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| 1.
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The slope of the Production Possibilities Curve of a country in the two good case shows |
| | A) | the opportunity cost of one good in terms of the other |
| | B) | the rate at which the goods can be exchanged with another country in trade |
| | C) | the relative costs of producing the two goods |
| | D) | A) and C) |
| | E) | B) and C) |
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| 2.
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Trade offers the possibility of increasing consumption possibilities |
| | A) | when the relative costs of producing goods differs as between countries |
| | B) | only if one of the countries can produce one or both goods at a lower price |
| | C) | both countries are equally efficient at producing one good |
| | D) | each country can run a trade surplus |
| | E) | each country can run a trade deficit |
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| 3.
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If a country moves from autarky to free trade it will produce-----of the good(s) it exports, and -----of the good(s) it imports, and consume-----than it produces of its export good(s) and----than it produces of its imported good(s). |
| | A) | more, more, less, less |
| | B) | more, less, less, more |
| | C) | more, less, more, less |
| | D) | less, more, more, less |
| | E) | less, less, more, more |
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| 4.
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For a country to compete successfully in trade through exporting its |
| | A) | wage costs must be lower than those in the countries to which it exports |
| | B) | wage costs may be higher provided these are offset by higher productivity |
| | C) | its general price level(adjusted for the exchange rate) must be lower than in the country to which it exports |
| | D) | the exchange rate of its currency must fall relative to that in competing countries |
| | E) | none of the above |
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| 5.
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Who among the following do not win from free trade? |
| | A) | Consumers of imported goods. |
| | B) | Producers of exported goods. |
| | C) | Consumers of exported goods. |
| | D) | Both a and b. |
| | E) | Both b and c. |
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| 6.
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Who gain from import tariffs? |
| | A) | Consumers of imported goods. |
| | B) | Producers of imported goods. |
| | C) | Producers and consumers of exported goods. |
| | D) | The government. |
| | E) | Both b and d. |
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| 7.
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The principal difference between a tariff and a quota is that: |
| | A) | A tariff generates profits for firms that hold import licenses,
while a quota generates tax revenues for the government. |
| | B) | A tariff generates tax revenues for the government, while a quota generates profits for firms that hold import licenses. |
| | C) | A tariff hurts consumers of imported goods, but a quota benefits them. |
| | D) | A tariff hurts producers of imported goods, but a quota benefits them. |
| | E) | A quota hurts the consumers of exported goods, but a tariff benefits them. |
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| 8.
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Which of the following is not correct about the effects of the VER
the US imposed on Japanese automobiles in the 1980s? |
| | A) | It benefited the US automakers. |
| | B) | It hurt the US auto consumers. |
| | C) | It id not result in price increases in the US automobile market. |
| | D) | It benefited the Japanese automakers. |
| | E) | It hurt the US government. |
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| 9.
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The demand for shoes in a country is given by: D = 200 - 0.5 P, where P is the price of a pair shoes. Supply by domestic producers is given by: S = 50 + 0.5P. The world price of a pair of shoes equals 100 and this economy is open to trade. If a quota of 20 pairs is placed on shoe imports, the quantity of shoes produced domestically will change from ____ pairs with trade, but no quota, to ____ pairs with trade and a quota. |
| | A) | 50; 115 |
| | B) | 100; 120 |
| | C) | 70; 105 |
| | D) | 80; 95 |
| | E) | 100;150 |
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| 10.
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A more efficient alternative to restricting trade is: |
| | A) | to compensate the winners. |
| | B) | to compensate the losers. |
| | C) | autarky. |
| | D) | to repeal the law of comparative advantage. |
| | E) | a system of voluntary export restraints. |
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