Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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International trade theory clearly predicts that when trade happens between
people in rich nations and people in poor nations, the
a. | people in the rich nation will benefit but the people in the poor nation will be
worse off than without trade | b. | people in the poor nation will benefit but the
people in the rich nation will be worse off than without trade | c. | people in both
countries will have higher standards of living than without trade | d. | only firms in the
countries will benefit, but workers and consumers in both countries will
lose |
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2.
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Restricted trade produces a net __________ in aggregate, while free trade
produces a net __________.
a. | loss; loss also | b. | benefit; benefit also | c. | benefit;
loss | d. | loss; benefit |
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3.
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Which of the following best expresses the benefit from international
trade?
a. | With trade, each country focuses its resources on producing the goods it is
relatively most efficient in producing and trades for goods it is relatively inefficient in
producing, thus reducing the real cost of all goods. | b. | With trade, a country can increase its
political involvement on a global scale. | c. | Increased U.S. trade will improve high-tech
exports but not agricultural exports. | d. | Increased trade will increase U.S. exports and
decrease U.S. imports. | e. | Increased trade implies that exports of goods
and services will always equal imports of goods and services. |
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4.
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Specialization and international trade allow the inhabitants of a country to do
what?
a. | Exploit workers in countries poorer than they are. | b. | Consume at a level
no greater than what they can produce by themselves. | c. | Consume at a level beyond its production
possibilities frontier. | d. | Achieve the same level of consumption as
inhabitants of the richest nations. |
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5.
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The reason people trade with people in other countries is because
a. | it is their own self-interest -- they can make themselves better off through
trade. | b. | big corporations use trade to exploit workers in other countries. | c. | it is a way to avoid
war. | d. | they want to be charitable and generous. | e. | membership in the
World Trade Organization requires it. |
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6.
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Which of the following is true?
a. | Both c and d are correct. | b. | Both c and e are correct. | c. | A country should
specialize in production of the good in which it has the lowest opportunity cost. | d. | A country should
specialize in production of the good in which it has a comparative advantage. | e. | A country should
specialize in production of the good in which it has an absolute
advantage. |
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7.
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Which of the following factors is the most significant in determining the
pattern of international trade?
a. | military alliances | b. | absolute advantage | c. | comparative
advantage | d. | relative wealth | e. | membership in the
UN |
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8.
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How do countries know when they have a comparative advantage in the production
of a good?
a. | They know because those goods which are not involved in international trade must be
those goods for which the country has a comparative advantage. | b. | They know as the
result of individuals trying to earn profits and buying low and selling high in the
process. | c. | The World Trade Organization (WTO) publishes the bi-annual “International Index
of Opportunity Costs”. | d. | There is not one major way that countries
acquire this information. |
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9.
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Which of the following is not an example of a trade restriction?
a. | quotas | b. | voluntary export restraints | c. | dumping | d. | tariffs | e. | none of the
above |
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10.
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Which of the following is an example of a trade restriction?
a. | quotas | b. | tariffs | c. | dumping | d. | a and b | e. | a, b, and
c |
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11.
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International trade policies are largely advocated, argued, and lobbied for
based more on their distributional effects than on their aggregate or overall effects. What does this
imply?
a. | Producers will lobby for protectionism even though they may know that their gains
from protectionism will be outweighed by the losses to consumers. | b. | Consumers care more
about how policies affect them than how policies affect them and everyone else,
too. | c. | Tariffs are more effective than quotas. | d. | Consumers'
surplus will rise (when it rises) more than producers' surplus will fall (when it
falls). | e. | none of the above |
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12.
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Which of the following is not correct concerning quotas?
a. | The enactment of quotas rewards domestic producers with higher
prices. | b. | The enactment of quotas creates opportunities for lobbyists to seek the perpetuation
of quotas. | c. | Quotas on steel, textiles and apparel, and sugar have been in effect for several
decades. | d. | Lobbying efforts by domestic producers and foreign exporters are vigorously fought by
domestic consumers. | e. | The auctioning of quotas would reduce their
attractiveness to foreign exporters. |
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13.
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If, at the world price, domestic producers are producing and selling 100 units
of a good, then at the world price plus tariff it follows that
a. | they will be producing and selling more than 100 units of the
good. | b. | they will be producing and selling fewer than 100 units of the
good. | c. | producers' surplus will be less than what it is when domestic producers produce
and sell 100 units. | d. | consumers' surplus will be greater than
what it is when domestic producers produce and sell 100 units. | e. | c and
d |
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14.
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If a quota is imposed,
a. | the gains to the winners will be greater than the losses to the losers, and the
government will not collect any tax revenue.. | b. | the gains to the winners will be less than the
losses to the losers, but the government will collect more tax revenue. | c. | the gains to the
winners will equal the losses to the losers, but the government will collect more tax
revenue. | d. | the gains to the winners will be less than the losses to the losers, and the
government will not collect any tax revenue.. |
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15.
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The primary objective of the World Trade Organization is to
a. | eliminate tariffs. | b. | help trade flow smoothly. | c. | improve wages and
working conditions in developing nations. | d. | serve the trade needs of the major trading
nations. |
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