McqMate
Chapters
| 1. |
In 2003, the US had the largest total amount of imports from and exports to |
| A. | China. |
| B. | Mexico. |
| C. | Canada. |
| D. | Germany. |
| Answer» C. Canada. | |
| 2. |
Evidence shows that |
| A. | the effect of borders is not important when comparing international trade with trade between regions within a country. |
| B. | the amount of trade that a country undertakes is not related to its geography. |
| C. | the amount of trade between countries is not related to the cultural affinity between the countries. |
| D. | countries farther apart have less trade between them on average. |
| Answer» D. countries farther apart have less trade between them on average. | |
| 3. |
The North American Free Trade Agreement |
| A. | has reduced the usefulness of the gravity model. |
| B. | has shown that international borders no longer affect the amount of trade between countries. |
| C. | has reduced tariffs and other trade restrictions among British Columbia, Manitoba and Ontario. |
| D. | has reduced tariffs and other trade restrictions among Canada, Mexico and the US. |
| Answer» D. has reduced tariffs and other trade restrictions among Canada, Mexico and the US. | |
| 4. |
While technologies have reduced the negative effect that distance has on trade, |
| A. | the effect of international borders has not been reduced through trade agreements. |
| B. | the effects of the Internet and airplanes on trade have been negligible. |
| C. | political factors have historically been more influential in determining the amount of trade than available technologies. |
| D. | cultural clashes have recently reduced the amount of US trade compared to US trade in 1950. |
| Answer» C. political factors have historically been more influential in determining the amount of trade than available technologies. | |
| 5. |
Most international trade today is classified as trade in |
| A. | Agricultural products |
| B. | Services |
| C. | Manufactured products |
| D. | Dairy products |
| Answer» C. Manufactured products | |
| 6. |
Approximately what percent of US imports occur through transactions conducted by a multinational corporation? |
| A. | 5% |
| B. | 10% |
| C. | 25% |
| D. | 40% |
| Answer» D. 40% | |
| 7. |
Outsourcing refers to the case in which |
| A. | a firm exports out of a country rather than selling products within a country. |
| B. | a firm imports into a country rather than buying products from within a domestic country. |
| C. | consumers find out the source of where production occurs. |
| D. | a firm moves part of its business operations out of the domestic country. |
| Answer» D. a firm moves part of its business operations out of the domestic country. | |
| 8. |
Gross domestic product measures |
| A. | the gross weight of products that are imported into a domestic country. |
| B. | the gross weight of products that are exported from a domestic country. |
| C. | the gross profits from all final goods and services produced in an economy. |
| D. | the total value of all final goods and services produced within an economy. |
| Answer» D. the total value of all final goods and services produced within an economy. | |
| 9. |
In the Ricardian model: |
| A. | Trade will happen even if countries are identical. |
| B. | Differences in factor endowments give rise to trade. |
| C. | There is only one factor of production. |
| D. | There is only one industry in each country. |
| Answer» C. There is only one factor of production. | |
| 10. |
The Ricardian model exhibits gains from trade: |
| A. | Only if each country has an absolute advantage in one of the industries. |
| B. | For both trading countries. |
| C. | Only for one of the trading countries. |
| D. | Only if countries specialize completely. |
| Answer» B. For both trading countries. | |
| 11. |
Country A has 5000 units of labor. It takes 50 units of labor to produce one computer and 1 unit to create a Web page. What is the opportunity cost of a Web page in terms of computers? |
| A. | 50 |
| B. | 0.0002 |
| C. | 100 |
| D. | 0.02 |
| Answer» D. 0.02 | |
| 12. |
The opportunity cost of producing computers in terms of Web pages is 50 in Country A and is 10 in Country B. Based on the Ricardian model, what can we conclude about the pattern of trade? |
| A. | Country A will export computers and import Web pages. |
| B. | We need to know what the relative price of computers in terms of web pages is to answer this question. |
| C. | We need to know what wages are to answer this question. |
| D. | Country A will export Web pages and import computers. |
| Answer» D. Country A will export Web pages and import computers. | |
| 13. |
Which of the following is NOT an assumption in the Ricardian model? |
| A. | Labor productivity in each country is fixed. |
| B. | Labor can freely move across countries. |
| C. | Each country has only one factor of production and its amount is fix |
| Answer» B. Labor can freely move across countries. | |
| 14. |
Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be: |
| A. | (or 1/100) |
| B. | 0.013 (or 1/75) |
| C. | Impossible to determine without knowing the relative price of computers in terms of Web pages. |
| D. | (or 1/50) |
| Answer» A. (or 1/100) | |
| 15. |
Country A and Country B produce computers and Web sites. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 At which of the following relative prices (computers in terms of Web sites) will Country B produce both goods under free trade? |
| A. | 50 |
| B. | 75 |
| C. | 100 |
| D. | 25 |
| Answer» C. 100 | |
| 16. |
In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by: |
| A. | Relative demand and relative supply for each trading country. |
| B. | Relative demand and relative supply on the world market. |
| C. | Relative opportunity costs in the two countries. |
| D. | Relative wages. |
| Answer» B. Relative demand and relative supply on the world market. | |
| 17. |
Which of the following is true? |
| A. | Trade only hurts countries with lower wages. |
| B. | Countries that open up for trade see their wages rise over time relative to U.S. wages. |
| C. | Trade necessarily hurts poorer countries. |
| D. | none |
| Answer» B. Countries that open up for trade see their wages rise over time relative to U.S. wages. | |
| 18. |
The welfare effects of a quota depend to a considerable extent upon |
| A. | Who has the quota license |
| B. | The size of the quota |
| C. | Elasticities of domestic demand and supply |
| D. | All of the above |
| Answer» D. All of the above | |
| 19. |
__________ are profits that accrue to whomever has the right to import the good that is restricted by the quota. |
| A. | Quota license |
| B. | Quota rents |
| C. | Quota prices |
| D. | None of the above |
| Answer» B. Quota rents | |
| 20. |
The home-country government can confiscate the revenue effect of an import quota if |
| A. | Quota licenses are given to foreign exporting companies |
| B. | Quota licenses are auctioned to the highest-bidding importing company |
| C. | If quota licenses are given to domestic consumers of the good |
| D. | Both (a) and (c) |
| Answer» B. Quota licenses are auctioned to the highest-bidding importing company | |
| 21. |
Governments around the world tend to auction quota licenses |
| A. | Never |
| B. | Seldom |
| C. | Often |
| D. | Always |
| Answer» B. Seldom | |
| 22. |
A(n) __________ is an example of a quota where foreigners hold quota licenses. |
| A. | Export quota |
| B. | Embargo |
| C. | Auction quota |
| D. | Tariff quota |
| Answer» D. Tariff quota | |
| 23. |
International dumping may involve |
| A. | selling goods to foreigners at a price below that charged domestic consumers |
| B. | selling goods to foreigners at a price below the cost of production |
| C. | antidumping duties being levied on the imported, dumped goods |
| D. | all of the above |
| Answer» D. all of the above | |
| 24. |
Nontariff trade barriers could include all of the following except |
| A. | Domestic content laws |
| B. | Government procurement policies |
| C. | Health, safety, and environmental standards |
| D. | Antidumping/countervailing duties applied to imports |
| Answer» D. Antidumping/countervailing duties applied to imports | |
| 25. |
A production subsidy that is granted to a producer of an import-competing good |
| A. | Does not require governmental taxes to finance it |
| B. | Yields the same deadweight welfare loss as an import tariff or import quota |
| C. | Has only a consumption effect deadweight loss |
| D. | Has only a protective effect deadweight loss |
| Answer» D. Has only a protective effect deadweight loss | |
| 26. |
A tariff-rate quota is essentially a |
| A. | Two-tier tariff applied to a country's imports |
| B. | Three-tier tariff applied to a country's imports |
| C. | Two-tier quota applied to a country's exports |
| D. | Three-tier quota applied to a country's exports |
| Answer» A. Two-tier tariff applied to a country's imports | |
| 27. |
A tax of 20 cents per unit of imported cheese would be an example of a (an): |
| A. | Compound tariff |
| B. | Effective tariff |
| C. | Ad valorem tariff |
| D. | Specific tariff |
| Answer» D. Specific tariff | |
| 28. |
A sudden shift from import tariffs to free trade may induce short-term unemployment in: |
| A. | Import-competing industries |
| B. | Industries that are only exporters |
| C. | Industries that sell domestically as well as export |
| D. | Industries that neither import nor export |
| Answer» A. Import-competing industries | |
| 29. |
The movement to free international trade is most likely to generate short-term unemployment in which industries? |
| A. | Industries in which there are neither imports nor exports |
| B. | Import-competing industries |
| C. | Industries that sell to domestic and foreign buyers |
| D. | Industries that sell to only foreign buyers |
| Answer» B. Import-competing industries | |
| 30. |
Suppose the government grants a subsidy to domestic producers of an import-competing good. The subsidy tends to result in deadweight losses for the domestic economy in the form of the: |
| A. | Consumption effect |
| B. | Redistribution effect |
| C. | Revenue effect |
| D. | Protective effect |
| Answer» D. Protective effect | |
| 31. |
Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, unlike domestic subsidies, import tariffs and quotas: |
| A. | Permit less efficient home production |
| B. | Distort choices for domestic consumers |
| C. | Result in higher tax rates for domestic residents |
| D. | Redistribute revenue from domestic producers to consumers |
| Answer» B. Distort choices for domestic consumers | |
| 32. |
Suppose the government grants a subsidy to its export firms that permits them to charge lower prices on goods sold abroad. The export revenue of these firms would rise if the foreign demand is: |
| A. | Elastic in response to the price reduction |
| B. | Inelastic in response to the price reduction |
| C. | Unit elastic in response to the price reduction |
| D. | None of the above |
| Answer» A. Elastic in response to the price reduction | |
| 33. |
Because export subsidies tend to result in domestic exporters charging lower prices on their goods sold overseas, the home country’s: |
| A. | Export revenues will decrease |
| B. | Export revenues will rise |
| C. | Terms of trade will worsen |
| D. | Terms of trade will improve |
| Answer» C. Terms of trade will worsen | |
| 34. |
Which trade restriction stipulates the percentage of a product’s total value that must be produced domestically in order for that product to be sold domestically? |
| A. | Import quota |
| B. | Orderly marketing agreement |
| C. | Local content requirement |
| D. | Government procurement policy |
| Answer» C. Local content requirement | |
| 35. |
The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to: |
| A. | Rise |
| B. | Fall |
| C. | Remain unchanged |
| D. | None of the above |
| Answer» B. Fall | |
| 36. |
Domestic content legislation applied to autos would tend to: |
| A. | Support wage levels of American autoworkers |
| B. | Lower auto prices for American autoworkers |
| C. | Encourage American automakers to locate production overseas |
| D. | Increase profits of American auto companies |
| Answer» C. Encourage American automakers to locate production overseas | |
| 37. |
Compared to an import quota, an equivalent tariff may provide a less certain amount of protection for home producers since: |
| A. | A tariff has no deadweight loss in terms of production and consumption |
| B. | Foreign firms may absorb the tariff by offering exports at lower prices |
| C. | Tariffs are effective only if home demand is perfectly elastic |
| D. | Quotas do not result in increases in the price of the imported good |
| Answer» D. Quotas do not result in increases in the price of the imported good | |
| 38. |
A tariff: |
| A. | Increases the volume of trade |
| B. | Reduces the volume of trade |
| C. | Has no effect on volume of trade |
| D. | (a) and (c) of above |
| Answer» B. Reduces the volume of trade | |
| 39. |
A tariff is: |
| A. | A restriction on the number of export firms |
| B. | Limit on the amount of imported goods |
| C. | Tax and imports |
| D. | and (c) of above |
| Answer» D. and (c) of above | |
| 40. |
It is drawback of protection: |
| A. | Consumers have to pay higher prices |
| B. | Producerrs get higher profits |
| C. | Quality of goods may be affected |
| D. | All of the above |
| Answer» B. Producerrs get higher profits | |
| 41. |
It is drawback of free trade: |
| A. | Prices of local goods rise |
| B. | Government looses income from custom duties |
| C. | National resources are underutilized |
| D. | (a) and (b) of above |
| Answer» A. Prices of local goods rise | |
| 42. |
Free traders maintain that an open economy is advantageous in that it provides all of the following except: |
| A. | Increased competition for world producers |
| B. | A wider selection of products for consumers |
| C. | The utilization of the most efficient production methods |
| D. | Relatively high wage levels for all domestic workers |
| Answer» A. Increased competition for world producers | |
| 43. |
Recent pressures for protectionism in the United States have been motivated by all of the following except: |
| A. | U.S. firms shipping component production overseas |
| B. | High profit levels for American corporations |
| C. | Sluggish rates of productivity growth in the United States |
| D. | High unemployment rates among American workers |
| Answer» C. Sluggish rates of productivity growth in the United States | |
| 44. |
A sudden shift from import tariffs to free trade may induce short-term unemployment in: |
| A. | Import-competing industries |
| B. | Industries that are only exporters |
| C. | Industries that sell domestically as well as export |
| D. | Industries that neither import nor export |
| Answer» B. Industries that are only exporters | |
| 45. |
Which of the following statements is correct? |
| A. | In a customs union, member nations apply a uniform external tariff |
| B. | in a free-trade area, member nations harmonize their monetary and fiscal policies |
| C. | within a customs union there is unrestricted factor movement |
| D. | a customs union is a higher form of economic integration than a common market |
| Answer» C. within a customs union there is unrestricted factor movement | |
| 46. |
A customs union that allows for the free movement of labor and capital among its member nations is called a: |
| A. | preferential trade arrangement |
| B. | free-trade area |
| C. | common market |
| D. | all of the above |
| Answer» C. common market | |
| 47. |
A trade-creating customs union is one where: |
| A. | lower-cost imports from outside the customs union are replaced by higher-cost imports from a union member |
| B. | some domestic production in a member nation is replaced by lower-cost imports from another member nation |
| C. | trade among members increases but trade with nonmembers decreases |
| D. | trade among members decreases while trade with nonmembers increases |
| Answer» D. trade among members decreases while trade with nonmembers increases | |
| 48. |
A trade-diverting customs union: |
| A. | increases trade among union members and with nonmember nations |
| B. | reduces trade among union members and with nonmember nations |
| C. | increases trade among members but reduces trade with non-members |
| D. | reduces trade among union members but increases it with nonmembers |
| Answer» B. reduces trade among union members and with nonmember nations | |
| 49. |
A trade-diverting customs union results in: |
| A. | trade diversion only |
| B. | trade creation only |
| C. | both trade creation and trade diversion |
| D. | we cannot say |
| Answer» C. both trade creation and trade diversion | |
| 50. |
A trade-diverting customs union: |
| A. | increases the welfare of member and nonmember nations |
| B. | reduces the welfare of member and nonmember nations |
| C. | increases the welfare of member nations but reduces that of nonmembers |
| D. | reduces the welfare of nonmembers and may increase or reduce that of members |
| Answer» D. reduces the welfare of nonmembers and may increase or reduce that of members | |
| 51. |
A tariff: |
| A. | Increases the volume of trade |
| B. | Reduces the volume of trade |
| C. | Has no effect on volume of trade |
| D. | (a) and (c) of above |
| Answer» C. Has no effect on volume of trade | |
| 52. |
A tariff is: |
| A. | A restriction on the number of export firms |
| B. | Limit on the amount of imported goods |
| C. | Tax and imports |
| D. | (b) and (c) of above |
| Answer» C. Tax and imports | |
| 53. |
What would encourage trade between two countries: |
| A. | Different tax system |
| B. | Frontier checks |
| C. | National currencies |
| D. | Reduced tariffs |
| Answer» D. Reduced tariffs | |
| 54. |
In a free trade world in which no restrictions exist, international trade will lead to: |
| A. | Reduced real living standard |
| B. | Decreased efficiency |
| C. | Increased efficiency |
| D. | Reduced real GDP |
| Answer» C. Increased efficiency | |
| 55. |
Govt. policy about exports and imports is called: |
| A. | Monetary policy |
| B. | Fiscal policy |
| C. | Commercial policy |
| D. | Finance policy |
| Answer» D. Finance policy | |
| 56. |
International trade and domestic trade differ because of: |
| A. | Trade restrictions |
| B. | Immobility of factors |
| C. | Different government policies |
| D. | All of the above |
| Answer» B. Immobility of factors | |
| 57. |
What would encourage trade between two countries? |
| A. | Different tax system |
| B. | Quality control |
| C. | Reduced tariffs |
| D. | Fixing import quota |
| Answer» A. Different tax system | |
| 58. |
In the European Union: |
| A. | All member countries have a single exchange rate |
| B. | All members set their own tariffs |
| C. | There is a common tariff against non-members |
| D. | All taxes are set the same |
| Answer» C. There is a common tariff against non-members | |
| 59. |
On the 1st January 1958, six countries signed the treaty establishing the European Economic Community (EEC), in turn establishing the foundations for the European Union. In which European capital was it signed in from which it also takes its name? |
| A. | Athens |
| B. | Brussels |
| C. | Rome |
| D. | Amsterdam |
| Answer» C. Rome | |
| 60. |
The European Union has grown to be one of the world's largest trading blocs and markets. What is the approximate size of the population of the EU? |
| A. | 500 million people |
| B. | 292 million people |
| C. | 1.3 billion people |
| D. | 127 million people |
| Answer» A. 500 million people | |
| 61. |
Which two institutions decide the Union's budget? |
| A. | The Council of Ministers and the European Commission |
| B. | The European Parliament and the European Central Bank |
| C. | The Council of Ministers and the European Parliament |
| D. | The European Central Bank and the European Commission |
| Answer» C. The Council of Ministers and the European Parliament | |
| 62. |
The European Union is one powerful global economic bloc. ASEAN is best described as being: |
| A. | A free trade zone |
| B. | A confederation of states |
| C. | A customs union |
| D. | A monetary union |
| Answer» A. A free trade zone | |
| 63. |
Which of the following EU countries are sometimes referred to as the PIGS countries? |
| A. | Portugal, Ireland. Greece, Spain |
| B. | Poland, Italy, Germany, Slovenia |
| C. | Poland, Ireland, Greece, Switzerland |
| D. | Portugal, Italy, Greece, Slovenia |
| Answer» A. Portugal, Ireland. Greece, Spain | |
| 64. |
What is the main reason behind the introduction of the euro? |
| A. | It promotes economic sovereignty |
| B. | It can protect business trading from currency fluctuations |
| C. | To allow the free movement of people |
| D. | It was a branding exercise |
| Answer» B. It can protect business trading from currency fluctuations | |
| 65. |
Which of the following are exclusive EU competencies in relation to Member States? |
| A. | Conservation of marine biological resources (common fisheries policies), common market policies, the customs union and monetary policy for Member States belonging to the Eurozone. |
| B. | The customs union, the environment, agriculture and consumer protection. |
| C. | Monetary policy for Member states belonging to the Eurozone, tourism, transport and industrial policy, EU regional Policy. |
| D. | The customs union, common commercial (trade) policies, education and culture. |
| Answer» A. Conservation of marine biological resources (common fisheries policies), common market policies, the customs union and monetary policy for Member States belonging to the Eurozone. | |
| 66. |
A common or single market will have all of the following features except: |
| A. | No internal trade barriers |
| B. | Common external tariff |
| C. | Factor and Asset mobility |
| D. | A common currency |
| Answer» D. A common currency | |
| 67. |
Which of the options below is the only characteristic of a free trade area? |
| A. | A common currency |
| B. | Common economic policy |
| C. | No internal trade barriers |
| D. | Common external tariff |
| Answer» C. No internal trade barriers | |
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