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| 1.
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An open economy is one that: |
| | A) | relies on a market system to allocate scarce resources. |
| | B) | relies on central planning to allocate scarce resources. |
| | C) | has a flexible exchange rate. |
| | D) | trades with other countries. |
| | E) | does not trade with other countries. |
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| 2.
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An economy has two workers, Amy and Brian. Per day of work Amy can produce 150 bushels of peaches or 50 glasses, and Brian can produce 20 bushels of peaches or 100 glasses. Amy and Brian work 200 days per year. Amy's opportunity cost of producing glasses is ______ bushels of peaches , while Brian's opportunity cost of producing glasses is ______ bushels of peaches. |
| | A) | 3; 5 |
| | B) | 0.33; 0.2 |
| | C) | 0.33; 5 |
| | D) | 3; 0.2 |
| | E) | 5; 0.33 |
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| 3.
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An economy has two workers, Amy and Brian. Per day of work Amy can produce 150 bushels of peaches or 50 glasses, and Brian can produce 20 bushels of peaches or 100 glasses. Amy and Brian work 200 days per year. The world price is one bushel of peaches for one glass. If this economy is closed to trade, the maximum possible consumption will be ____ glasses, compared to _____ glasses if this economy is open to trade. |
| | A) | 20,000; 26,000 |
| | B) | 20,000; 50,000 |
| | C) | 30,000; 50,000 |
| | D) | 50,000; 30,000 |
| | E) | 50,000; 34,000 |
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| 4.
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If a small open economy is equally productive in producing corn and wheat and the world price of corn is twice the world price of wheat, then to maximize consumption possibilities, this economy will produce ______ and trade. |
| | A) | only wheat. |
| | B) | only corn. |
| | C) | equal quantities of corn and wheat. |
| | D) | twice as much corn as wheat. |
| | E) | twice as much wheat as corn. |
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| 5.
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If the world price is less than the domestic price of a commodity in a closed economy, when that economy begins to trade, the economy will ______ the commodity. |
| | A) | stop consuming |
| | B) | stop producing |
| | C) | be self-sufficient in |
| | D) | become a net importer of |
| | E) | become a net exporter of |
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| 6.
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The demand for laser printers in a country is given by: D = 8,000 - 2 P, where P is the price of a laser printer. Supply by domestic producers is given by: S = 1,000 + 8P. If the world price of a laser printer equals 800 and this economy is open to trade, then this country will: |
| | A) | export 1,000 laser printers. |
| | B) | export 23,000 laser printers |
| | C) | neither import nor export laser printers. |
| | D) | import 1,000 laser printers. |
| | E) | import 2,000 laser printers |
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| 7.
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Consumers of imported goods are ____ as a result of trade and consumers of exported goods are _____ as a result of trade. |
| | A) | winners; losers |
| | B) | winners; winners |
| | C) | losers; winners |
| | D) | losers; losers |
| | E) | unaffected; unaffected |
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| 8.
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A tax imposed on an imported good is called a: |
| | A) | tariff. |
| | B) | quota. |
| | C) | protection tax. |
| | D) | capital inflow. |
| | E) | capital outflow. |
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| 9.
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A quota is: |
| | A) | legal limit on the quantity of a good that may be imported. |
| | B) | legal limit on the price of a good that may be imported. |
| | C) | a tax imposed on an imported good. |
| | D) | a tax imposed on an exported good. |
| | E) | menu cost. |
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| 10.
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The demand for jeans in a country is given by: D = 60 - 0.6 P, where P is the price of a pair jeans. Supply by domestic producers is given by: S = 10 + 0.4P. The world price of a pair of jeans equals 30 and this economy is open to trade. If a tariff of 10 per pair is placed on jeans imports, the quantity of jeans demanded domestically will change from ____ pairs with trade, but no tariff, to ____ pairs with trade and a tariff. |
| | A) | 30; 42 |
| | B) | 30; 36 |
| | C) | 42; 36 |
| | D) | 42; 22 |
| | E) | 42; 26 |
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