Question 38

Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a lower opportunity cost for producing copper, then

		Chile has a comparative advantage in the production of copper, but it is outweighed by Argentina's absolute advantage in wheat production.
		Chile has a comparative advantage in wheat production, but there will be no gains from specialisation and trade.
		Argentina still has a comparative advantage in the production of both goods.
		Chile has a comparative advantage in the production of copper, and specialisation and trade between the two countries can be mutually beneficial.

Question 39

Which of the following is NOT a problem with protection?

		It may be an inferior solution to problems of free trade.
		It reduces the amount supplied by domestic producers.
		It risks retaliation from other countries.
		It leads to smaller world output.

Question 40

The EU is a

		customs union.
		common market.
		free trade area.
		federal state.

Question 41

If the United States increases the tariff on imported tuna steaks, this will

		reduce the number of tuna steaks imported into the United States and reduce production of tuna steaks in the United States.
		increase the number of tuna steaks imported in the United States and increase the production of tuna steaks in the United States.
		reduce the number of tuna steaks imported in the United States and increase the production of tuna steaks in the United States.
		increase the number of tuna steaks imported in the United States and reduce the production of tuna steaks in the United States.

Question 42

The WTO requires its members to operate under various rules. Which of the following are included in these rules?

		Any trade concession that a country makes to one member must be granted to all signatories.
		WTO-sanctioned retaliatory action is permitted in response to unfair barriers to trade.
		Any nation benefiting from a tariff reduction by another country must reciprocate by making similar tariff reductions itself.
		All the above

Question 44

According to the theory of comparative advantage, specialisation will benefit all trading partners

		even those that may be absolutely less efficient producers.
		except those that may be relatively less efficient producers.
		except those that may be absolutely less efficient producers.
		except those that may be relatively more efficient producers.

Question 45

Assume that Outland specialises in producing skateboards and Inland specialises in producing surfboards. After trade, Outland exports 500 skateboards and imports 100 surfboards. The rate of exchange

		is 1:5 skateboards to surfboards.
		is 1/5:1 skateboards to surfboards.
		is 5:1 skateboards to surfboards.
		cannot be determined from this information.

Question 47

A country is said to enjoy an absolute advantage over another country in the production of a product if it uses fewer resources to produce that product than the other country does.

True

False

Question 48

A tariff imposed on imported shoes will cause the domestic price of shoes to ________ and the domestic production of shoes to ________.

		decrease, decrease
		decrease, increase
		increase, decrease
		increase, increase

Question 49

The infant industry argument for protection is abused, but it is valid. In some cases new industries may well need protection from more powerful competitors.

True

False

Question 50

Under the WTO's 'most favoured nation' clause

		exports from favoured nations will be subject to lower tariffs than from other nations.
		any trade concession that a country makes to one member must be granted to all signatories.
		countries can make special deals with other countries provided that they are agreed with the WTO.
		a country that receives a trade concession from another is then entitled to receive the same concession from all other signatories.

Question 52

A possible disadvantage of trade between two countries is that

		trade will lead to a more equitable distribution of income in both countries.
		long-term unemployment in both countries will increase.
		trade makes both countries less self-sufficient and possibly more vulnerable.
		both countries move out beyond their previous resource and productivity constraints.

Question 53

When an economy is in the recessionary phase of the business cycle we would normally expect the rate of inflation to be rising.

True

False

Question 54

The multiplier can be calculated using which of the following formulas?

	a.	Change in aggregate expenditure divided by the change in GDP
	b.	Change in GDP divided by change in interest rates
	c.	Change in GDP divided by the change in aggregate expenditure
	d.	Change in GDP divided by change in consumption

Question 55

Which of the following is NOT regarded as an injection within the circular flow of income?

	a.	Investment
	b.	Export expenditure
	c.	Saving
	d.	Government expenditure

Question 56

Savings, taxation, and exports are all withdrawals from the circular flow of income.

True

> 1 200 800 ' Quantity Looking at the diagram above, if this market only has one rm, the marginal revenue earned from the last unit produced will be: $ Question 24 1 points Save Answer The following diagram shows the demand for sterling by holders of dollars (e.g. to buy UK imports) and the supply of sterling to purchase dollars (e.g. to buy US exports). The sterling demand and supply curves are currently D 0 and S o and the exchange rate is currently 1 = $1.30. _~. in O 1.30 $price 0f _\\ M O 1.10 1.00 0 Goff: Now assume that the rate of inflation is higher in the USA than in the UK. What would happen to the exchange rate assuming that one ofthe demand and supply curves, or both curves, shift to one of the other positions shown in the diagram. 0 Fall to $1.10 0 Fall to $1.20 0 Rise to $1.40 0 Rise to $1.50 Question 28 1 points Save Answer The following diagram shows the demand for British pounds by holders of US dollars (e.g. to buy UK imports) and the supply of pounds to purchase US dollars (e.g. to buy US exports). The pounds demand and supply cum/es are currently D 0 and S o and the exchange rate is currently 1 = $1.30. 1.00 1.50 _~. in O 1.30 $ price 0f _\\ M (D 1.10 1.00 0 Goff: Now assume that both UK incomes and US incomes fall. Assuming that this shifts one or both curves to new positions as shown in the diagram, the exchange rate will stay at $1.30. 0 True 0 False