McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Arts in Economics (BA Economics) , Master of Business Administration (MBA) .
Chapters
| 51. |
A primary reason why nations conduct international trade is because: |
| A. | Some nations prefer to produce one thing while others produce another |
| B. | Resources are not equally distributed to all trading nations |
| C. | Trade enhances opportunities to accumulate profits |
| D. | Interest rates are not identical in all trading nations |
| Answer» B. Resources are not equally distributed to all trading nations | |
| 52. |
A main advantage of specialization results from: |
| A. | Economics of large scale production |
| B. | The specializing country behaving as a monopoly |
| C. | Smaller production runs resulting in lower unit costs. |
| D. | High wages paid to foreign workers |
| Answer» A. Economics of large scale production | |
| 53. |
International trade in goods and services is sometimes used as a substitute for all of the following except: |
| A. | International movements of capital. |
| B. | International movements of labor. |
| C. | International movements of technology |
| D. | Domestic production of different goods and services |
| Answer» D. Domestic production of different goods and services | |
| 54. |
If a nation has an open economy it means that the nation: |
| A. | Allows private ownership of capital. |
| B. | Has flexible exchange rates |
| C. | Has fixed exchange rates |
| D. | Conducts trade with other countries |
| Answer» D. Conducts trade with other countries | |
| 55. |
International trade forces domestic firms to become more competitive in terms of: |
| A. | The introduction of new products |
| B. | Product design and quality |
| C. | Product price |
| D. | All of the above |
| Answer» D. All of the above | |
| 56. |
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. | |
| 57. |
International trade is based on the idea that: |
| A. | Exports should exceed imports |
| B. | Imports should exceed exports |
| C. | Resources are more mobile internationally than are goods |
| D. | Resources are less mobile internationally than are goods |
| Answer» D. Resources are less mobile internationally than are goods | |
| 58. |
Arguments for free trade are sometimes disregarded by politicians because: |
| A. | Maximizing domestic efficiency is not considered important |
| B. | Maximizing consumer welfare may not be a chief priority |
| C. | There exist sound economic reasons for keeping one’s economy isolated from other economies. |
| D. | Economists tend to favor highly protected domestic markets |
| Answer» B. Maximizing consumer welfare may not be a chief priority | |
| 59. |
Increased foreign competition tend to |
| A. | Intensify inflationary pressure at home |
| B. | Induce falling output per worker-hour for domestic workers |
| C. | Place constraints on the wages of domestic workers |
| D. | Increase profits of domestic import-competing industrie |
| Answer» C. Place constraints on the wages of domestic workers | |
| 60. |
Free trade is based on the principle of: |
| A. | Comparative advantage |
| B. | Comparative scale |
| C. | Economies of advantage |
| D. | Production possibility advantage |
| Answer» B. Comparative scale | |
| 61. |
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. | |
| 62. |
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. | |
| 63. |
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. | |
| 64. |
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. | |
| 65. |
Most international trade today is classified as trade in |
| A. | Agricultural products |
| B. | Services |
| C. | Manufactured products |
| D. | Dairy products |
| Answer» C. Manufactured products | |
| 66. |
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% | |
| 67. |
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. | |
| 68. |
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. | |
| 69. |
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. | |
| 70. |
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. | |
| 71. |
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 | |
| 72. |
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. | |
| 73. |
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. | |
| 74. |
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) | |
| 75. |
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 | |
| 76. |
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. | |
| 77. |
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. | |
| 78. |
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 | |
| 79. |
__________ 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 | |
| 80. |
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 | |
| 81. |
Governments around the world tend to auction quota licenses |
| A. | Never |
| B. | Seldom |
| C. | Often |
| D. | Always |
| Answer» B. Seldom | |
| 82. |
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 | |
| 83. |
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 | |
| 84. |
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 | |
| 85. |
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 | |
| 86. |
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 | |
| 87. |
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 | |
| 88. |
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 | |
| 89. |
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 | |
| 90. |
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 | |
| 91. |
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 | |
| 92. |
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 | |
| 93. |
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 | |
| 94. |
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 | |
| 95. |
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 | |
| 96. |
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 | |
| 97. |
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 | |
| 98. |
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 | |
| 99. |
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 | |
| 100. |
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 | |
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