Question 1

Suppose Canada eliminates tariffs on German bicycles.As a result, we would expect:

Accepted Answer

A)  the price of German bicycles to decline in Canada.
B)  employment would increase in the German bicycle industry.
C)  employment would decrease in the Canadian bicycle industry.
D)  all of the above to occur.E) A) and C)
F) B) and D)

Question 2

d and Dd are the domestic supply and demand for a product and Pc is the world price of that product.With a PcPt per unit tariff, per unit revenue received by domestic and foreign producers respectively will be: A) Pc and Pa. B) Pa and Pc. C) Pa and Pt. D) Pt and Pc." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product.With a PcPt per unit tariff, per unit revenue received by domestic and foreign producers respectively will be:

Accepted Answer

A)  Pc and Pa.
B)  Pa and Pc.
C)  Pa and Pt.
D)  Pt and Pc.E) A) and B)
F) A) and C)

Question 3

In the real world, specialization is rarely complete because:

Accepted Answer

A)  nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.
B)  production possibilities curves are straight lines rather than curves bowed outward as viewed from the origin.
C)  one nation's imports are necessarily another nation's exports.
D)  international law prohibits monopolies.E) All of the above
F) B) and C)

Question 4

Canadian exports of goods and services are about:

Accepted Answer

A)  20 percent of Canadian GDP.
B)  5 percent of Canadian GDP.
C)  10 percent of Canadian GDP.
D)  30 percent of Canadian GDP.E) A) and B)
F) C) and D)

Question 5

When Sally can paint a house and plant a tree more efficiently than Tom, we can conclude that:

Accepted Answer

A)  Tom has absolute advantage over Sally in both painting and gardening.
B)  Sally has absolute advantage over Tom in both painting and gardening.
C)  Sally has absolute advantage over Tom in gardening and not painting.
D)  Tom has absolute advantage over Sally in painting and not gardening.E) All of the above
F) A) and B)

Question 6

A tariff can best be described as:

Accepted Answer

A)  an excise tax on an imported good.
B)  a government payment to domestic producers to enable them to sell competitively in world markets.
C)  an excise tax on an exported good.
D)  a law which sets a limit on the amount of a good which can be imported.E) A) and C)
F) None of the above

Question 7

Production possibilities data for Gamma and Sigma.All data are in tons.Gamma production possibilities:  Sigma production possibilities:
 On the basis of the above information:

Accepted Answer

A)  Gamma should export both tea and pots to Sigma.
B)  Sigma should export tea to Gamma and Gamma should export pots to Sigma.
C)  Gamma should export tea to Sigma and Sigma should export pots to Gamma.
D)  Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots.E) All of the above
F) B) and D)

Question 8

As it relates to international trade, "dumping":

Accepted Answer

A)  is a form of price discrimination illegal under Canadian anti-combines laws.
B)  is the practice of selling goods in a foreign market at less than cost.
C)  constitutes a general case for permanent tariffs.
D)  is defined as selling more goods than allowed by an import quota.E) A) and B)
F) A) and C)

Question 9

Refer to the above diagram pertaining to two nations and a specific product.Point G is the:

Accepted Answer

A)  domestic price for the nation represented by lines FA and FC.
B)  world equilibrium price.
C)  domestic price for the nation represented by lines GB and GD.
D)  price above the world equilibrium price.E) A) and D)
F) A) and C)

Question 10

The following data is for the hypothetical nations of Alpha and Beta.Qs is domestic quantity supplied and Qd is domestic quantity demanded. s is domestic quantity supplied and Qd is domestic quantity demanded.   Refer to the above data.The equilibrium world price of steel must be between: A) $5 and $4. B) $4 and $3. C) $3 and $2. D) $2 and $1." class="answers-bank-image d-inline" rel="preload" > Refer to the above data.The equilibrium world price of steel must be between:

Accepted Answer

A)  $5 and $4.
B)  $4 and $3.
C)  $3 and $2.
D)  $2 and $1.E) C) and D)
F) A) and B)

Question 11

The graph below shows the production possibility curves for two hypothetical nations, Orin and Pohl, which each make two hypothetical products, jaxs and keps.Which of the following statements is correct?

Accepted Answer

A)  Orin has a comparative advantage in both jaxs and keps.
B)  Pohl has a comparative advantage in jaxs.
C)  The opportunity cost of making jaxs is lower in Orin than in Pohl.
D)  Orin is more efficient than Pohl.E) B) and C)
F) B) and D)

Question 12

According to the principle of comparative advantage, worldwide output and consumption levels will be highest when goods are produced in nations where:

Accepted Answer

A)  domestic opportunity costs are lowest.
B)  inflation rates are low.
C)  the balance of trade is in a surplus position.
D)  the exchange rate is falling.E) A) and B)
F) A) and C)

Question 13

Diversification for stability argument is given as an excuse for imposing tariff and quotas against imports in some countries.This argument is based on:

Accepted Answer

A)  the fact that some of the highly specialized economies such as Saudi Arabia are very dependent on international markets for their income.
B)  the fact that some highly specialized economies such as Cuba do not want any foreign income getting into their country.
C)  the fact that imposing such tariffs and quotas has little economic cost for the host country.
D)  the fact that Canada needs such tariff and quotas to protect its industries.E) B) and D)
F) A) and B)

Question 14

A tax on an imported product is a(n) :

Accepted Answer

A)  tariff.
B)  quota.
C)  import subsidy.
D)  export subsidy.E) B) and C)
F) A) and C)

Question 15

Consider two countries which trade with each other.The degree of specialization according to their respective comparative advantages will be greater if the countries face:

Accepted Answer

A)  constant costs.
B)  high tariffs.
C)  low unemployment rates.
D)  increasing costs.E) B) and C)
F) B) and D)

Question 16

If Canadian government were to impose a quota on wristwatches imported from Switzerland, the:

Accepted Answer

A)  Canada would reduce its export of watches.
B)  prices of watches in Switzerland would rise.
C)  price of watches in Canada would remain the same, but the quantity will fall.
D)  total quantity of watches (domestically produced and imported)  purchased would decline.E) C) and D)
F) B) and C)

Question 17

A high tariff on imported good X might reduce domestic employment in industry Y if:

Accepted Answer

A)  X is an input used domestically in producing Y.
B)  X and Y are substitute goods.
C)  X is an inferior good.
D)  Y is an inferior good.E) A) and B)
F) A) and C)

Question 18

Free trade based on comparative advantage is economically beneficial because:

Accepted Answer

A)  it promotes an efficient allocation of world resources.
B)  it increases competition.
C)  it provides consumers with a wider range of products.
D)  of all of the above reasons.E) None of the above
F) B) and C)

Question 19

An example of a nontariff barrier would be:

Accepted Answer

A)  a minimum limit on the quantity of imports.
B)  excessive licensing requirements.
C)  a tax on an imported product.
D)  voluntary export restraints.E) A) and B)
F) All of the above

Question 20

Consider two countries which trade with each other.As these countries expand their production according to their comparative advantage, most probably they will experience:

Accepted Answer

A)  constant costs.
B)  high tariffs.
C)  decreasing costs.
D)  increasing costs.E) None of the above
F) A) and B)

Exam 17: Part B: International Trade

Production possibilities data for Gamma and Sigma.All data are in tons.Gamma production possibilities: Sigma production possibilities: On the basis of the above information:

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A high tariff on imported good X might reduce domestic employment in industry Y if:

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As it relates to international trade, "dumping":

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Free trade based on comparative advantage is economically beneficial because:

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An example of a nontariff barrier would be:

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A tariff can best be described as:

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The graph below shows the production possibility curves for two hypothetical nations, Orin and Pohl, which each make two hypothetical products, jaxs and keps.Which of the following statements is correct?

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Suppose Canada eliminates tariffs on German bicycles.As a result, we would expect:

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If Canadian government were to impose a quota on wristwatches imported from Switzerland, the:

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Canadian exports of goods and services are about:

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Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product.With a PcPt per unit tariff, per unit revenue received by domestic and foreign producers respectively will be:

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Refer to the above diagram pertaining to two nations and a specific product.Point G is the:

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A tax on an imported product is a(n) :

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Diversification for stability argument is given as an excuse for imposing tariff and quotas against imports in some countries.This argument is based on:

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The following data is for the hypothetical nations of Alpha and Beta.Qs is domestic quantity supplied and Qd is domestic quantity demanded. Refer to the above data.The equilibrium world price of steel must be between:

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In the real world, specialization is rarely complete because:

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Consider two countries which trade with each other.The degree of specialization according to their respective comparative advantages will be greater if the countries face:

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When Sally can paint a house and plant a tree more efficiently than Tom, we can conclude that:

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Consider two countries which trade with each other.As these countries expand their production according to their comparative advantage, most probably they will experience:

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According to the principle of comparative advantage, worldwide output and consumption levels will be highest when goods are produced in nations where:

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Refer to the above diagram, where S_d and D_d are the domestic supply and demand for a product and P_c is the world price of that product.With a P_cP_t per unit tariff, per unit revenue received by domestic and foreign producers respectively will be:

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The following data is for the hypothetical nations of Alpha and Beta.Q_s is domestic quantity supplied and Q_d is domestic quantity demanded. Refer to the above data.The equilibrium world price of steel must be between:

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