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| 1 | |
According to the text, in 2004 Canadian exports of goods and services accounted for ____ of GDP and imports were _____ of GDP. |
| | A) | 38%; 34% |
| | B) | 12%; 12% |
| | C) | 34%; 38% |
| | D) | 66%; 50% |
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| 2 | |
The top three buyers of Canadian exports, in order, are: |
| | A) | the United States, China, and Mexico. |
| | B) | China, United States, and Japan. |
| | C) | the United States, Japan, and the United Kingdom. |
| | D) | China, the United States, and the United Kingdom. |
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| 3 | |
Agricultural subsidies in rich countries contribute to: |
| | A) | lower prices for consumers in rich countries. |
| | B) | lower prices for the agricultural producers in LDCs. |
| | C) | greater exports of agricultural products from rich countries. |
| | D) | higher demand for agricultural products in rich countries. |
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| 4 | |
Globalization, the increased competition between countries, is a result of: |
| | A) | economic growth in the LDCs. |
| | B) | bilateral trade agreements. |
| | C) | the dismantling of agricultural subsidies in rich countries. |
| | D) | lower transportation costs and better information technology. |
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| 5 | |
Suppose that, in Canada, it takes 42 labour hours to produce solar panels and 6 hours to produce plywood, while in the United States it takes 30 hours and 5 hours, respectively. In this case: |
| | A) | Canada has a comparative advantage in solar panels. |
| | B) | Canada has a comparative advantage in plywood. |
| | C) | Canada has an absolute advantage in solar panels. |
| | D) | Canada has an absolute advantage in plywood. |
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| 6 | |
Country A has an absolute advantage over country B when: |
| | A) | the opportunity cost of production is lower in country A than in country B. |
| | B) | the opportunity cost of production is lower in country B than in country A. |
| | C) | country A uses fewer resources than country B to produce the same output. |
| | D) | country B uses fewer resources than country A to produce the same output. |
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| 7 | |
Trade based on comparative advantage: |
| | A) | allows both countries to consume beyond their respective PPFs. |
| | B) | allows the larger country to consume beyond its PPF. |
| | C) | shifts the PPF of the larger country out and the PPF of the smaller country in. |
| | D) | shifts the PPFs of both countries outward. |
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| 8 | |
Comparative advantage has the potential to generate trade. Actually, trading patterns depend on: |
| | A) | absolute advantage. |
| | B) | exchange rates. |
| | C) | differences in wage rates. |
| | D) | differences in climates. |
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| 9 | |
Comparative advantage may be a result of: |
| | A) | different technologies and tariffs. |
| | B) | exchange rates and factor endowments. |
| | C) | decreasing returns to scale and tariffs. |
| | D) | factor endowments and increasing returns to scale. |
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| 10 | |
Tariffs, taxes imposed on imports, are most likely to lead to: |
| | A) | an increase in domestic consumption. |
| | B) | an increase in domestic production. |
| | C) | an increase in imports. |
| | D) | both a and b. |
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| 11 | |
Tariffs are most likely to cause: |
| | A) | an increase in imports. |
| | B) | a reduction in consumer surplus. |
| | C) | an increase in domestic producer surplus. |
| | D) | an net increase in consumer and producer surplus. |
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| 12 | |
Which of the following is not one of the popular arguments for restricting trade? |
| | A) | protection of the national currency. |
| | B) | the infant industry argument. |
| | C) | national defence. |
| | D) | protection from cheap foreign labour. |
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| 13 | |
Protection from cheap foreign labour is not a particularly good argument for protective tariffs because: |
| | A) | new technologies are available to reduce the need for labour. |
| | B) | capital can be easily substituted for labour. |
| | C) | labour is free to move from one country to another. |
| | D) | wage rates are determined by factor endowments, one of the sources of comparative advantage. |
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| 14 | |
Economist generally agree that tariffs are bad. Even so, countries like Canada still have tariffs because: |
| | A) | economists are rarely correct. |
| | B) | political forces dominate the efficient allocation of resources. |
| | C) | politicians don’t understand economics. |
| | D) | the benefits of tariffs outweigh the costs. |
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| 15 | |
The international institution responsible for settling trade disputes between countries is known as the: |
| | A) | World Bank. |
| | B) | International Monetary Fund |
| | C) | World Trade Organization. |
| | D) | United Nations. |
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