Economics 4th Edition Krugman
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1. Goods and services purchased from abroad are _____, while goods and services sold abroad are _____.
A) exports; imports
B) imports; exports
C) exports; quotas
D) quotas; factors
2. Over the past 50 years in the United States, as a percentage of gross domestic product:
A) exports have grown and imports have remained constant.
B) imports have grown and exports have remained constant.
C) exports have decreased.
D) exports and imports have grown.
3. As measured by a percentage of the entire economic output of the United States, imports have been _____ and exports have been _____.
A) increasing; increasing
B) decreasing; decreasing
C) increasing; decreasing
D) decreasing; increasing
4. France and England both produce wine and clothing with constant opportunity costs. France will have a comparative advantage in wine production if:
A) it can produce more wine than England.
B) its labor productivity in wine production is greater than England's.
C) the absolute cost of producing wine is lower in France than in England.
D) the opportunity cost of wine production is lower in France than in England.
5. In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. From this information, we know that:
A) the Netherlands has a comparative advantage in raising beef.
B) the Netherlands has a comparative advantage in raising tulips.
C) Belgium has a comparative advantage in raising beef.
D) Belgium has an absolute advantage in raising beef.
6. In a Ricardian model of international trade, the production possibility frontiers are _____, indicating that the opportunity cost of increasing the production of one item relative to another _____.
A) convex; is constant
B) concave; increases
C) straight lines; is constant
D) straight lines; decreases
7. France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. Using this information, we can conclude that:
A) France has a comparative advantage in cloth production.
B) England has a comparative advantage in cloth production.
C) France has a comparative advantage in both goods.
D) mutually beneficial international trade is not possible.
8. In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky the opportunity cost of beef:
A) is higher in the Netherlands than in Belgium.
B) is lower in the Netherlands than in Belgium.
C) is the same in the Netherlands as in Belgium.
D) cannot be determined in either country.
9. In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky, the opportunity cost of 1 ton of beef in the Netherlands is:
A) 100 tons of beef.
B) 1,000 boxes of tulips.
C) 10 boxes of tulips.
D) 0.1 box of tulips.
10. Production possibility frontiers:
A) illustrate the production choices available to an economy.
B) assume full employment but not maximum efficiency.
C) assume maximum efficiency but not full employment.
D) are used to illustrate the law of decreasing opportunity costs.
11. The absolute value of the slope of the production possibility frontier at any point:
A) gives the autarky price of the good on the vertical axis.
B) is found by dividing the horizontal change by a vertical change.
C) gives the quantity of the good on the vertical axis that must be given up to produce an additional unit of the good on the horizontal axis.
D) gives the autarky price of the good on the horizontal axis relative to the autarky price of the good on the vertical axis.
12. Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is _____ sweater(s).
A) 1
B) 3
C) 22
D) 28
13. Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 4 sweaters is _____ hats.
A) 4
B) 12
C) 71
D) 79
14. The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 100 bicycles is _____ tractor(s).
A) 1
B) 4
C) 25
D) 100
15. The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 5 tractors is _____ bicycles.
A) 5
B) 20
C) 100
D) 125
16. On a production possibility frontier, opportunity cost is:
A) the decrease in the output of one good when the output of the other good is increased.
B) the rate at which people are willing to exchange goods as determined by demand and supply.
C) the dollar cost of the good given up to get another good.
D) independent of the slope of the curve.
Use the following to answer questions 17-18: Table: The Production Possibilities for Cars and Leather Boots
17. (Table: The Production Possibilities for Cars and Leather Boots) Look at the table The Production Possibilities for Cars and Leather Boots. Given the opportunity costs of production:
A) there is no basis for trade.
B) Mexico should specialize in boots.
C) the United States should specialize in cars.
D) the United States should specialize in both goods, and Mexico should not produce either good.
18. (Table: The Production Possibilities for Cars and Leather Boots) Look at the table The Production Possibilities for Cars and Leather Boots. The opportunity cost of producing one car in Mexico is:
A) 500 pairs of leather boots.
B) 1,000 pairs of leather boots.
C) different from the opportunity cost in the United States.
D) 2,000 pairs of leather boots, which is the same as in the United States.
19. The _____ analyzes trade under the assumption that opportunity costs are constant and therefore production possibility frontiers are straight lines.
A) pauper labor fallacy model
B) Ricardian model
C) Heckscher–Ohlin model
D) oligopoly model
20. If the opportunity costs of production are constant, then the production possibility frontier is:
A) bowed out from the origin.
B) bowed in toward the origin.
C) a straight line.
D) circular.
21. The term autarky refers to a country that:
A) trades goods and services based upon the principle of comparative advantage.
B) trades goods and services based upon the principle of absolute advantage.
C) trades goods and services based upon the principle of Ricardian advantage.
D) does not trade with other countries.
22. Japan must give up the production of 75 computers to produce 25 additional cellular telephones. The opportunity cost of producing 3 computers is _____ cell phone(s).
A) 1
B) 3
C) 22
D) 28
23. If Japan must give up the production of 75 computers to produce 25 additional cellular telephones, the opportunity cost of producing 4 cellular telephones is _____ computers.
A) 4
B) 12
C) 71
D) 79
24. The United States must give up the production of 300 motorcycles to produce 15 additional SUVs with the same resources. The opportunity cost of producing 100 motorcycles is _____ SUV(s).
A) 1
B) 5
C) 7
D) 15
25. The United States must give up the production of 300 motorcycles to produce 20 additional SUVs with the same resources. In this case, the opportunity cost of producing 5 SUVs is ________ motorcycles.
A) 5
B) 20
C) 100
D) 75
Use the following to answer questions 26-31:
26. (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.
A) petroleum; less
B) petroleum; more
C) petroleum; the same
D) machinery; the same
27. (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.
A) machinery; more
B) machinery; the same
C) machinery; less
D) petroleum; less
28. (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. In the United States the opportunity cost of producing 40 units of machinery is _____ units of petroleum.
A) 80
B) 60
C) 40 D) 20
29. (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost in the United States of producing 30 units of petroleum is _____ units of machinery.
A) 60
B) 80
C) 100
D) 120
30. (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico of producing 10 units of machinery is _____ units of petroleum.
A) 30 B) 90
C) 180
D) 270
31. (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico of producing 105 units of petroleum is _____ units of machinery.
A) 35
B) 70
C) 90
D) 160
32. Countries that engage in trade will tend to specialize in goods in which they have _____ and will _____ those goods.
A) a comparative advantage; import
B) an absolute advantage; export
C) a comparative advantage; export
D) an economic profit; import
33. Taken collectively, people in nations that engage in international trade are not likely to:
A) consume more than they were able to consume in the absence of trade.
B) raise their standards of living.
C) gain from lower opportunity costs of production.
D) be made worse off.
34. In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. Trade will take place between these two countries if 1 ton of beef costs
_____ boxes of tulips.
A) 20
B) 5
C) 12
D) 8
35. France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 150 bolts of cloth if it produces no wine. When international trade takes place, each country specializes completely in the production of the good in which it has a comparative advantage 1 barrel of wine exchanges for 1 bolt of cloth and France exports 50 units of wine. We can conclude that France produces _____ units of wine and _____ units of cloth and that France consumes _____ units of wine and _____ units of cloth.
A) 150; 100; 100; 100
B) 150; 0; 100; 50
C) 150; 0; 50; 50
D) 0; 100; 50; 50
36. If the United States can produce 30 computers for every car it produces and Japan can produce 15 computers for every car it produces, _____ has the _____ advantage in car production.
A) the United States; comparative
B) Japan; comparative
C) the United States; absolute
D) Japan; absolute
37. The United States can produce 30 computers for every car it produces, and Japan can produce 15 computers for every car it produces. Based on this information, which of the following statements is INCORRECT?
A) The United States should specialize in computer production.
B) Japan has the comparative advantage in car production.
C) There will be gains from trade if the United States exports computers to Japan.
D) Japan has an absolute advantage in car production.
38. The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the:
A) pauper labor fallacy.
B) sweatshop labor fallacy.
C) third-world country fallacy.
D) Nike fallacy.
39. Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage?
A) mild temperatures
B) large reserves of crude oil
C) no opportunity cost associated with oil production
D) high tariffs on oil from other nations
40. Lower wages in China reflect _____ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _____ in China than in the United States.
A) lower; higher
B) lower; lower
C) higher; higher
D) higher; lower
41. According to the Heckscher–Ohlin model, Brazil will have a comparative advantage in oranges if the factors _____ in the production of oranges are _____.
A) intensive; abundant
B) intensive; imported
C) that are scarce; imported
D) intensive; inexpensive
42. China, which is labor-abundant, has a comparative advantage in clothing production, which is labor-intensive. Which of the following models explains this pattern of comparative advantage?
A) the Ricardian model
B) a model of increasing returns
C) the Heckscher–Ohlin model
D) a model of autarky
43. Bangladesh exports shirts, the making of which is labor-intensive, to the United States. The likely source of Bangladesh's comparative advantage in shirts is:
A) a hotter climate, which makes it possible to produce shirts outdoors, eliminating the need for factory buildings and hence reducing costs.
B) superior production technology.
C) that in comparison with the United States, Bangladesh is a labor-abundant country.
D) the higher labor productivity in Bangladesh.
44. An urbanized country has 100 million workers living on 100 square miles of land. A country that is principally rural has 1 million workers living on 10 square miles of land. From this information we know that the urbanized country is _____ relative to the rural country.
A) land-abundant
B) labor-abundant
C) land-intensive
D) labor-intensive
45. Which of the following trade patterns is best explained by increasing returns?
A) Honduras exports bananas to the United States and the United States exports airplanes to Honduras.
B) Pakistan exports clothing to the United States and the United States exports airplanes to Pakistan.
C) Japan exports cars to the United States and the United States exports airplanes to Japan.
D) Mexico exports beef to the United States and the United States exports airplanes to Mexico.
46. If the _____ differ(s) between two countries, this suggests the possibility for mutually advantageous trade.
A) currency
B) factor endowments
C) exchange rate
D) level of government spending for defense
47. Chile has a comparative advantage over the United States in copper. Which of the following is a source of this comparative advantage?
A) mild temperatures
B) large deposits of copper ore
C) no opportunity cost associated with copper production
D) high tariffs on copper from other nations
48. Mexico is relatively labor-abundant when compared with the United States. Therefore, Mexico has a comparative advantage in _____ compared with the United States.
A) all goods
B) goods that are labor-intensive in production
C) goods that are capital-intensive in production
D) goods that are land-intensive in production
49. Which model states that nations that are abundant in a factor will have a comparative advantage in a good whose production is intensive in that factor?
A) the pauper labor fallacy model
B) the Ricardian model
C) the Heckscher–Ohlin model
D) the oligopoly model
50. Sri Lanka's comparative advantage over the United States in textiles can be explained by its:
A) labor abundance.
B) mild climate.
C) advanced technology.
D) increasing returns.
51. Japan's comparative advantage in automobiles can be attributed to:
A) climate.
B) factor endowments.
C) technology.
D) exchange rates.
52. Both the United States and Canada produce automobiles and their components; however, each particular model or component is produced in only one of the two countries. Which of the following explains this pattern of production and trade?
A) differences in climate
B) differences in factor endowments
C) differences in technology
D) the role of increasing returns
53. Honduras exports clothing to the United States, and the United States exports bulldozers to Honduras. Proponents of the Heckscher–Ohlin model would explain this pattern of trade by stating that:
A) Honduras has an advantage in the technology used in clothing production, while the United States has an advantage in the technology used in bulldozer production.
B) Honduras's climate is more conducive to producing clothing, while the United States' climate is more conducive to producing bulldozers.
C) Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers.
D) Honduras has a factor intensity in capital and the United States has a factor intensity in labor.
54. Which is NOT a source of comparative advantage?
A) In general, France has absolute advantage over Italy in production of goods and services.
B) The United States' technology for computer chip design is more advanced than India's.
C) Hawaii has a more favorable climate to grow pineapple than Italy.
D) In the market for lumber, Canada has many more trees than England.
Use the following to answer questions 55-59:
55. (Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. Both nations can produce cars and lumber. In _____, the opportunity cost of _____ cars is _____ board feet of lumber.
A) the United States; 1 million; 10 million
B) the United States; 10 million; 1 million
C) Canada; 1 million; 6 million
D) Canada; 1 million; 166,000
56. (Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. Both nations can produce cars and lumber. If these nations trade, Canada has the comparative advantage in _____ and should trade _____ to the United States in exchange for _____.
A) cars; cars; lumber
B) lumber; lumber; cars
C) lumber; cars; lumber
D) cars; lumber; cars
57. (Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. Both nations can produce cars and lumber. If these nations were to specialize and trade, the United States would export 1 million cars to Canada in exchange for _____ million board feet of lumber.
A) 2
B) 0.5
C) 8 D) 1
58. (Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. _____ has (have) an absolute advantage in producing cars.
A) Both the United States and Canada
B) Neither the United States nor Canada
C) The United States
D) Canada
59. (Table: Production Possibilities for the United States and Canada) Look at the table Production Possibilities for the United States and Canada. _____ has (have) an absolute advantage in producing lumber.
A) Both the United States and Canada
B) Neither the United States nor Canada
C) The United States
D) Canada
Use the following to answer questions 60-67:
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. _____ has a(n) _____ advantage in the production of _____.
A) Jackson; comparative; cattle
B) Tahoe; comparative; wheat
C) Jackson; comparative; wheat
D) Jackson; absolute; cattle
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. With complete specialization according to comparative advantage, the two nations' combined production of wheat will:
A) remain constant.
B) increase by 120 bushels.
C) increase by 60 bushels.
D) decrease by 60 bushels.
62. (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If both nations specialize completely in the good of their comparative advantage and Jackson exports 120 bushels of wheat to Tahoe in exchange for 60 head of cattle, then the new consumption point for Jackson after trade is _____ bushels of wheat and _____ head of cattle.
A) 120; 30
B) 120; 60
C) 80; 60
D) 200; 100
63. (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If the two countries engage in international trade and specialize completely and if the price of 1 head of cattle equals the price of 2 bushels of wheat, world production of cattle will:
A) remain constant.
B) increase by 90 head.
C) increase by 120 head.
D) decrease by 30 head.
64. (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. Assume each nation specializes completely, based on comparative advantage, and the price of 1 head of cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to Tahoe, Tahoe will export _____ head of cattle to Jackson.
A) 120
B) 60
C) 240
D) 200
65. (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. Each nation specializes completely, based on comparative advantage, and the price of 1 head of cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to Tahoe, then the new consumption point for Tahoe after trade is _____ bushels of wheat and _____head of cattle.
A) 120; 140
B) 120; 60
C) 60; 120
D) 400; 200
66. (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. Jackson has an absolute advantage in producing:
A) wheat only.
B) cattle only.
C) both wheat and cattle.
D) neither wheat nor cattle.
67. (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. Tahoe has an absolute advantage in producing:
A) wheat only.
B) cattle only.
C) both wheat and cattle.
D) neither wheat nor cattle.
Use the following to answer questions 68-78:
68. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. Which of the following is TRUE?
A) The opportunity cost of crude oil is lower in the United States than in Mexico.
B) The opportunity cost of crude oil is higher in the United States than in Mexico.
C) Crude oil costs are the same in the United States and in Mexico.
D) Tractor costs are the same in the United States and in Mexico.
69. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.
A) tractors; higher
B) tractors; the same
C) tractors; lower
D) crude oil; lower
70. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In the United States the opportunity cost of producing 40 tractors is _____ barrels of crude oil.
A) 80,000
B) 60,000
C) 40,000
D) 20,000
71. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In the United States the opportunity cost of producing 30,000 barrels of crude oil is _____ tractors.
A) 60
B) 80
C) 100
D) 120
72. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In Mexico the opportunity cost of producing 40 tractors is _____ barrels of crude oil.
A) 30,000
B) 90,000
C) 120,000
D) 270,000
73. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In Mexico the opportunity cost of producing 150,000 barrels of crude oil is _____ tractors.
A) 50
B) 70
C) 90
D) 160
74. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. The United States has a comparative advantage in _____ and Mexico has a comparative advantage in _____.
A) both goods; neither good
B) neither good; both goods
C) tractors; crude oil
D) crude oil; tractors
75. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of crude oil.
A) 5,000
B) 4,000
C) 1,000
D) 200
76. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. Both the United States and Mexico will gain from trade if one tractor trades for _____ barrels of oil.
A) 1,500
B) 4,500
C) 6,500
D) 8,500
77. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. _____ has (have) an absolute advantage in producing tractors.
A) The United States
B) Mexico
C) Both the United States and Mexico
D) Neither the United States nor Mexico
78. (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. _____ has (have) an absolute advantage in producing crude oil.
A) The United States
B) Mexico
C) Both the United States and Mexico
D) Neither the United States nor Mexico
Use the following to answer questions 79-91:
Figure: The Production Possibilities for Two Countries
79. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. The opportunity cost of producing 1 tire in Indonesia is _____ radio(s), while the opportunity cost of producing 1 tire in Malaysia is _____ radio(s).
A) 0.5; 2
B) 2; 1
C) 600; 800
D) 800; 1,200
80. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. The opportunity cost of producing 1 radio in Indonesia is:
A) 0.5 tire.
B) 1 tire.
C) 2 tires.
D) 6 tires.
81. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. The opportunity cost of producing 1 radio in Malaysia is:
A) 0.5 tire.
B) 1 tire.
C) 2 tires.
D) 6 tires.
82. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Indonesia has a comparative advantage in producing _____, while Malaysia has a comparative advantage in producing _____.
A) both radios and tires; neither good
B) neither good; both radios and tires
C) radios; tires
D) tires; radios
83. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia and Malaysia specialize completely in the production of the good of their comparative advantage, the two nations together will produce _____ tires and _____ radios.
A) 600; 800
B) 800; 1,200
C) 1,200; 1,600
D) 800; 600
84. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia specializes completely in the production of the good of its comparative advantage, it will produce:
A) 600 radios.
B) 800 radios.
C) 800 tires.
D) 1,200 tires.
85. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Malaysia specializes completely in the production of the good of its comparative advantage, it will produce:
A) 800 radios.
B) 1,600 radios.
C) 800 tires.
D) 1,200 tires.
86. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Both nations will gain from trade when 1 tire trades for:
A) 0.33 radio.
B) 0.5 radio.
C) 1.5 radios.
D) 2 radios.
87. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Trade will NOT take place if 1 radio trades for:
A) 0.25 tire.
B) 1 tire.
C) 1.5 tires.
D) 1.75 tires.
88. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 radio for 1 tire, the most that Indonesia can consume is _____ radios and _____ tires, while the most that Malaysia can consume is _____ radios and _____ tires.
A) 300; 600; 800; 200
B) 200; 900; 600; 300
C) 1,200; 400; 800; 200
D) 600; 600; 1,000; 600
89. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 radio for 1.5 tires, the most that Indonesia can consume is _____ radios and _____ tires, while the most that Malaysia can consume is _____ radios and _____ tires.
A) 300; 600; 800; 200
B) 1,200; 400; 800; 200
C) 400; 600; 1,200; 600
D) 600; 600; 600; 600
90. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Indonesia has an absolute advantage in producing:
A) radios.
B) tires.
C) both radios and tires.
D) neither radios nor tires.
91. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Malaysia has an absolute advantage in producing:
A) radios.
B) tires.
C) both radios and tires.
D) neither radios nor tires.
Use the following to answer questions 92-93:
Figure: Comparative Advantage and the Production Possibility Frontier
92. (Figure: Comparative Advantage and the Production Possibility Frontier) Look at the figure Comparative Advantage and the Production Possibility Frontier. _____ has an absolute advantage in the production of _____ and a comparative advantage in the production of _____.
A) The United States; computers; roses
B) Colombia; computers; roses
C) The United States; computers; computers
D) Colombia; roses; computers
93. (Figure: Comparative Advantage and the Production Possibility Frontier) Look at the figure Comparative Advantage and the Production Possibility Frontier. _____ has an absolute advantage in the production of _____ and a comparative advantage in the production of _____.
A) The United States; computers; roses
B) Colombia; computers; roses
C) The United States; roses; computers
D) Colombia; roses; roses
Use the following to answer questions 94-95:
94. (Table: Production Possibilities) Look at the table Production Possibilities. The opportunity cost of 1 computer for _____ is _____.
A) the United States; 2
B) Colombia; 0.5
C) the United States; 0.5
D) Colombia; 1
95. (Table: Production Possibilities) Look at the table Production Possibilities. The opportunity cost of 1 computer for _____ is _____ box(es) of roses.
A) the United States; 2
B) Colombia; 2
C) Colombia; 0.5
D) the United States; 1
Use the following to answer question 96:
Figure: The Gains from International Trade
96. (Figure: The Gains from International Trade) Look at the figure The Gains from International Trade. If each country specializes completely in the good for which it has a comparative advantage, each country must trade _____ computer(s) for _____ box of roses to consume at combination C .
A) 1; 0.5
B) 2; 1
C) 0.5; 1
D) 1; 1
97. An economy moves from autarky to free international trade. In the import sector consumer surplus _____, producer surplus _____, and the economy as a whole _____.
A) rises; rises; gains
B) rises; falls; gains
C) falls; rises; gains
D) rises; falls; loses
Use the following to answer questions 98-101:
98. (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus without international trade would be area:
A) W + X + Y.
B) Z.
C) W + X + Z.
D) W.
99. (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus with international trade would be area:
A) W + X + Y.
B) Z.
C) W + X + Z.
D) W.
100. (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Producer surplus without international trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
101. (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Producer surplus with international trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
102. If a nation imports a good when the economy is opened to trade, the domestic price of the good will _____ and domestic consumption will _____.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
Use the following to answer questions 103-106:
A) import; CT – QT
B) export; CT – QT
C) import; Q1 – QT
D) export; CT – Q1
_____.
A) fall; M
B) fall; M + N
C) rise; M + N + O
D) rise; M + N + O + P
105. (Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When the economy is opened to trade, the price falls to PW and producer surplus will _____ to area _____.
A) fall; N + Q
B) fall; Q
C) rise; M + N + O + P
D) rise; M + N + O + P + Q
106. (Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When the economy is opened to trade, the price falls to PW and the change in total surplus is area:
A) O.
B) O + P.
C) M + N + O + P.
D) M + N + O + P + Q.
107. The United States can produce wine domestically, but it can also import wine if the world price is lower than the domestic price. If the United States imports wine, consumer surplus will _____ by _____ the _____ in producer surplus; total surplus will _____.
A) increase; less than; decrease; decrease
B) increase; the same amount as; decrease; stay constant
C) decrease; less than; increase; increase
D) increase; more than; decrease; increase
108. Mexico produces lettuce but can also import it. If Mexico imports some lettuce:
A) Mexico has a comparative advantage in lettuce production.
B) the world price is lower than the domestic price.
C) the price in Mexico will rise to equal the world price.
D) the domestic quantity supplied will increase.
Use the following to answer questions 109-111:
Figure: The Domestic Market for Digital Cameras
109. (Figure: Domestic Market for Digital Cameras) Look at the figure The Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the world price. Total surplus before international trade is equal to the area:
A) A + B + C.
B) A + B.
C) A + B – D – E.
D) A.
110. (Figure: Domestic Market for Digital Cameras) Look at the figure The Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the world price. Consumer surplus after international trade is equal to the area:
A) A.
B) A + B.
C) A + B + D + E.
D) A + B + D + E – C.
111. (Figure: Domestic Market for Digital Cameras) Look at the figure The Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the world price. Total surplus after international trade _____ by the area _____.
A) rises; B + D + E
B) falls; C
C) rises; C
D) rises; D + E
112. A blockade at the border between the United States and Canada prevents the entry of all lumber products to the United States from Canada. This blockade will:
A) increase the consumer surplus for American lumber consumers.
B) decrease the producer surplus for Canadian lumber producers.
C) increase the total surplus for the American lumber market.
D) increase the total surplus for the Canadian lumber market.
Use the following to answer questions 113-117:
Figure: The Market for MP3 Players
113. (Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, the autarky price equals:
A) $140.
B) $120.
C) $110.
D) $100.
114. (Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, this country:
A) will import 150,000 MP3 players.
B) will export 150,000 MP3 players.
C) has a domestic supply equal to 250,000 MP3 players.
D) has a domestic demand equal to 100,000 MP3 players.
115. (Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, consumer surplus
_____ and producer surplus _____ compared to autarky.
A) increases; decreases
B) increases; increases
C) decreases; increases
D) decreases; decreases
116. (Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, what is the gain in consumer surplus?
A) $5 million
B) $2.5 million
C) $2.625 million
D) $750,000
117. (Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. If the world price equals $100 and there is free trade, producer surplus:
A) gains $1.5 million.
B) gains $2 million.
C) gains $750,000.
D) falls.
Use the following to answer questions 118-120:
Figure: The Market for Thumb Drives
118. (Figure: The Market for Thumb Drives) Look at the figure The Market for Thumb Drives. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. Consumer surplus in free trade equals the area:
A) A.
B) A + B + C.
C) A + B + C + D.
D) A + B.
119. (Figure: The Market for Thumb Drives) Look at the figure The Market for Thumb Drives. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. Producer surplus in free trade equals the area:
A) B + C.
B) B + C + D +E.
C) B + E.
D) E.
120. (Figure: The Market for Thumb Drives) Look at the figure The Market for Thumb Drives. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. The loss of producer surplus when the market moves from autarky to free trade equals the area:
A) B.
B) B + C + D +E.
C) B + C + D.
D) E.
Use the following to answer questions 121-123:
Figure: The Domestic Supply and Demand for SUVs in the United States
121. (Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the figure The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. The United States would _____ SUVs.
A) import 6 million
B) export 6 million
C) export 2 million
D) import 2 million
122. (Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the figure The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. In the United States, consumer surplus would _____ and producer surplus would _____.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
123. (Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the figure The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. Calculate the loss of consumer surplus.
A) $41,250 million
B) $30,000 million
C) $52,500 million
D) $22,250 million
Use the following to answer questions 124-125: Figure: The Domestic Market for Rice
124. (Figure: The Domestic Market for Rice) Look at the figure The Domestic Market for Rice. Assume that PA is the autarky price and PW is the world price. Before international trade, consumer surplus is equal to the area:
A) A.
B) A + B.
C) A + B + C.
D) A + B + D.
125. (Figure: The Domestic Market for Rice) Look at the figure The Domestic Market for Rice. Assume that PA is the autarky price and PW is the world price. After international trade, this nation will _____ a quantity of rice equal to _____.
A) import; Qs – Qd
B) export; Qs – Qd
C) export; Qs – Qa
D) import; Qa – Qd
126. If a country's price for wood furniture in the absence of trade is lower than the price with trade, the country will likely:
A) import wooden furniture.
B) export wooden furniture.
C) have absolute advantage in wooden furniture production.
D) have a surplus of wooden furniture.
127. If a country's price in the absence of trade is lower than the price with trade, then the domestic quantity supplied with trade is _____ the domestic quantity demanded.
A) greater than
B) less than
C) equal to
D) not comparable to
128. If a country has the comparative advantage in producing cloth, in the market for cloth the autarky price would be _____ the world price and the country would _____ cloth.
A) less than; export
B) greater than; export
C) less than; import
D) the same as; export
129. If a country has the comparative advantage in producing wooden furniture, then with free trade:
A) the country will import wooden furniture.
B) producer surplus in the market for wooden furniture will increase.
C) consumer surplus in the market for wooden furniture will increase.
D) the domestic quantity supplied will be less than the domestic quantity demanded.
130. Assume an economy moves from autarky to free international trade. In the export sector, consumer surplus _____, producer surplus _____, and the economy as a whole _____.
A) rises; rises; gains
B) rises; falls; gains
C) falls; rises; gains
D) falls; rises; loses
Use the following to answer questions 131-135:
Figure: The Market for Tea in Sri Lanka
131. (Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1, consumer surplus equals _____, and producer surplus equals _____.
A) F + G + H + I; J + K
B) F; G + H + I + J + K
C) F + I; J + K
D) F + G + H; J + K
132. (Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW Sri Lanka will _____ tea and the volume of trade will equal _____.
A) import; QT – CT
B) export; QT – CT
C) import; QT – Q1
D) export; Q1 – CT
133. (Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW and consumer surplus _____ to _____.
A) falls; F
B) falls; F + G
C) rises; F + G + H + I
D) rises; G + H + I
134. (Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW, and producer surplus _____ to _____.
A) falls; J + K
B) falls; G + H + J + K
C) rises; G + H + I + J + K
D) rises; G + H + I
135. (Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises to PW and the change in total surplus is:
A) I.
B) G + H + I.
C) G + H + I + J + K.
D) F + G + H + I + J + K.
136. When an economy moves from autarky to free international trade, for industries in the export sector, consumer surplus _____, producer surplus _____, and the economy as a whole _____.
A) rises; rises; gains
B) rises; falls; gains
C) falls; rises; gains
D) falls; rises; loses
Use the following to answer questions 137-140:
137. (Figure: The Market for Computers) Look at the figure The Market for Computers. Assume that PA is the autarky price and PW is the world price. Consumer surplus without international trade would be area:
A) W + X + Y.
B) W.
C) Y.
D) W + X.
138. (Figure: The Market for Computers) Look at the figure The Market for Computers. Assume that PA is the autarky price and PW is the world price. Consumer surplus with international trade is area:
A) W + X + Y.
B) W.
C) Y.
D) W + X.
139. (Figure: The Market for Computers) Look at the figure The Market for Computers. Assume that PA is the autarky price and PW is the world price. Producer surplus without international trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
140. (Figure: The Market for Computers) Look at the figure The Market for Computers. Assume that PA is the autarky price and PW is the world price. Producer surplus with international trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
141. If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
142. The effect of international trade on U.S. factor markets is to:
A) increase the wage of highly educated workers.
B) increase the wage of unskilled workers.
C) decrease the wage of both highly educated workers and unskilled workers.
D) increase the wage of both highly educated workers and unskilled workers.
143. Since the United States imports a large quantity of textiles from Asia, the overall wages of U.S. textile workers has _____, while the price of textiles in the United States has _____.
A) decreased; decreased
B) increased; decreased
C) decreased; increased
D) increased; not changed
144. If labor is abundant in South Africa but capital is scarce, when South Africa opens to trade, the price of labor will _____ and the price of capital will _____.
A) rise; rise
B) fall; fall
C) rise; fall
D) fall; rise
145. If labor is scarce in Sri Lanka but capital is abundant, when Sri Lanka opens to trade, the price of labor will _____ and the price of capital will _____.
A) rise; rise
B) fall; fall
C) rise; fall
D) fall; rise
146. When a country exchanges goods with another country, in the short run:
A) producers in the exporting industry may be better off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry are better off.
147. In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the price of beef in Argentina:
A) to fall.
B) to rise.
C) to remain at the autarky price.
D) to be 10 boxes of tulips.
148. In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the total surplus from beef consumption and production to:
A) fall in Argentina.
B) rise in Argentina.
C) stay the same in Venezuela.
D) either rise or fall in Venezuela.
149. In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the price of beef in Venezuela:
A) to fall.
B) to rise.
C) to remain at the autarky price.
D) to be 15 boxes of tulips.
150. In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the consumer surplus from beef consumption to:
A) fall in Argentina.
B) rise in Argentina.
C) stay the same in Argentina.
D) either rise or fall in Argentina.
151. When a market begins to engage in international trade:
A) producers in the exporting industry may be better off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry are better off.
152. If a market begins to engage in international trade, we can assume that:
A) producers in the exporting industry may be worse off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry may be worse off.
153. Compared with autarky, international trade leads to _____ domestic production in exporting industries and _____ domestic production in import-competing industries.
A) higher; lower
B) higher; higher
C) lower; higher
D) lower; lower
154. Policies that limit imports, usually to insulate domestic producers from foreign competition, are known as:
A) import-competing clauses.
B) import reduction acts.
C) trade protection.
D) competition protection.
155. Restrictions on free international trade designed to insulate domestic industries from competitive market forces that originate beyond the borders of the country are _____ policies.
A) competitive
B) protectionist
C) free-trade
D) antitrust
Use the following to answer questions 156-158:
Figure: The Market for Laptop Sleeves
156. (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of consumer surplus when a tariff raises the domestic price from the world price to PT.
A) A + B
B) A + B + C + D + E + F
C) A + C + G
D) D + F
157. (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.
A) A + B
B) C + D + E + F
C) D + E + F
D) D + F
158. (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of government tax revenue when a tariff raises the domestic price from the world price to PT.
A) D + E + F
B) D + F
C) E
D) B
159. If the United States placed larger tariffs on all textiles, domestic _____ surplus would _____.
A) producer; increase
B) consumer; increase
C) total; increase
D) producer; decrease
160. An example of a tariff is a:
A) limit on the total number of Honda automobiles imported from Japan.
B) regulation specifying that each imported Honda automobile must meet certain emission exhaust guidelines.
C) tax of $500 on each Honda automobile produced in the United States.
D) tax of 10% of the value of each Honda automobile imported from Japan.
161. If Japan levies tariffs on U.S. goods entering Japan, this will tend to:
A) benefit both Japanese and U.S. producers.
B) damage U.S. producers and benefit Japanese producers.
C) benefit U.S. producers and damage Japanese producers.
D) damage both Japanese and U.S. producers.
162. If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to _____, domestic consumption to _____, and domestic production to _____.
A) fall; fall; fall
B) fall; rise; fall
C) rise; fall; rise
D) rise; rise; fall
Use the following to answer questions 163-166:
Figure: A Tariff on Oranges in South Africa
163. (Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and the volume of imports falls to:
A) Q2 – Q1.
B) C1 – C2
C) C1 – Q1.
D) C2 – Q2.
164. (Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and domestic consumer surplus _____ to
A) falls; F + L
B) falls; F + G + I + J + K + L
C) rises; F + L
D) rises; F + G + I + J + K + L