Questions:
Question 1
If Italy can produce grapes at a lower opportunity cost than any other nation, Italy is said to have a(n. __________ in the production of grapes.
A. autarky
B. absolute advantage
C. comparative disadvantage
D. comparative advantage
Question 2
A possible reason a nation might impose a protectionist policy such as a tariff is to __________ .
A. increase the level of imports
B. protect an infant industry from foreign competitors
C. encourage specialization in the good in which the nation has a comparative advantage
D. slow domestic production
Question 3
Which of the following situations will arise in the domestic market following the removal of an import quota?
A. imports increase, domestic production increases, prices increase
B. imports increase, domestic production decreases, prices decrease
C. imports decrease, domestic production increases, prices decrease
D. imports decrease, domestic production decreases, prices increase
Question 4
The consumption possibilities curve shows the combinations of goods that can be __________ .
A. consumed by a nation before trade begins
B. consumed by a nation after trading begins
C. produced by a nation before trading begins
D. produced by a nation after trade begins
Question 5
Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only teapots, it can make 80 per day. If Arcadia produces only surfboards, it can make 30 per day. What is the opportunity cost of 1 teapot in Arcadia?
A. 3/8 of a surfboard
B. 8/3 surfboards
C. 30 surfboards
D. 80 surfboards
Question 6
Voluntary export restraints __________ .
A. have the same effect as an import ban
B. are illegal under the international trading rules
C. violate the spirit of international trade agreements
D. all of the above
Question 7
Import bans, import quotas, voluntary export restraints, and tariffs on goods all __________ .
A. increase imports and raise prices for consumers
B. reduce imports and prices for consumers
C. reduce imports and raise prices for consumers
D. increase imports and reduce prices for consumers
Question 8
According to the infant industry argument for trade protectionism, __________ .
A. trade barriers must be used to protect domestic workers
B. new industries need to be shielded from competition in the early stages of learning by doing
C. tariffs imposed to aid new industries should never be removed
D. new industries are capable of competing with established rivals
Question 9
As a whole, nations are better off after trade and specialization because __________ .
A. nations can consume along their consumption possibilities curve, which is outside of their production possibilities curve
B. nations can consume along their consumption possibilities curve, which is inside of their production possibilities curve
C. nations can consume along their production possibilities curve, which is outside of their consumption possibilities curve
D. nations experience an inward shift of their production possibilities curve
Question 10
A possible reason a nation might impose a protectionist policy such as a tariff is to __________ .
A. help domestic firms establish a world monopoly in a particular market
B. increase the level of imports
C. encourage specialization in the good in which the nation has a comparative advantage
D. increase the welfare of domestic consumers
Question 11
Suppose Belgium produces only two goods, chocolate and lace. If Belgium has a comparative advantage in lace, a move toward free trade will __________ .
A. benefit chocolate workers, harm lace workers in the short run, but benefit the nation as a whole
B. harm chocolate workers in the short run, benefit lace workers, but benefit the nation as a whole
C. harm chocolate workers in the short run, harm lace workers, but benefit the nation as a whole
D. benefit chocolate workers, harm lace workers in the short run, but harm the nation as a whole
Question 12
An import ban results in __________ .
A. a decrease in the supply of the product
B. an increase in the product's price
C. a decrease in the quantity of the product bought and sold
D. all of the above
Question 13
A(n. __________ is a tax on an imported good.
A. tariff
B. import quota
C. voluntary export restraint
D. export quota
Question 14
A possible reason to impose a protectionist policy such as a tariff is to __________ .
A. increase the welfare of domestic consumers
B. slow domestic production
C. aid other nations in developing their own industries
D. protect domestic workers from foreign competition
Question 15
A(n. __________ is a trade policy by which a nation agrees to limit its exports of a good in order to avoid more restrictive trade policies.
A. tariff
B. voluntary export restraint
C. import quota
D. import ban
Question 16
Suppose there are only two nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 27 per day. If Atlantis produces only kayaks, it can make 18 per day. If Pacifica produces only surfboards, it can make 32 per day. If Pacifica produces only kayaks, it can make 24 per day. After trade begins, __________ will specialize in the production of surfboards and __________ will specialize in the production of kayaks.
A. Atlantis; Atlantis
B. Pacifica; Atlantis
C. Atlantis; Pacifica
D. No trade will occur.
Question 17
Exporting nations often agree to voluntary export restraints in an attempt to __________ .
A. employ more workers in the importing nation
B. avoid more restrictive trade policies
C. increase global welfare
D. decrease inflation
Question 18
Which of the following situations will arise in the domestic market following the imposition of a tariff?
A. imports decrease, domestic production increases, prices increase
B. imports increase, domestic production increases, prices increase
C. imports increase, domestic production decreases, prices decrease
D. imports decrease, domestic production increases, prices decrease
Question 19
Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only teapots, it can make 40 per day. If Arcadia produces only surfboards, it can make 60 per day. What is the opportunity cost of one teapot in Arcadia?
A. 2/3 of a surfboard
B. 1.5 surfboards
C. 40 surfboards
D. 60 surfboards
Question 20
Which of the following situations will arise in the domestic market following the imposition of an import ban?
A. imports increase, domestic production increases, prices increase
B. imports increase, domestic production decreases, prices decrease
C. imports decrease, domestic production increases, prices increase
D. imports decrease, domestic production increases, prices decrease