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Pre-Test
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1
Which of the following statements about the gains from trade is false?
A)The more competition, the more of the gains from trade will go to citizens, rather than traders.
B)When two countries trade, either the traders or the citizens will benefit in each country, but never both.
C)Once competition prevails, smaller countries get a larger percentage of the gains from trade.
D)Gains from trade go to countries producing goods that exhibit economies of scale.
2
The reason two countries trade is that:
A)trade can make them both better off.
B)trade will make one of them better off, but will make the other worse off.
C)trade doesn't make either country better off, but it does create more jobs.
D)legally-binding treaties between nations require that they engage in trade with each other.
3
From a global perspective, free trade:
A)reduces total output.
B)increases output in some countries while decreasing output in other countries.
C)increases total output.
D)has no effect on total output.
4
Which of the following may help to explain why economists view trade as good, while the public tends to be fearful of outsourcing?
A)The gains from trade are sometimes difficult to see when they come in the form of lower prices.
B)The balance of trade for any nation must be zero, and the public does not understand this.
C)Trade primarily involves only manufactured goods.
D)The public tends to overemphasize that opportunity cost is relative.
5
If the opportunity cost of producing computers is lower in Japan than in the U.S., then:
A)Japan should produce computers and sell them to the U.S.
B)Japan will consume more computers than the U.S.
C)the U.S. should produce computers and sell them to Japan.
D)the U.S. will consume more computers than Japan.
6
Outsourcing manufacturing work out of the United States:
A)happens because the United States has a comparative advantage in manufactured goods.
B)may increase the number of jobs in services because the United States has a comparative advantage in facilitating trade.
C)is the result of the persistent trade deficits over the past 30 years.
D)has created higher consumer prices in the United States because of increased transportation costs.
7
The fact that most U.S. citizens learn English from birth is a source of:
A)gains from trade for the U.S.
B)opportunity cost for the U.S.
C)comparative advantage for the U.S. because English is the international language of business.
D)comparative disadvantage for the U.S. because Mandarin Chinese is spoken by more people than is English
8
A country would prefer to have:
A)inherent sources of comparative advantage.
B)transferable sources of comparative advantage.
C)a positive trade balance.
D)no outsourcing.
9
A country that is exporting more than it is importing:
A)has a balance of trade.
B)has a trade surplus.
C)has a trade deficit.
D)is increasing its debt to the rest of the world.
10
If the U.S. dollar appreciates relative to the Canadian dollar:
A)the Canadian dollar must also be appreciating relative to the U.S. dollar.
B)the Canadian dollar may or may not be appreciating relative to the U.S. dollar.
C)the U.S. dollar must also be appreciating relative to other currencies.
D)the Canadian dollar must be depreciating relative to the U.S. dollar.







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