A)
9 million pounds of rice.
B)
15 million pounds of rice.
C)
31 million pounds of rice.
D)
42 million pounds of rice.
A
Refer to Figure 9-2. With the tariff in place, the United States consumes
A)
9 million pounds of rice.
B)
15 million pounds of rice.
C)
31 million pounds of rice.
D)
42 million pounds of rice.
C
Refer to Figure 9-2. With the tariff in place, the United States
A)
exports 31 million pounds of rice.
B)
imports 15 million pounds of rice.
C)
imports 16 million pounds of rice.
D)
imports 9 million pounds of rice.
C
An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called
A)
an import quota.
B)
a non-tariff trade barrier.
C)
an export quota.
D)
a voluntary export restraint.
D
The main purpose of most tariffs and quotas is to
A)
reduce the foreign competition that domestic firms face.
B)
improve the quality of goods and services imported into the country.
C)
raise revenue for the government.
D)
reduce the prices consumers pay for goods and services.
A
Which of the following is the best example of a quota?
A)
a $5,000 per-car fee imposed on all sport utility vehicles imported into the United States
B)
a limit imposed on the number of sport utility vehicles that the United States can import from Japan
C)
a subsidy granted by the U.S. government to domestic sport utility vehicle manufacturers so they can compete more effectively with foreign sport utility vehicle manufacturers
D)
a tax placed on all sport utility vehicles sold in the domestic market
B
Which of the following is the best example of a voluntary export restraint?
A)
a $50 per-cell phone fee imposed on all cell phones imported into the United States
B)
a subsidy granted by the U.S. government to domestic cell phone manufacturers so they can compete more effectively with foreign cell phone manufacturers
C)
a limit set by the Korean government on the number of cell phones that the United States can import from Korea
D)
a limit imposed by the U.S. government on the number of cell phones that the United States can import from Korea
C
In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to voluntary export restraints. With voluntary export restraints, foreign producers
A)
agree to meet specific quality standards required by the importing country.
B)
must agree to import an equal quantity of products that they export.
C)
limit their exports to a country.
D)
pay a tax on all products they export.
C
The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. In the market for steel, the "Buy American" provision would ________ the price of steel in the United States and ________ the quantity of steel demanded in the United States.
A)
increase; increase
B)
decrease; increase
C)
increase; decrease
D)
decrease; decrease
C
Refer to Figure 9-4. Under autarky, the equilibrium price is
A)
$54.
B)
$30.
C)
$0.
D)
$24.
B
Refer to Figure 9-4. Under autarky, the consumer surplus is area
A)
S.
B)
R + S + V.
C)
R.
D)
S + V.
C
Refer to Figure 9-4. Under autarky, the producer surplus is area
A)
S + V.
B)
S + T + V + W + X.
C)
V.
D)
T + W+ X.
A
Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. What will the market price be?
A)
> $24
B)
$24
C)
$30
D)
$54
B
Refer to Figure 9-4. Suppose the government allows imports of leather footwear into the United States. What will be the quantity demanded?
A)
Q0
B)
Q1
C)
Q2
D)
Q2 - Q0
C
In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to limit their exports to a country. What are these types of agreements called?
A)
implicit quotas
B)
sanctions
C)
involuntary export restraints
D)
voluntary export restraints
D
Protectionism
A)
is the use of cheap labor to protect firms from paying high wages.
B)
is the use of trade barriers to protect domestic firms from foreign competition.
C)
refers to reductions in tariffs and other barriers that protect consumers from paying high prices.
D)
refers to the use of copyright and trademark laws to protect inventors and artists from losing the rights to their creative efforts.
B
Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?
A)
Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue).
B)
Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."
C)
Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets.
D)
Governments always make the level of protection for infant industries too high.
B
Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries. This protectionism will cause the greatest harm to
A)
the Canadian government.
B)
Canadian consumers.
C)
Canadian manufacturers.
D)
manufacturers who export to Canada.
D
The selling of a product for a price below its cost of production is called
A)
operating at a loss.
B)
dumping.
C)
fair competition.
D)
unfair competition.
B
Dumping refers to
A)
exporting products that do not meet domestic safety standards.
B)
selling a product for a price below its cost of production.
C)
selling inferior products to unsuspecting consumers.
D)
illegally avoiding tariffs by selling products on the black market.
B
It is difficult to determine if foreign companies are selling their products for prices below their costs of production because
A)
the true costs of production are difficult to calculate.
B)
the firms have no legal obligation to reveal this information.
C)
domestic taxes increase the firms' costs but it is difficult to determine the incidence of these taxes.
D)
costs are calculated in the firms' local currencies.
A
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