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| 1 | |
Answer the next question on the basis of the following production possibilities tables for two countries, North and South Cantina:
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Refer to the above tables. Assume that prior to specialization, each country chose production possibility C. If each then specializes according to comparative advantage, the resulting gains in total production will be: |
| | A) | 6 smokes |
| | B) | 1 smoke and 1 mirror |
| | C) | 2 smokes and 8 mirrors |
| | D) | 4 mirrors |
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| 2 | |
Which of the following is an example of a capital-intensive industry? |
| | A) | Wool |
| | B) | Automobiles |
| | C) | Clothing |
| | D) | Grain |
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| 3 | |
According to the concept of comparative advantage, specialization and trade between two countries will benefit: |
| | A) | only the country with the lowest labor costs |
| | B) | both countries, provided neither country has an absolute advantage in both goods |
| | C) | both countries, provided domestic opportunity costs differ in the two countries |
| | D) | only the country with the highest tariff rate |
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| 4 | |
In Qatar, a worker can produce either one unit of salt or two units of pepper. In Korea, one worker can produce either two units of salt or three units of pepper. Compared to Qatar, Korea has a comparative advantage in the production of: |
| | A) | both salt and pepper |
| | B) | neither salt nor pepper |
| | C) | salt |
| | D) | pepper |
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| 5 | |
Answer the next question on the basis of the following production possibilities tables for two countries, North and South Cantina:
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Refer to the above tables. If North and South Cantina engage in trade, the terms of trade will be between: |
| | A) | 1 and 3 mirrors for each smoke |
| | B) | 2 and 3 smokes for each mirror |
| | C) | 2/3 and 3/2 smokes for each mirror |
| | D) | 3 and 9 mirrors for each smoke |
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| 6 | |
Use the following diagram to answer the next question.
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Refer to the above diagram, wherein Sd and Dd are the domestic supply and demand for a product. If the world price for this product is $10, this country will: |
| | A) | export 20 units |
| | B) | export 40 units |
| | C) | import 20 units |
| | D) | import 40 units |
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| 7 | |
Which of the following is an example of "dumping?" |
| | A) | China restricts total imports of U.S. produced textiles |
| | B) | Lower wages cause U.S. firms to outsource data-entry jobs to India |
| | C) | Japan exports steel to the U.S. at a price below its production cost |
| | D) | Canada exceeds its yearly quota of fish taken from the Outer Banks |
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| 8 | |
Answer the next question based on the following diagram.
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Refer to the diagram. Lines A and C, respectively, represent the export supply curve and import demand curve for Aycee, and lines B and D represent the same for Bedee. In world equilibrium: |
| | A) | Aycee imports 100 units from Bedee at a price of $16 |
| | B) | Aycee exports 100 units from Bedee at a price of $20 |
| | C) | Both Aycee and Bedee import 100 units from the rest of the world at a price of $16 |
| | D) | Both Aycee and Bedee export 100 units from the rest of the world at a price of $20 |
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| 9 | |
An example of a nontariff barrier would be: |
| | A) | a voluntary reduction in the quantity of exports |
| | B) | an increase in the cost of shipping exported goods |
| | C) | excessively long quarantines and slow inspections of exported fruits |
| | D) | a subsidy on an imported good |
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| 10 | |
In terms of their economic impacts, the primary difference between tariffs and quotas is that: |
| | A) | tariffs benefit producers and quotas benefit consumers |
| | B) | quotas result in a lower volume of imports, but tariffs do not |
| | C) | tariffs result in higher domestic prices, but quotas do not |
| | D) | tariffs generate revenue for the taxing government, but quotas do not |
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