Question 1

Mercantilists advocated a policy in which:

Question 1 options:

A)	The government regulates all aspects of economic activity

B)	The government interferes with economic activity to a moderate level

C)	The government keeps regulation of economic activity to a minimum

D)	The governments interference in economic activity is completely non-existent

Question 2

Adam Smith advocated a policy in which:

Question 2 options:

A)	The government regulates all aspects of economic activity

B)	The government interferes with economic activity to a moderate level

C)	The government keeps regulation of economic activity to a minimum

D)	The governments interference in economic activity is completely non-existent

Question 3

The increase in consumption in each nation resulting from specialization in production and trading is referred to as:

Question 3 options:

A)	basis for trade

B)	losses from trade

C)	gains from trade

D)	pattern of trade

Question 4

______________ states that the true cost of a commodity is the amount of a second commodity that must be given up to release just enough resources to produce one more unit of the first commodity:

Question 4 options:

A)	Mercantilism

B)	The law of comparative advantage

C)	The labor theory of value

D)	The opportunity cost theory

Question 5

_____________ explains how mutually beneficial trade can take place even when one nation is less efficient than another nation in the production of all commodities.

Question 5 options:

A)	Mercantilism

B)	The law of comparative advantage

C)	The labor theory of value

D)	The law of absolute advantage

Question 6

Japan is more efficient in the production of rice, and the United States is more efficient in the production of oranges. In the production of oranges, the United States is said to have a(n):

Question 6 options:

A)	comparative advantage

B)	absolute disadvantage

C)	absolute advantage

D)	comparative disadvantage

Question 7

True or False? Merchants, bankers, and government officials from Spain, France, and Portugal outline the principles and ideas of mercantilism in the publicationThe Wealth of Nations.

Question 7 options:

	True
	False

Question 8

According to the factor endowment theory, nations heavily endowed with labor will:

Question 8 options:

A)	Import more labor intensive goods

B)	Export more labor intensive goods

C)	Have an absolute advantage in labor intensive goods

D)	Have a comparative advantage in capital intensive goods

Question 9

Which of the following is a part of the Heckscher-Ohlin model that states international trade will bring about equalization in the returns to homogeneous factors across nations?

Question 9 options:

A)	Factor-price equalization theorem

B)	Factor-proportions theory

C)	Factor-endowment theory

D)	Product cycle theory

Question 10

Which model states that a nation can shift from being a net exporter of a good to a net importer of the same good?

Question 10 options:

A)	Specific-factors model

B)	Technological gap model

C)	Product cycle model

D)	Real business cycle model

Question 11

In his empirical test of Heckscher and Ohlin's model, Leontief found that

Question 11 options:

A)	the US imported more labor intensive goods and exported more capital intensive goods.

B)	the US imported more capital intensive goods and exported more labor intensive goods.

C)	the US imported and exported more labor intensive goods.

D)	the US imported and exported more capital intensive goods.

Question 12

Which of the following would least likely apply to the product cycle theory?

Question 12 options:

A)	Digital cameras

B)

Coal

C)	Televisions

D)

Computers

Question 13

True or False? Low-skilled US labor was in favor of NAFTA because it will inevitably increase the standard of living for the country as a whole.

Question 13 options:

	True
	False

Question 14

A tariff that is a combination of an ad valorem and a specific tariff is a(n):

Question 14 options:

A)	import tariff

B)	export tariff

C)	compound tariff

D)	optimum tariff

Question 15

Suppose, to produce $200,000 worth of finished cloth in the US, textile producers import $150,000 of raw materials. The raw materials are imported duty free. However, the US has imposed a 5% nominal tariff on imports of finished cloth. What is the effective rate of protection enjoyed by the domestic cloth producers in the US?

Question 15 options:

A)

20%

B)

10%

C)

5%

D)

6%

Question 16

A(n) ____________ is a duty levied on a commodity as it leaves a nation and is transported to another nation..

Question 16 options:

A)	specific tariff

B)	import tariff

C)	export tariff

D)	ad valorem tariff

Question 17

A tax of 5% per unit of imported wine would be an example of a(n):

Question 17 options:

A)	compound tariff

B)	specific tariff

C)	export tariff

D)	ad valorem tariff

Question 18

True or False? In industrialized nations, a lower tariff is often imposed on raw materials than the final commodity.

Question 18 options:

	True
	False

Question 19

In order to avoid outsourcing or offshoring, the national government could provide the firm with trade protection in the form of:

Question 19 options:

A)

a tariff

B)

a quota

C)

a subsidy

D)	this is not allowed by WTO rules

Question 20

Areas set up to attract foreign investments by allowing the importation of raw and intermediate materials without paying tariffs are called:

Question 20 options:

A)	Customs unions

B)	Duty-free zones

C)	free trade area

D)	Economic unions

Question 21

The ___________________ was formed by Argentina, Brazil, Paraguay, and Uruguay in 1991.

Question 21 options:

A)	European Economic Area (EEA)

B)	European Free Trade Association (EFTA)

C)	North American Free Trade Agreement (NAFTA)

D)	Southern Common Market (Mercosur)

Question 22

The United States benefits from NAFTA (aka the US-Canada-Mexico Trade agreement) include:

Question 22 options:

A)	Increased competition in product markets

B)	Increased competition in resource markets

C)	Lower price of many U.S commodities

D)	All of the above

Question 23

Suppose that apples from Japan face a 15% tariff in Germany and a 20% tariff in Italy, while Germany and Italy maintain free trade between each other. Germany and Italy are therefore part of a(n):

Question 23 options:

A)	Free trade area

B)	Customs union

C)	common market

D)	economic union

Question 24

Free trade access to Mexico allows the US industries to import __________________ from Mexico and maintain other operations in the US rather than risking the loss of all jobs in the industry to low-wage countries.

Question 24 options:

A)	labor-intensive components

B)	technology

C)	capital-intensive components

D)

textiles

Question 25

A car can be produced by a worker in India in 8 hours while the same time in the US is only 2 hours. In the mean time in a bicycle factory it takes an Indian and an American worker the same amount of time (1 hour) to assemble a bicycle. According to this example, India has a comparative advantage in bicycle assembly.

Question 25 options:

	True
	False

Question 26

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect:

Question 26 options:

A)	the price of German bicycles to increase in the United States.

B)	employment to decrease in the German bicycle industry.

C)	employment to decrease in the U.S. bicycle industry.

D)	profits to rise in the U.S. bicycle industry.

Question 27

Product US Exports (bil of $) US Imports (bib of $) Electronic mucrocircuits 38 59 22 38 Shoes and other footwear 0.65 17.40 Pharmaceuticals 23 98 35 37 Clothing and Accessories 5.95 75.73 Aircraft 38 52 16.48