1. Which must exist before a country can specialize its production?

Responses

an international division of labor

government subsidies

a global economy

a free-market system

2. Which circumstances would allow Country A to have an absolute advantage over Country B in the production of computers?

Responses

Country B was the target of a trade embargo by Country A.

The government of Country B subsidizes its computer industry.

Country A had a higher minimum wage than Country B.

Companies in Country A can produce computers at a lower cost.

3. Under which circumstance would a country have a comparative advantage in the production of a certain good?

Responses

It has a more highly skilled work force.

It uses an assembly line to produce that good.

It has well-developed industrial capacities.

It has a lower opportunity cost for production of that good.

4. Why does interdependence bring economic growth?

Responses

Interdependence increases international competition, which leads to lower prices.

Interdependence enables specialized production, which is more efficient.

Interdependence creates greater protection for domestic producers, which enables them to raise prices.

Interdependence strengthens governments, allowing great tax revenues.

5. What was the result of developed countries extracting resources from their colonies?

Responses

Developed countries lost jobs to the colonies because labor was cheaper there.

Trade wars began among the colonies to attract investment from developed countries.

There was a one-way flow of wealth favoring the colonizers.

The colonizers used these resources to help the colonies build their infrastructure.

6. Why do high tariff levels restrict international trade?

Responses

It is more difficult to protect domestic producers when there are high tariffs.

High tariff levels make it difficult for countries to enforce consumer-protection regulations.

There is a decreasing marginal return on sales when tariff levels are high.

Traded goods cost more when there are high tariffs, and this limits their sale.

7. Which current trend tied to increased globalization has the effect of providing an incentive for countries to export more goods?

Responses

infrastructure development

industrialization

improved communication

trade liberalization

8. Why does globalization lead to a reduction in prices for goods and services?

Responses

Competition for jobs drives down wages, which helps companies lower their prices.

Consumers buy less when there are more goods available on the market.

Globalization increases both supply and demand for all goods and services.

There is a decreasing marginal utility to goods produced in developing countries.

9. Why do the actions of central banks have an important effect on the global economy?

Responses

Monetary policy is an important tool for protecting domestic industries.

Control of the money supply determines how much money is available for international trade.

The amount of capital mobility is dependent on regulations enforced by central banks.

Interest rates on government bonds are responsible for foreign investment.

10. What is the main purpose of foreign aid?

Responses

eliminate colonization

retaliate against trade sanctions

stabilize the currency market

alleviate poverty and underdevelopment

11. Which describes the role of the World Trade Organization (WTO) in the global economy?

Responses

provide long-term development loans

provide short-term emergency loans

coordinate banking regulations

generate multilateral agreements

12. Why does the IMF impose conditionality on countries that accept its loans?

Responses

The IMF wants to help fix the economies of countries that need its help.

The IMF wants to get all countries to accept free-trade policies.

The IMF wants to make sure that the money it loans results in sustainable development.

The IMF wants to impose uniform regulations on the international banking system.

13. What is the main purpose of the loans made by the World Bank?

Responses

help countries achieve sustainable development

make profits for its shareholders

prevent future economic crises

help create multilateral trade agreements

14. What is the main goal of the WTO?

Responses

help developing countries build their industrial capacity

assure that international trade flows smoothly and freely

prevent multinational corporations from exploiting workers

enable governments to give out less foreign aid

15. Which describes the goal of international foreign aid?

Responses

punish an offending government

eliminate poverty

provide emergency relief

reduce production costs

16. Why are the majority of the world's countries left on the margins of globalization?

Responses

Many countries are too underdeveloped to take advantage of the opportunities presented by increasing international trade.

Many countries continue to rely on protectionist policies that limit their imports and exports.

Many countries don't have sufficient natural resources to fuel high levels of industrial production.

Many countries have laws requiring such high wages that foreign producers don't want to invest.

17. Which is not an issue caused by globalization?

Responses

wealth inequality

environmental damage

job losses

higher prices

18. Why do many developing countries not benefit from the spread of free trade?

Responses

They have weak domestic industries.

They cannot afford to give foreign aid.

They don't possess important natural resources.

They have large trade deficits.

19. How has globalization contributed to the recent increase in international terrorism?

Responses

Increased labor migration makes it possible for terrorists to infiltrate critical infrastructure points.

The downsides of globalization affect many people who often feel they have nowhere to turn other than violence.

Globalization requires ruthless competition that can usually only be accomplished through force and coercion.

The lack of centralized banking regulations makes it possible for terrorists to profit from foreign investment.

20. How has globalization helped work against human rights violations around the world?

Responses

Violating human rights is too costly to be profitable in the competitive international marketplace.

Companies have boycotted abusive governments as a punishment for these practices.

Revolutions against abusive governments have made the investment climate insecure.

Improved global communications brings these abuses to the world's attention.

21. Why does globalization lead to increasing environmental damage?

Responses

Sustainable development relies on the increasing use of nonrenewable energy sources.

Technological development leads to less pollution but greater consumption of nonrenewable energy.

Environmental-protection regulations increase compliance costs, and decrease economic competitiveness.

Consumer boycotts and government regulations undermine companies' attempts to reduce their output of waste.

22. Which is an example of outsourcing?

Responses

A U.S. car company begins making certain car parts in Bangladesh.

Japan imposes a tariff on cars coming from Europe and the United States.

The IMF requires a loan recipient to privatize its oil industry.

A U.S. computer company buys its memory chips from a company in Taiwan.

23. Why do lower labor costs in other countries lead to job loss in the United States?

Responses

It enables foreign producers to undersell domestic producers.

Foreign producers are able to insource and make higher profits.

Workers migrate in search of better-paying jobs.

Foreign governments can charge higher tariffs and make more revenues.

24. What has been the main drawback of globalization for the United States?

Responses

lost tariff revenues

higher prices

slow economic growth

wage reductions

25. Which of these is a reason for opposing globalization?

Responses

It only benefits a handful of the world's countries.

It leads to increased environmental-protection costs.

It undermines the purchasing power of consumers.

It gives too much power to repressive governments.

26. Define comparative advantage, and explain how a country gets a comparative advantage in the production of a certain good.

27. Explain why globalization is increasing the gap in income, wealth, and economic growth that already exists between developed and developing countries.

28. What is the purpose of the WTO? Explain one positive effect and one negative effect the WTO's operations can have on member countries.

29. Describe how the globalization of production leads to environmental damage.

30. Explain why the high-tech and textile industries in the United States are facing continued job losses.