exam questions chp 16 PDF

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Chapter 16 Practice Quiz Economics Today: The Macro View, 5Ce (Miller) Comparative Advantage and the Open Economy 1) Of the countries below, the country with the lowest imports-to-GDP ratio is A) Germany. B) Japan. C) Netherlands. D) United Kingdom. Answer: B 2) Assume that the United States could produce all products at a lower per unit cost compared to Canada. If this were the case, A) it would still be possible for Canada to have an absolute advantage in the production of some products. B) Canada could not have a comparative advantage in any product. C) it would still be possible for Canada to have a comparative advantage in trade for some products. D) Canada would have a comparative advantage to the United States in all products. Answer: C 3) Specialization in trade will be economically efficient if it is based upon A) national security needs. B) absolute advantage. C) comparative advantage. D) government regulations. Answer: C 4) Consider a world of two countries producing only wheat and cloth. If country A uses 1 unit of labour to produce 1 unit of wheat and 2 units of labour to produce 1 unit of cloth, while B uses 3 units of labour per unit of wheat and 4 units of labour per unit of cloth, A should export A) wheat and cloth, and B should not export anything. B) wheat, and B should export cloth. C) nothing, and B should export wheat and cloth. D) cloth, and B should export wheat. Answer: B Table 16-1 Output per Unit of Input Jake Holly Output of X Output of Y

50 25

40 per period 100 per period

5) According to Table 16-1, it is true that

A) Holly has an absolute advantage in X. B) Holly has a comparative advantage in X. C) Jake has an absolute advantage in X. D) Jake has a comparative advantage in Y. Answer: C 6) According to Table 16-1, it is true that A) Holly has an absolute advantage in Y. B) Holly has a comparative advantage in X. C) Jake has an absolute advantage in Y. D) Jake has a comparative advantage in Y. Answer: A 7) Suppose Mexico has a comparative advantage relative to Canada in clothing manufacturing and Canada has a comparative advantage in producing agricultural products. Which of the following options is most likely to occur? A) Mexico and Canada will not trade agricultural products or clothing. B) Mexico will sell clothing to Canada and Canada will sell agricultural products to Mexico. C) Mexico will sell agricultural products to Canada and Mexico will buy clothing from Canada. D) Mexico will sell clothing to Canada but not buy any agricultural products from Canada. Answer: B 8) If a country has an absolute advantage in every good, then A) it should avoid international trade. B) it should still export those goods in which it has a comparative advantage. C) it should export a small amount of every good. D) this is an impossible condition; a country cannot have an absolute advantage in all goods. Answer: B 9) Mike and Mary each produce two goods. According to the principle of comparative advantage, the total output produced by the individuals will be greatest A) if Mary produces both goods and Mike produces nothing. B) if each good is produced by the individual who has the lower opportunity cost of producing the good. C) if each good is produced by the individual who has the higher absolute cost of producing the good. D) if Mike produces both goods and Mary produces nothing. Answer: B 10) Suppose that John can produce 80 widgets per hour and can lift 75 kilograms. Robert, on the other hand, can produce 60 widgets per hour and can lift 50 kilograms. It can be concluded that A) John has a comparative advantage in lifting weights. B) Robert has an absolute advantage in lifting weights. C) Robert has a comparative advantage in the production of widgets. D) John has an absolute advantage in widget production. Answer: D

11) A new industry develops and we want to protect it from foreign competition. Which one of the following arguments would appropriately describe this Type of protection? A) national security B) cartelization C) infant industry D) protecting Canadian jobs Answer: C 12) When one country "dumps" some of its products in another country, it A) creates an environmental hazard in the receiving country. B) sells its products abroad at a price lower than it costs to produce the goods. C) increases the aggregate level of employment in the receiving country. D) indirectly reduces its national income. Answer: B 13) For infant-industry tariff protection to be valid requires that A) the tariff be allowed to last forever. B) only industries that currently are producing efficiently should be protected. C) government officials can predict which industries will eventually be able to compete with more established foreign producers. D) the industries protected have substantial monopoly power in the absence of foreign competition. Answer: C 14) A quota is A) a tariff imposed on goods that are dumped in the country. B) a law that prevents ecologically damaging goods to be imported into a country. C) a market-imposed balancing factor that keeps prices of imports and exports in equilibrium. D) a government-imposed restriction on the quantity of a specific good that can be imported. Answer: D 15) A government-imposed restriction on the quantity of a specific good that can be imported is an example of A) dumping. B) a countervailing duty. C) a tariff. D) a quota. Answer: D 16) The Uruguay round of GATT talks resulted in A) reducing trade barriers and tariffs. B) increasing trade barriers and tariffs. C) lowering some trade barriers but increasing tariffs.

D) no changes in tariffs or trade barriers. Answer: A 17) Overall, since the 1930s, tariff rates in Canada have A) increased. B) decreased. C) remained unchanged. D) become very unstable, changing week-to-week. Answer: B 18) The free trade agreement between the United States, Canada, and Mexico is called the A) General Agreement on Tariffs and Trade (GATT). B) World Trade Organization (WTO). C) North American Free Trade Agreement (NAFTA). D) Uruguay Round. Answer: C 19) The WTO is responsible for A) handling trade disputes among its members. B) agreements between the U.S. and Mexico only. C) implementing protectionism. D) restricting foreign trade. Answer: A...