Directions:Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best in each case and write the correct letter of your anwer in the space provided for.

___1. Importing more than exporting is

A. trade surplusB. trade deficitC. balance of trade

D. balance of paymentE. None of the above

___2. A limit on the number of cars that can be brought into the country

A. import quotaB. tariffC. customs duty

D. voluntary export constraintE. None of the above

___3.In the short-run, tariffs and quotas help protect

A. domestic jobsB. foreign employmentC. price wars

D. consumer choiceE. None of the above

___4. Generally, a nation should probably specialize in those products:

A. for which worldwide demand is high.B. for which its needs are greatest.

C. in which it has absolute advantage.D. in which it has comparative advantage.

E. None of the above

___5. Why should countries trade?

A. To help them thriveB. To increase outputC. To decrease output

E. To keep them busy E. None of the above

___6. Which of the following is a situation in which trade is advantageous?

A. Two countries produce the same goods for the same costs

B. Two countries produce different goods for different costs

C. Two countries are isolated

D. Two countries have the same markets

___7. When one producer can make a given amount of output with fewer inputs, what exists?

A. Comparative advantageB. Absolute advantage

B. Both A& BD. None of the above

___8. When one producer has a lower opportunity cost of production than another producer for a given item, what exists?

A.Comparative advantageB. Absolute advantage

B.Both A& BD. None of the above

___9. Farmer John has a pistachio farm. It takes him 5 hours worth of work to harvest 1 pound of nuts. Farmer Rick also has a pistachio farm. It takes him 10 hours worth of work to harvest 1 pound of nuts. Finally, Farmer Erica owns a third pistachio farm. She can harvest 1 pound of nuts in 2 hours. Who has the absolute advantage in this example?

A. Farmer EricaB. Farmer RickC. Farmer JohnD. Unclear

___10.There are three producers. Producer A spends $10 to make a widget. Producer B spends $50 to make a widget. Producer C spends $4. Who has the absolute advantage?

A. Producer B B. Producer C C. Producer A D. Unclear

___11. Mechanic A can change a tire in 1 hour and change a sparkplug in 2 hours. Mechanic B can change a tire in 0.5 hours and change a sparkplug in 0.25 hours. Who has the comparative advantage in changing sparkplugs?

A. Need more informationB. Both mechanics

B. Mechanic BD. Mechanic A

___12. Rancher Tom can raise 10 goats and 20 pigs in a year. Rancher Joe can raise 20 goats and 100 pigs in a year. Who has the comparative advantage for raising pigs?

A. Need more informationB. Both ranchers

C. Rancher TomD. Rancher Joe

___13. What is the equation that describes net exports?

A. Net exports = exports - importsB. Net exports = output - exports

C. Net exports = exports - outputD. Net exports = imports - exports

E. None of the above

___14. When a country exports and imports the same amount of goods, what is its net exports?

A. Need more informationB. ZeroC. Exports plus imports

C. Output plus exports E. None of the above

___15. What is it called when the government places taxes on imported goods?

A. SubsidiesB. TaxesC. QuotasD. TariffsE. None of the above

___16. What develops when exports exceed imports?

A. Trade deficitB. Trade surplusC. Barrier to trade D. Tariff E. None of the above

___17. The term comparative advantage implies that

A. one country can produce everything better than another country

B. a country should produce those things that have the highest opportunity cost

C. one country should specialize in raw materials for another country

D. one country can produce a product relatively more efficiently than other products, and should therefore specialize in that product

____18. A tariff imposed on an import will

A. raise the price of the imported good

B. shift the demand curve to the right for the domestic substitute

C. reduce the quantity of the imported good

D. all of the above

___19. A tariff and import quota will both

A. Increase the quantity of imports and raise domestic price

B. Increase the quantity of imports and lower the domestic price

C. Reduce the quantity of imports and raise the domestic price

D. Reduce the quantity of imports and lower the domestic price

E. None of the above

___20. Countries usually impose restrictions on free foreign trade to...

A. Protect foreign producers

B. Protect foreign consumers

C. Protect domestic producers

D. Protect domestic consumers

E. None of the above