Question 1

Which is a valid counterargument to the infant industry argument for protective tariffs?

Accepted Answer

A)  Protective tariffs result in too many benefits for domestic firms that export goods and services.
B)  It is difficult to determine which infant industries will become mature industries with a comparative advantage.
C)  The objective would be better achieved through strategic trade policy.
D)  The objective would be better achieved by import quotas and nontariff barriers.

Question 2

The terms of trade reflect the

Accepted Answer

A)  rate at which gold exchanges internationally for any domestic currency.
B)  ratio at which nations will exchange two goods.
C)  fact that the gains from trade will be equally divided.
D)  cost conditions embodied in a single country's production possibilities curve.

Question 3

In a two-nation, two-good world, if both nations have identical production possibilities curves with constant costs, then one nation would have

Accepted Answer

A)  no comparative advantage over the other nation.
B)  a comparative advantage in one good and a comparative disadvantage in the other good.
C)  no absolute advantage over the other nation.
D)  an absolute advantage in one good and an absolute disadvantage in the other good.

Question 4

(Consider This)  The greatest benefit to an economy from international trade is

Accepted Answer

A)  greater employment in the export sector of the economy.
B)  the economic power it gives a nation over other countries.
C)  full employment of its labor force.
D)  consumption beyond domestic production possibilities.

Question 5

Suppose the domestic price (no-international-trade price)  of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel.Assuming no transportation costs, the United States will

Accepted Answer

A)  have a domestic shortage of wheat.
B)  export wheat.
C)  import wheat.
D)  neither export nor import wheat.

Question 6

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y.Trade in the two products will only benefit the two nations if

Accepted Answer

A)  the exchange ratio of X for Y is fixed.
B)  the terms of trade increase in both nations.
C)  there is excess capacity in both economies.
D)  the prices charged for X and Y reflect their domestic opportunity costs.

Question 7

(Consider This)  Madison, the CPA, is faster than Mason, the house painter, at both accounting services and painting.This means that

Accepted Answer

A)  there is no reason for them to trade services.
B)  Madison should trade her accounting services for Mason's painting services, so long as Madison is relatively more efficient at accounting services.
C)  Madison should trade her accounting services for Mason's painting services, so long as Madison is relatively more efficient at painting.
D)  Madison has the comparative advantage in both services.

Question 8

Which of the following was not one of the principles on which the General Agreement on Tariffs and Trade (GATT)  was established?

Accepted Answer

A)  the elimination of import quotas
B)  equal, nondiscriminatory trade treatment for all member nations
C)  the formation of international trade contracts to alleviate global poverty
D)  the reduction of tariffs by multilateral negotiations

Question 9

In a two-nation, two-good world, which of the following statements is true?

Accepted Answer

A)  One nation cannot possibly have an absolute advantage over the other nation in both products.
B)  If one nation has the comparative advantage in one product, then the other nation would have the comparative advantage in the other product.
C)  One nation will always have the comparative advantage over the other nation in one of the products.
D)  If one nation has the absolute advantage in one product, then the other nation would have the absolute advantage in the other product.

Question 10

Trade protection in most instances transfers wealth from consumers to domestic producers.

Accepted Answer

A) True 
 B)False

Question 11

In comparing a tariff and an import quota, we find that

Accepted Answer

A)  the tariff and quota both generate the same amount of revenue for the U.S.Treasury.
B)  the tariff generates revenue for the U.S.Treasury, but the quota does not.
C)  the quota generates revenue for the U.S.Treasury, but the tariff does not.
D)  neither the tariff nor the quota generates revenue for the U.S.Treasury.

Question 12

Which of the following arguments contends that certain industries need to be protected in the interest of national security?

Accepted Answer

A)  the increased domestic employment argument
B)  the cheap foreign labor argument
C)  the diversification-for-stability argument
D)  the military self-sufficiency argument

Question 13

With constant costs in production, specialization tends to proceed to complete specialization, but with increasing costs, specialization will not be complete.

Accepted Answer

A) True 
 B)False

Question 14

The basic difference in the economic effects of a tariff compared with a quota is that a

Accepted Answer

A)  quota reduces domestic consumption of the product, but a tariff does not.
B)  tariff allows imports to increase if demand increases, whereas a quota does not.
C)  tariff raises product prices, but a quota does not.
D)  quota raises product prices, but a tariff does not.

Question 15

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

Accepted Answer

A)  the increased domestic employment argument
B)  the cheap foreign labor argument
C)  the diversification-for-stability argument
D)  the infant industry argument

Question 16

As it relates to international trade, dumping

Accepted Answer

A)  is a form of price discrimination illegal under U.S.antitrust laws.
B)  is the practice of selling goods in a foreign market at less than cost.
C)  constitutes a general case for permanent tariffs.
D)  is defined as selling more goods than allowed by an import quota.

Question 17

Common arguments often raised to present the case for protectionism include the following, except

Accepted Answer

A)  protecting infant industries until they mature.
B)  protection against foreign suppliers' dumping.
C)  raising domestic employment in specific industries.
D)  reducing the price of the product to consumers.

Question 18

Tariffs and import quotas meant to increase domestic employment also eliminate domestic jobs in export industries.

Accepted Answer

A) True 
 B)False

Question 19

The imposition of a tariff on a product is least likely to result in a(n)

Accepted Answer

A)  increase in efficiency in the domestic industry producing the product.
B)  increase in the price of the product.
C)  decrease in the quantity of imports.
D)  decrease in the real incomes of workers in other industries.

Question 20

"Offshoring" refers to

Accepted Answer

A)  importing goods, services, and resources.
B)  stashing money in offshore accounts for the purpose of avoiding taxes.
C)  shifting work overseas that was previously done domestically.
D)  exporting key resources.

Exam 40: International Trade

The imposition of a tariff on a product is least likely to result in a(n)

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With constant costs in production, specialization tends to proceed to complete specialization, but with increasing costs, specialization will not be complete.

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Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

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Which is a valid counterargument to the infant industry argument for protective tariffs?

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Which of the following arguments contends that certain industries need to be protected in the interest of national security?

Correct AnswerverifiedShow Answer

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y.Trade in the two products will only benefit the two nations if

Correct AnswerverifiedShow Answer

Common arguments often raised to present the case for protectionism include the following, except

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In a two-nation, two-good world, if both nations have identical production possibilities curves with constant costs, then one nation would have

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Which of the following was not one of the principles on which the General Agreement on Tariffs and Trade (GATT) was established?

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Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel.Assuming no transportation costs, the United States will

Correct AnswerverifiedShow Answer

"Offshoring" refers to

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The basic difference in the economic effects of a tariff compared with a quota is that a

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As it relates to international trade, dumping

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The terms of trade reflect the

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(Consider This) The greatest benefit to an economy from international trade is

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(Consider This) Madison, the CPA, is faster than Mason, the house painter, at both accounting services and painting.This means that

Correct AnswerverifiedShow Answer

Tariffs and import quotas meant to increase domestic employment also eliminate domestic jobs in export industries.

Correct AnswerverifiedShow Answer

In a two-nation, two-good world, which of the following statements is true?

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Trade protection in most instances transfers wealth from consumers to domestic producers.

Correct AnswerverifiedShow Answer

In comparing a tariff and an import quota, we find that

Correct AnswerverifiedShow Answer

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