Problem 1. If a nation is capable of producing more computers than another nation, given the same factors of production, it is said to have which of the following capabilities?
- Comparative advantage
- Basis for terms of trade
- Absolute advantage
- Labor theory of value
Problem 2. Which of the following is NOT a trade barrier?
- Import quota
- Tariff
- Trade-zone
- Subsidies
Problem 3. The loss in consumer and producer surplus that is not government revenue become:
- Total expenditure
- Protective effect
- Welfare loss
- Redistributive effect
Problem 4. If the government imposes a tariff on an imported good, what will happen to government revenue?
- Revenue will necessarily decrease, because tariffs are always inefficient.
- Revenue must increase, because tariffs increase the demand for goods.
- Revenue will rise, because tariffs cause welfare losses that are partly turned into revenue.
- No revenue will be generated, because a tariff causes all welfare lost to become deadweight loss.