Question 1
Suppose there are only two nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 75 per day. If Pacifica produces only surfboards, it can make 75 per day. If Pacifica produces only kayaks, it can make 75 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; Pacifica
C. Atlantis; Pacifica
D. Pacifica; Atlantis
Question 2
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 3
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 4
A(n. __________ is a tax on an imported good.
A. tariff
B. import quota
C. voluntary export restraint
D. export quota
Question 5
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 6
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 7
Which of the following situations will arise in the domestic market following the imposition of a voluntary export restraint?
A. imports increase, domestic production increases, prices increase
B. imports decrease, domestic production increases, prices increase
C. imports increase, domestic production decreases, prices decrease
D. imports decrease, domestic production increases, prices decrease
Question 8
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 9
The relative amounts of the goods that will be exchanged for each other in trade refers to the nations' __________ .
A. absolute advantages
B. terms of trade
C. production possibilities
D. autarky status
Question 10
An import quota __________ .
A. limits the amount of a good that can be imported, thus decreasing prices
B. limits the amount of a good that can be imported, thus increasing prices
C. increases the amount of a good imported, thus decreasing prices
D. increases the amount of a good imported, thus increasing prices
Question 11
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 12
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 13
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 14
Which of the following benefits from a quota or voluntary export restraint (VER.?
A. consumers
B. domestic producers
C. the government
D. all of the above
Question 15
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 16
Which of the following statements is true?
A. Free trade will benefit all workers in a nation equally.
B. As a result of specialization some workers will be displaced and harmed in the short run by free trade.
C. Free trade leads to lower wages for all workers in both nations.
D. Specialization will result in a decline in an industry, and none of those workers will be able to find other jobs
Question 17
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 18
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 19
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 20
For a nation to have __________ in producing a good, it must have a lower opportunity cost of producing that good than the other country.
A. a comparative advantage
B. an absolute advantage
C. an autarky advantage
D. both a comparative advantage and an absolute advantage
