CH 34. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.

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1 Class: Date: CH 34 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Goods and services that the United States sells to other nations are called a. exports. b. imports. c. bartered goods. d. exchanges. e. world goods. 2. The majority of U.S. exports and imports is a. manufactured goods. b. raw materials. c. agricultural products. d. services. e. government securities. 3. If U.S. vacation travelers go to Canada and spend money in Canada on hotels and meals, the expenditure of money counts as a. the United States exporting services. b. the United States importing goods. c. Canada exporting goods. d. the United States importing services. e. Canada importing services. 4. A country with a comparative advantage in the production of a good will production of the good and. a. decrease; import the good b. increase; export the good c. not change; import the good d. increase; import the good e. decrease; export the good 5. A country exports the goods a. for which its domestic prices are very high compared to the world prices. b. that the economy can produce the most of. c. that the economy can produce at relatively lowest opportunity cost. d. that it cannot sell domestically. e. in which it has a comparative disadvantage. 6. If a nation can produce a good or service at the lowest opportunity cost, then it a. can sell the product at a lower price than other nations. b. does not want to export the good because the low cost means it makes only a low profit. c. is best for the nation to not trade the good internationally. d. will definitely import the good because it can beat other countries' prices. e. might export or import the good, depending on whether or not it has a comparative advantage in the production of the good. 1

2 7. The United States imports t-shirts because a. it is a dangerous job to produce them. b. foreign nations have a lower opportunity cost of production. c. the United States has a lower opportunity cost of production. d. foreign economies have an absolute advantage in their production. e. the United States must import goods and services from other countries so that they can develop economically. 8. The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of international trade, how many pounds of cherries would U.S. farmers produce? a. 200,000 pounds b. 400,000 pounds c. 600,000 pounds d. 800,000 pounds e. 0 pounds 9. The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound, the total imports of cherries to the United States from other nations equals a. 200,000 pounds. b. 400,000 pounds. c. 600,000 pounds. d. 800,000 pounds. e. 0 pounds. 10. Most t-shirts bought by Americans are made in Asia. Producers in Asia making t-shirts trade with America because they a. receive a lower price than they would receive from another buyer. b. receive a higher price than they would receive from another buyer. c. must export something to the United States. d. cannot produce enough t-shirts for their own domestic consumption. e. cannot lower their price any lower and still make a profit. 2

3 11. When a nation starts importing a good or service, domestic employment in that industry a. decreases. b. stays the same. c. increases. d. might change, but more information about what else the country imports is needed to determine if employment increases, decreases, or does not change. e. might change, but more information about what the country exports is needed to determine if employment increases, decreases, or does not change. 12. When a nation starts importing a good or service, the domestic production of the good or service a. decreases. b. stays the same. c. increases. d. might change, but more information about what the country exports is needed to determine if production increases, decreases, or does not change. e. might change, but more information about what else the country imports is needed to determine if production increases, decreases, or does not change. 13. The figure above shows the production possibilities frontiers for the United Kingdom and France. What is the opportunity cost of one bushel of wheat for the United Kingdom? a. 1 pound of fish 4 b. 1 pound of fish 2 c. 1 pound of fish d. 200 pounds of fish e. 2 pounds of fish 3

4 14. Which of the following are correct? i. Offshoring is the same as outsourcing. ii. Everyone in the United States gains from offshoring. iii. One reason offshoring increased in recent years is the fall in the cost of telecommunications. a. i only. b. ii only. c. iii only. d. i and iii. e. ii and iii. 15. A tax on a good that is imposed by the importing country is called a a. tariff. b. nontariff barrier. c. quantitative restriction. d. licensing regulation. e. trade constraint. 16. Looking at the average tariff rate in the United States since 1930, we see that a. at first tariffs declined, but have recently risen. b. tariffs have trended downward for most of the period. c. tariff levels have remained high, at over 50 percent throughout the period. d. while we talk about free trade, tariff levels have risen over the last 30 years. e. tariffs were made illegal in the United States in During the past 70 years, the peak average tariff rate in the United States stemmed from the a. creation of GATT in the middle of the 1940s. b. Kennedy Administration in the early 1960s. c. Uruguay round of GATT in the 1980s. d. Smoot-Hawley Tariff Act in the early 1930s. e. Clinton-Bush tariff of Country A imports 1,000 cars per month. After imposing a $50 per car tariff, imports fall to 800 cars per month. How much does Country A's government collect in tariff revenue? a. $90,000 b. $50,000 c. $40,000 d. $10,000 e. $60, A quota is defined as a. a tax on imports. b. any non-tax barrier to restrict imports. c. a specified maximum amount that can be imported. d. a specified maximum amount that can be exported. e. a specified minimum amount that can be imported. 20. When governments specify the maximum amount of a good that may be imported in a given period of time, they are establishing a a. tariff. b. quota. c. dynamic tariff. d. tax. e. dumping limit. 4

5 21. The imposition of a quota domestic production, imports, and domestic purchases. a. increases; decreases; decreases b. increases; decreases; increases c. decreases; increases; decreases d. decreases; decreases; decreases e. increases; increases; increases 22. If the United States imposed a quota on the amount of salmon imported from Chile, the result would be salmon prices in the United States and in the quantity of salmon demanded in the United States. a. higher; an increase b. higher; a decrease c. lower; an increase d. lower; a decrease e. higher; no change 23. Dumping is defined as the situation in which a. domestic producers sell a product at prices below the cost of production. b. foreign producers sell a product at a price below the cost of production. c. foreign producers sell a product at a price above a fair level. d. domestic producers cut production to drive up domestic prices. e. domestic producers are protected by tariffs. 24. A flawed argument for protection from foreign trade is that i. tariffs save domestic jobs. ii. tariffs protect the national culture. iii. quotas bring about diversity and stability a. i only. b. ii only. c. iii only. d. i and ii. e. i, ii, and iii. 25. The argument that jobs are lost to free trade is a. totally false because no jobs are lost to free trade. b. correct because jobs are lost but foreign countries are helped and we can afford losses. c. incorrect because no jobs are lost and new jobs are created by trade. d. correct because some jobs are lost but incorrect because new jobs also are created. e. true only when tariffs are imposed on the goods being imported. 26. International trade decreases the demand for workers in domestic industries that a. produce goods that are exported from the country. b. produce goods that also are imported into the country. c. help businesses import and export. d. service imported goods. e. produce the goods in which the nation has a comparative advantage. 27. The two main reasons why international trade is restricted is because restricting trade means that governments can and because domestic businesses. a. create jobs; earn profits b. obtain revenue; rent seek c. rent seek; want to dump d. prevent dumping; want to dump e. rent seek; obtain revenue 5

6 28. Comparing developed and developing nations in their use of tariffs, we see that a. the developing nations' governments get very little revenue from tariffs. b. both governments get large amounts of revenue from tariffs. c. many developing nations' governments get a large portion of their revenue from tariffs. d. developing nations almost never impose tariffs because they want their people to obtain goods and services at the lowest possible price. e. developed nations rely much more than developing nations on tariff revenue. 29. In the 1950s, crude oil and natural gas imports were restricted to keep the domestic industries viable in case of a war. The rationale for this protection is the argument for protection. a. save domestic jobs b. national security c. anti-dumping d. infant-industry e. penalizing lax environmental standards 30. In the United States since 1960, what has happened to the percentage of the total production of goods and services that is exported and to the percentage of the total purchases of goods and services that is imported? a. They have remained roughly constant. b. The percentages are about two to three times as much as they were in c. The percentages are now about half as much as they were in d. The percentages are about ten times as much as they were in e. It is impossible to tell because these percentages were first calculated in If a college student from North Carolina State University travels to Germany, the money spent on hotels and sight-seeing in Germany is counted as services America and Germany. a. exported to; imported from b. imported from; imported from c. imported from; exported to d. exported to; exported to e. neither exported to nor imported from; imported from 32. A country exports a good if a. it has a high opportunity cost of production. b. the world price of the good is below the country's no-trade equilibrium price. c. the world price of the good is above the country's no-trade equilibrium price. d. the quantity demanded of the good in the country is greater than the quantity supplied at the world price. e. it cannot import the good. 33. A country will export a good if it a. can sell the good to a foreigner at a higher price than the no-trade price. b. can sell the good to a foreigner at a lower price than the no-trade price. c. can dump the good on the world market. d. has a high opportunity cost of production. e. is impossible to import the good. 6

7 34. If the United States starts to import a good that had previously been produced in the United States, the market price of the good in the United States a. rises. b. falls. c. remains constant. d. either remains constant or rises, depending on how whether the supply of the good stays the same or increases. e. There is not enough information to answer the question because we need to know if the market price in the United States had been above or below the world market price before trade began. 35. The table above has the domestic demand and domestic supply schedules for a good. According to the table, the no-trade price of the good is a. $4. b. $6. c. $8. d. $10. e. $ The United States can use all its resources to produce 100 videos or 500 shoes. China can use all of its resources to produce 25 videos or 200 shoes. The opportunity cost of producing a video in the United States is a. 5 shoes. b. 8 shoes. c. 20 shoes. d. 2 shoes. e. 1 video. 37. Who gains from international trade? a. only the exporting nation b. only the importing nation c. both the importing and the exporting nations d. neither the importing nor the exporting nations e. The gains depends on which nation gets to keep the total revenue from the sale. 7

8 38. With no international trade, a country consume at a point outside of its PPF; with international trade, a country consume at a point outside of its PPF. a. cannot; can b. can; cannot c. can; can d. cannot; cannot e. None of the above answers are correct because the presence or absence of international trade has nothing to do with where a country consumes in comparison to its PPF. 39. For a nation without foreign trade, its consumption of goods and services is a. limited by foreign production possibilities frontiers and the world price. b. limited by its production possibilities frontier. c. unlimited. d. limited by its demand for goods and services. e. limited by what other nations produce. 40. When a good is imported, the domestic production and the domestic consumption. a. increases; increases b. increases; decreases c. decreases; increases d. decreases; decreases e. increases; does not change 41. The difference between a tariff and a quota is that the tariff revenue goes to the a. domestic consumer. b. domestic producer. c. domestic government. d. holder of the quota license. e. foreign government. 42. If the U.S. government imposes a tariff on imported steel, who else besides U.S. steel producers gains from the tariff? a. U.S. steel consumers b. the U.S. government c. U.S. importers of steel d. foreign exporters of steel e. the foreign government 8

9 43. The table above gives the domestic demand and supply schedules for a good. Suppose the world price of the good is $40 and the government imposes a $20 per unit tariff. How much will the government collect as tariff revenue? a. $160 b. $320 c. $80 d. $240 e. $ Of the following, who gains with a quota? a. domestic buyers of the good or service b. the importer of the good or service c. the foreign exporter of the good or service d. the government of the importing nation e. the government of the exporting nation 45. When a tariff is imposed on a good, the increases. a. domestic quantity purchased b. domestic quantity produced c. quantity imported d. quantity exported e. world price 46. What is the national security argument to support protection from international trade? a. Domestic firms must be protected until they gain a comparative advantage. b. Any firm necessary in wartime must be protected. c. Foreign producers selling below cost to drive domestic firms bankrupt must be stopped. d. Domestic jobs must be protected from competition from low-paid foreign workers. e. Foreigners selling products in the economy limit the nation's diversity and stability. 47. What is the infant-industry argument for protection from international trade? a. Domestic firms must be protected until they gain a comparative advantage. b. Any firm necessary in wartime must be protected. c. Foreign producers selling below cost to drive domestic firms bankrupt must be stopped. d. Domestic jobs must be protected from competition from low-paid foreign workers. e. Foreigners selling products in the economy limit the nation's diversity and stability. 9

10 48. What is rent seeking with respect to restricting international trade? a. The rent on factory buildings increases if trade is restricted. b. The government avoids paying rent on buildings when importers pay the tariff. c. An attempt to capture the gains from trade by imposing a tariff. d. The government's efforts to capture tariff rents. e. The attempt by importers to avoid paying a tariff. 49. Which of the following groups gain from international trade? i. producers of exported goods ii. domestic consumers of imported goods iii. workers in exporting firms a. i only. b. ii only. c. iii only. d. i and iii. e. i, ii, and iii Trade is often restricted because the a. total gain to all producers is larger than the total loss to all consumers. b. total gain to all producers is smaller than the total loss to all consumers. c. gain per producer is larger than the loss per consumer. d. gain per producer is less than the loss per consumer. e. gain per consumer is larger than the loss per producer. 10