1. Growth of the scarce factor in the large-country case will, other things equal,

Select one:

a. always expand trade and improve the terms of trade.

b. expand both exports and imports and lead to an improvement in the terms of trade.

c. result in a protrade production effect and a deterioration in the terms of trade.

d. result in an ultra-antitrade production effect and an improvement in the terms of trade.

2. If a (large) country B puts an export tax on a good, and assuming that world demand for the export from B is not perfectly inelastic, then, because of the tax, the price of the good in country B will __________ and the price of the good on the world market __________.

Select one:

a. increase; also will increase.

b. increase; will decrease.

c. decrease; will increase.

d. decrease; also will decrease.

3. If a country grows such that, at constant relative prices, the production of its export good rises by 5 percent and the production of its import-competing good rises by 15 percent (and these are the only two goods produced in the economy), this production pattern would be called __________ production effect.

Select one:

a. a "neutral".

b. a "protrade"

c. an "antitrade".

d. an "ultra-antitrade".

4. If a country's total output grows by 10 percent and its imports fall by 6 percent because of the growth, this growth pattern would be classified as __________ growth.

Select one:

a. ultra-antitrade.

b. antitrade.

c. protrade.

d. ultra-protrade.

5. If a small country produces 100 units of product X and consumes 140 units at a price of $2 under free trade, but the imposition of a tariff leads to a situation where domestic price is $2.20, domestic production is 120 units, and domestic consumption is 125 units, then the gain in producer surplus in this country because of the tariff is __________.

Select one:

a. $1.00.

b. $22.00.

c. $24.00.

d. $26.50.

6. If population growth is taking place,

Select one:

a. one can no longer meaningfully compare community indifference curves to evaluate the impact of growth and trade.

b. the growth in population must be accompanied by increased capital stock or changes in technology if social welfare is to increase (if increasing returns to scale are not present).

c. the production-possibilities frontier will shift out relatively more for the labor-intensive good than for the capital-intensive good.

d. all of the above.

7. If tariffs are used in an attempt to improve country A's balance of trade, and if exchange rates are flexible, the imposition of the tariffs will cause __________ in the value of A's currency relative to other currencies and, as a consequence, A's exports will __________.

Select one:

a. a decrease; decrease.

b. a decrease; increase.

c. an increase; decrease.

d. an increase; increase.

8. If the "net" or "overall" effect (which is the net result of the production and consumption effects) of a country's growth is "protrade" in nature, then the country's offer curve (with the export good on the horizontal axis) will shift or pivot __________; if the "net" or "overall" effect is "antitrade" in nature, then the country's offer curve (with the export good on the horizontal axis) __________.

Select one:

a. outward (or to the right); will shift or pivot inward (or to the left).

b. outward (or to the right); also will shift or pivot outward (or to the right).

c. inward (or to the left); also will pivot inward (or to the left).

d. inward (or to the left); will shift or pivot outward (or to the right).

9. If, when a country grows, its home production of its import good increases by 15 percent and its home consumption of the import good also increases by 15 percent, then, with the economic growth, the country's absolute quantity of imports will __________.

Select one:

a. increase.

b. decrease.

c. remain constant.

d. increase, decrease, or remain constant - cannot be determined without more information.

10. In the analysis of growth and trade, growth in the labor force (coupled with no growth in the capital stock) in a relatively capital-abundant country would lead to what type of "production effect" in the country?

Select one:

a. ultra-antitrade production effect.

b. antitrade production effect.

c. protrade production effect.

d. ultra-protrade production effect.

11. In the general equilibrium graph with a production-possibilities frontier (PPF) and consumer indifference curves,

Select one:

a. a tariff has the same welfare impact as a subsidy to the import-competing industry (provided domestic production is the same with each alternative instrument).

b. a tariff reduces both real income and the gains from exchange.

c. a tariff reduces consumer welfare only if the tariff is a prohibitive tariff (i.e., eliminates all imports).

d. protection shifts the PPF outward but reduces consumer welfare.

12. In the large country case, the imposition of an import quota

Select one:

a. will always produce a net loss for the imposing country.

b. can result in a net gain for the importing country if the government employs an auction quota system to allocate the restricted imports.

c. will produce a net gain for the exporting country.

d. will have no predictable effect on the exporting country.

13. In the large-country case, an export tax

Select one:

a. leads to an increase in the price of the good in the importing country.

b. leads to no change in the price of the good in the importing country.

c. is absorbed totally by the exporting country.

d. increases consumer welfare in both the exporting and the importing country.

14. In a Heckscher-Ohlin context, other things equal, growth of the relatively-abundant factor of production in a country that is a "large" country will lead to __________ willingness to trade and to __________ in the country's terms of trade.

Select one:

a. an increased willingness; a deterioration.

b. an increased willingness; an improvement.

c. a decreased willingness; a deterioration.

d. a decreased willingness; an improvement.

15. Other things equal, a larger share of a tariff is more likely to be "paid" by the foreign exporting country B rather than the domestic importing country A if

Select one:

a. the supply curve of B's producers is very inelastic.

b. the supply curve of A's producers is very inelastic.

c. the demand curve of B's consumers is very elastic.

d. the demand curve of A's consumers is very inelastic.

16. Other things equal, which one of the following factors would likely NOT contribute to a worsening of the terms of trade of developing countries?

Select one:

a. heavy reliance on primary product exports.

b. the differing price effects of technological change compared to developed countries.

c. developing countries' attempts to diversify their exports and to include more manufactured goods in their export bundle.

d. differences in the demand characteristics of the developing countries' exports and imports.

17. The imposition of an export tax on good X by country A, other things equal,

Select one:

a. will lead to an increase in consumer surplus in country A.

b. will improve the terms of trade of country A if A is a "small" country.

c. will lead to a lower price of good X in country A's home market if A is a "large" country but will not affect the price of good X in A's home market if A is a "small" country.

d. will always lead to an improvement in country A's welfare if A is a "large" country

18. The "optimum tariff rate" for a country is that rate which, assuming no retaliation,

Select one:

a.maximizes the country's terms of trade.

b. maximizes the country's quantity of imports.

c. maximizes the country's balance of trade.

d. maximizes the country's welfare.

19. The presence of an export subsidy (assuming that foreign demand is not perfectly-inelastic)

Select one:

a. will increase the price of the export good in the home market and decrease the well-being of home consumers.

b. will decrease the price of the export good in the home market and increase the well-being of home consumers.

c. will lead to a net gain in welfare in the home country since producer surplus is enhanced.

d. can lead to a higher import price in the importing country in the large-country case.

20. Given the following information pertaining to large country A with respect to good X under free trade and with a tariff in place:

domestic price of X under free trade $100

world price of X under free trade $100

domestic price of X with tariff in place $103

world price of X with tariff in place $98

domestic production of X under free trade $40

domestic production of X with tariff in place $50

consumption of X under free trade $100

consumption of X with tariff in place $80

What is the impact of the tariff upon country A's welfare?

Select one:

a. loss of $15.

b. loss of $45.

c. gain of $15.

d. gain of $60.