TRac nghiem finance TRac nghiem finance TRac nghiem finance TRac nghiem finance

QN=1 (2563)
a.
b.
c.
d.
e.

(4366) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater
costing 50 British pounds if the exchange rate is 1.25 dollars per one British pound?
62.5 dollars
50 dollars
60 dollars
70 dollars
40 British pounds
[id=2563, Mark=1]1. A

QN=2 (2566)
(4345) A monopolistic firm
a.
cannot sell additional quantity unless it raises the price on each unit.
b.
will always earn a profit in the long run.
c.
can sell as much as it wants for any price it determines in the market.
d.
will never sell a product whose demand is inelastic at the quantity sold.
e.
cannot determine the price, which is determined by consumer demand.
[id=2566, Mark=1]2. D
QN=3 (2570)
a.

b.
c.
d.
e.

(4374) Which of the following statements is the MOST accurate? The law of one price
states
in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in different countries must sell for the same price.
in competitive markets free of transportation costs and official barriers to trade,
identical goods sold in different countries must sell for the same price when their
prices are expressed in terms of the same currency.
in competitive markets free of official barrier to trade, identical goods are sold at the
same price regardless of transportation costs.
identical goods sold in different countries must sell for the same price when their
prices are expressed in terms of the same currency.
in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in the same country must sell for the same price when their prices
are expressed in terms of the same currency.
[id=2570, Mark=1]3. B

QN=4 (2577)
a.
b.
c.
d.
e.

(4375) Which of the following statements is the MOST accurate? The law of one price
states

in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in different countries must sell for the same price.
in competitive markets free of transportation costs and official barriers to trade,
identical goods sold in different countries must sell for the same price when their
prices are expressed in terms of the same currency.
in competitive markets free of official barrier to trade, identical goods are sold at the
same price regardless of transportation costs.
identical goods sold in different countries must sell for the same price when their
prices are expressed in terms of the same currency.
in competitive markets free of transportation costs and official barrier to trade,


identical goods sold in the same country must sell for the same price when their prices
are expressed in terms of the same currency.
[id=2577, Mark=1]4. B
QN=5 (2592)
a.
b.
c.
d.
e.
[id=2592, Mark=1]5. C

(4355) Which of the following could explain why the terms of trade of developing
countries might deteriorate over time?
Developing country exports consist mainly of manufactured goods
Commodity export prices are solely determined by developing countries
Commodity export prices are determined in highly competitive markets.
Developing country exports are too diverse.
Developing country exports consist mainly of primary products.

QN=6 (2586)
a.
b.
c.
d.
e.

(4356) Which trade strategy have developing countries used to restrict imports of
manufactured goods so that the domestic market is preserved for home producers?
export promotion
import substitution
export subsidies
international commodity agreement
multilateral contract
[id=2586, Mark=1]6. B

QN=7 (2594)
(4342) A country cannot produce a mix of products with a higher value than where
a.
the isovalue line is below the production possibility frontier.
b.
the isovalue line is above the production possibility frontier.
c.
the isovalue line intersects the production possibility frontier.
d.
the isovalue line is tangent with the indifference curve
e.
the isovalue line is tangent to the production possibility frontier.
[id=2594, Mark=1]7. E

QN=8 (2614)
(4334) From 1960 to 2012
a.
the share of US Trade in the global economy roughly tripled in size.
b.
U.S. exports roughly tripled in size
c.
U.S. Imports roughly tripled as compared to U.S. exports.
d.
U.S. imports roughly tripled in size.
e.
the U.S. economy roughly tripled in size.
[id=2614, Mark=1]8. A
QN=9 (2615)
a.
b.
c.
d.
e.

(4569) The optimum tariff is
the tariff, which maximizes the terms of trade gains
not practical for a large country due to the likelihood of retaliation
not practical for a small country due to the likelihood of retaliation
the best tariff a country can obtain via a WTO negotiated round of compromises
the tariff, which maximizes the difference between terms of trade gains and terms of


trade loses.
[id=2615, Mark=1]9. B

QN=10 (2612)
a.
b.
c.
d.
e.

(4362) A country's gross national product (GNP) is
the value of all final goods produced by its factors of production and sold on the
market in a given time period.
the value of all final goods and services produced by its factors of production,
excluding land, and sold on the market in a given time period.
the value of all final goods and services produced by its factors of production and sold
on the market.
the value of all final goods and services produced by its factors of production and sold
on the market in a given time period.
the value of all intermediate goods and services produced by its factors of production
and sold on the market in a given time period
[id=2612, Mark=1]10. D

QN=11 (2603)
a.
b.
c.
d.
e.

(4339) In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across
the border would
move the point of production along the production possibility curve.

shift the production possibility curve outward and decrease the production of the
capital-intensive product.
shift the production possibility curve outward and decrease the production of the
labor-intensive product.
shift the production possibility curve outward, and increase the production of both
goods.
shift the possibility curve outward and displace preexisting labor.
[id=2603, Mark=1]11. B

QN=12 (2622)

a.
b.
c.
d.
e.

(4578) It is argued that high-tech industries typically generate new technologies but
cannot fully appropriate the commercial benefits associated with their inventions or
discoveries. If this is true then in order to maximize a country's real income, the
government should
subsidize the high-tech firms.
discourage high-tech investments.
protect the high-tech firms
outsource high-tech production
tax the high-tech firms
[id=2622, Mark=1]12. A

QN=13 (2618)
a.

b.
c.
d.

(4558) Modeling trade in imperfectly competitive industries is problematic because
collusion among imperfectly competitive firms makes usable data rare
there are no models of imperfectly competitive behavior.
it is difficult to find an imperfectly competitive firm in the real world
there is no single generally accepted model of behavior by imperfectly competitive
firms.
e.
there is only a single model of imperfect competition (monopoly) but imperfect
competition can take many forms in the real world.
[id=2618, Mark=1]13. D


QN=14 (2634)
a.
b.
c.
d.
e.

(4559) The simultaneous export and import of widgets by the United States is an
example of
increasing returns to scale
imperfect competition.
inter-industry trade
intra-industry trade
the effect of a monopoly on international trade

[id=2634, Mark=1]14. D

QN=15 (8614)
a.
b.
c.
d.
e.

(16017) A factor of production that cannot be used outside of a particular sector of an
economy is a(an)
import-competing factor.
export-competing factor.
mobile factor.
specific factor.
variable factor.
[id=8614, Mark=1]15. D

QN=16 (2644)
(4572) The imperfect capital market justification for infant industry promotion
a.
assumes that new industries will tend to have low profits
b.
assumes that infant industries will be in products of comparative advantage
c.
assumes that infant industries will soon mature
d.
assumes that developing country will reward the donor country.
e.
assumes that banks can allocate resources efficiently.

[id=2644, Mark=1]16. A
QN=17 (8622)
a.
b.
c.
d.
e.

(16017) In the 2-factor, 2 good Heckscher-Ohlin model, trade will ________ the owners
of a country's ________ factor and will ________ the good that uses that factor
intensively.
benefit; scarce; import
harm; scarce; export
harm; abundant; import
benefit; abundant; export
benefit; scarce; export
[id=8622, Mark=1]17. D

QN=18 (8630)
a.
b.
c.
d.
e.

(16017) International trade has strong effects on income distributions. Therefore,
international trade
will tend to hurt everyone in both countries.
will tend to hurt one trading country
will tend to hurt some groups in each trading country.

is beneficial to everyone in both trading countries.
will be beneficial to all those engaged in international trade.
[id=8630, Mark=1]18. C

QN=19 (2647)
a.

(4552) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in
the international marketplace, then
the country would import more cloth


b.
c.
d.
e.

the cloth exporter will increase the quantity of cloth produced.
the cloth exporter will increase the quantity of cloth exported
the food exporter will increase the quantity of food exported.
the cloth exporter will decrease the quantity of cloth exported.
[id=2647, Mark=1]19. B

QN=20 (2637)
(4531) Theories of international economics from the 18th and 19th Centuries are
a.
not well understood by modern mathematically oriented theorists
b.
only of moderate relevance in today's modern international economy.
c.

highly relevant in today's modern international economy.
d.
the only theories that actually relevant to modern international economy.
e.
not relevant to current policy analysis.
[id=2637, Mark=1]20. C
QN=21 (2671)
a.
b.
c.
d.

(15882) Who sells what to whom
is determined by political rather than economic factors.
has been a major preoccupation of international economics.
is not a valid concern of international economics.
is not considered important for government foreign trade policy since such decisions
are made in the private competitive market.
e.
is less important than international economic theory.
[id=2671, Mark=1]21. B
QN=22 (8646)

(16017) If one observes that Japan was traditionally a net foreign lender, one could
conclude that relative to its international trade and financial partners
a.
Japan's intertemporal production possibilities are biased toward present consumption.
b.
Japan's intertemporal production possibilities are larger than that of the other
countries.

c.
Japan's intertemporal production possibilities are not biased.
d.
Japan's intertemporal production possibilities are biased toward future consumption
e.
Japan preferred to consume beyond its production in the present
[id=8646, Mark=1]22. A
QN=23 (8636)
a.
b.
c.
d.
e.

(16017) If two countries with diminishing returns and different marginal rates of
substitution between two products were to engage in trade, then
the larger of the two countries would dominate their trade.
the shapes of their respective production possibility frontiers would change.
the opportunity costs for the smaller country would increase.
the country with relatively elastic supplies would export more.
the marginal rates of substitution of both would become equal.
[id=8636, Mark=1]23. E

QN=24 (8638)
a.
b.

(16017) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in
the international marketplace, then
world relative quantity of cloth supplied will increase.

world relative quantity of cloth demanded will decrease.


c.
world relative quantity of cloth supplied and demanded will increase.
d.
world relative quantity of food will increase.
e.
world relative quantity of cloth supplied and demanded will decrease
[id=8638, Mark=1]24. A
QN=25 (2662)
a.
b.
c.
d.
e.

(4549) In the 2-factor, 2 good Heckscher-Ohlin model, the country with a relative
abundance of ________ will have a production possibility frontier that is biased toward
production of the ________ good.
land; labor intensive
labor; labor intensive
labor; capital intensive
capital; land intensive
land; capital intensive
[id=2662, Mark=1]25. B

QN=26 (2679)
a.
b.

c.
d.
e.

(15895) Since World War II, the likelihood that the job of a new college graduate will be
directly or indirectly affected by world trade
remained constant.
increased.
decreased.
fluctuated widely with no clear trend.
increased slightly before dropping off.
[id=2679, Mark=1]26. B

QN=27 (2684)
a.
b.
c.
d.
e.

(15899) In order to know whether a country has a comparative advantage in the
production of one particular product we need information on at least ________ unit
labor requirements
4
5
2
3
1
[id=2684, Mark=1]27. A

QN=28 (8660)
a.
b.
c.
d.
e.

(16017) External economies of scale will ________ average cost when output is
________ by ________.
increase; increased; the industry
reduce; reduce; the industry
reduce; increased; the industry
reduce; increased; a firm
increase; increased; a firm
[id=8660, Mark=1]28. C

QN=29 (2705)
a.
b.

(15927) In the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across
the border would
move the point of production along the production possibility curve.
shift the production possibility curve outward and decrease the production of the
capital-intensive product.


c.

shift the production possibility curve outward and decrease the production of the

labor-intensive product.
d.
shift the production possibility curve outward, and increase the production of both
goods.
e.
shift the possibility curve outward and displace preexisting labor.
[id=2705, Mark=1]29. B
QN=30 (2694)
(15913) In modern economies,
a.
outsourcing increases international labor mobility.
b.
restrictions on international labor mobility are common.
c.
restrictions on international labor mobility are rare.
d.
labor is far more mobile internationally than capital.
e.
labor is far more mobile internationally than it is intra-nationally.
[id=2694, Mark=1]30. B
QN=31 (2695)
a.
b.

(15916) In the two-country model of international labor mobility
the long-run equilibrium assumes that actual migration exceeds desired migration.
the long-run equilibrium is the result of a divergence of the real wages in the two
countries.
c.
the long-run equilibrium assumes that desired migration exceeds actual migration.

d.
the long-run equilibrium assumes countries' policies place significant restrictions on
migration.
e.
the long-run equilibrium assumes that desired and actual migration are equal.
[id=2695, Mark=1]31. E
QN=32 (2693)
a.
b.
c.
d.
e.

(15914) Immigration into the U.S. over the past century has caused the percentage of
immigrants in the U.S. population to
fall steadily over the entire century.
rise steadily over the entire century
fall steadily until the 1970s and increase thereafter.
remain relatively constant over the time period.
rise steadily until the 1970s and fall thereafter.
[id=2693, Mark=1]32. C

QN=33 (2712)
(15940) Terms of trade refers to
a.
what goods are imported.
b.
the relative price at which trade occurs.
c.
the tariffs applied to trade.

d.
what goods are exported.
e.
the volume of trade.
[id=2712, Mark=1]33. B

QN=34 (2726)
a.
b.
c.

(15955) Tariff rates on products imported into the U.S.
were prohibited by the Constitution.
have risen steadily since 1920.
have dropped substantially over the past 50 years.


d.
were the government's main source of income in 2006.
e.
reached an all time high in 2002.
[id=2726, Mark=1]34. C
QN=35 (8681)
a.
b.
c.
d.
e.

(16017) It is argued that special interest groups are likely to take over and promote

protectionist policies, which may lead to a decrease in national economic welfare. This
argument leads to
a presumption that free trade is generally a second-best policy, to be avoided if feasible
alternatives are available.
a presumption that free trade is generally a second-best policy, to be avoided if feasible
alternatives are available.
a presumption that protectionist policies will better serve a country as a whole than
free trade policies.
a presumption that free trade is the likely equilibrium solution if the government
allows special interest groups to dictate its trade policy.
a presumption that in practice a free trade policy is likely to be better than alternatives.
[id=8681, Mark=1]35. E

QN=36 (8685)
(16017) Protectionism tends to be concentrated in two sectors
a.
agriculture and clothing
b.
high-tech and national security sensitive industries.
c.
industries concentrated in the South and in the Midwest of the country.
d.
capital and skill intensive industries.
e.
financial services and manufacturing based in the Midwest
[id=8685, Mark=1]36. A
QN=37 (2729)
(15947) Specific tariffs are
a.
import taxes calculated based solely on the origin country

b.
import taxes calculated as a fraction of the value of the imported goods.
c.
the same as import quotas.
d.
import taxes calculated as a fixed charge for each unit of imported goods.
e.
import taxes stated in specific legal statutes.
[id=2729, Mark=1]37. D
QN=38 (2747)
a.
b.
c.
d.
e.

(15977) Which trade strategy have developing countries used to restrict imports of
manufactured goods so that the domestic market is preserved for home producers?
export promotion
import substitution
export subsidies
international commodity
multilateral contract
[id=2747, Mark=1]38. B

QN=39 (2742)
a.
b.

(15962) The optimum tariff is most likely to apply to

a large tariff imposed by a large country.
a large tariff imposed by a small country.


c.
d.
e.

an ad valorem tariff on a small country.
a small tariff imposed by a small country.
a small tariff imposed by a large country.
[id=2742, Mark=1]39. E

QN=40 (8692)
(16017) A reason why it is difficult for developing countries to maintain a cartel is that
a.
the elasticity of demand for a cartel's output decreases over time
b.
tariffs allow producers in the cartel to produce items that make no profit.
c.
producers in the cartel have the motivation to lower prices but not to raise prices.
d.
economic profits discourage other producers from entering the industry.
e.
producers in the cartel have an economic incentive to cheat.
[id=8692, Mark=1]40. E
QN=41 (2732)
a.
b.
c.

d.
e.

(15970) When the U.S. placed tariffs on French wine, France placed high tariffs on U.S.
chickens. This is an example of
a trade war.
multilateral negotiations.
deadweight losses.
bilateral trade negotiations
international market failures.
[id=2732, Mark=1]41. A

QN=42 (8706)
a.
b.
c.
d.
e.

(16017) Labor standards in trade are typically opposed by most developing countries
who believe that they will be used
to hinder investment in foreign-based multinational corporations.
as a means of spreading U.S. Corporate Values and destroying local cultures.
to charge these countries with crimes against child-labor standards at the Hague.
as a protectionist tool by import-competing producers in industrial countries.
to further neo-imperialist colonial exploitation.
[id=8706, Mark=1]42. D

QN=43 (2764)
(15990) The largest trading of foreign exchange occurs in

a.
Tokyo.
b.
London.
c.
New York.
d.
Frankfurt.
e.
Singapore.
[id=2764, Mark=1]43. B
QN=44 (2768)
a.
b.
c.
d.
e.

(15996) The two types of trade, intertemporal and pure asset swap ________ perfect
substitutes, because ________.
are not; asset swapping never relates to intertemporal trade
could possibly be; different economic states occur at different points in time
are not; asset swapping is immediate and involves only assets, while intertemporal
trade takes two time periods and involves both assets and goods/services
are; they both offer considerable payoff and are equal in the long run
are; they both involve the smoothing out of now and future consumption
[id=2768, Mark=1]44. B


QN=45 (2762)

(15992) Forward and spot exchange rates
a.
move closely together and are equal on the value date.
b.
are always such that the forward exchange rate is higher.
c.
are necessarily equal.
d.
do not move closely together.
e.
are unrelated to the value date.
[id=2762, Mark=1]45. A
QN=46 (8705)
a.
b.
c.
d.
e.

(16017) The evidence usually cited to prove that globalization hurts workers in
developing countries
is conclusive.
is inconclusive due to the poorly funded Central Statistical Office of Mexico.
is inconclusive due to the ambiguous theoretical implications of the findings.
is inconclusive due to poor statistical design of the underlying samples.
does not take into account the Heckscher-Ohlin model.
[id=8705, Mark=1]46. C

QN=47 (2773)
(16002) Asset trades that deal with debt instruments are best described as

a.
share of stock.
b.
bonds or bank deposits.
c.
factors.
d.
receipts.
e.
exchange rate.
[id=2773, Mark=1]47. B
QN=48 (8732)
(16017) A closed economy
a.
can save by avoiding excessive imports.
b.
can save either by building up its capital stock or by acquiring foreign wealth.
c.
can save only by acquiring foreign wealth.
d.
can save only by building up its capital stock.
e.
cannot save either by building up its capital stock or by acquiring foreign wealth.
[id=8732, Mark=1]48. D
QN=49 (2783)
(16007) The European Economic and Monetary Union
a.
produced a single government for handling European affairs.
b.
set up a single currency and sole bank for European economic monetary policy.

c.
created the Common Agricultural Pact.
d.
eliminated all barriers to trade such as tax differentials between borders.
e.
eliminated all local currencies in Western Europe.
[id=2783, Mark=1]49. B

QN=50 (8734)
a.
b.
c.

(16017) If the goods' money prices do not change, a depreciation of the dollar against
the pound
makes British jeans more expensive in Britain.
doesn't change the relative price of sweaters and jeans.
makes British sweaters cheaper in terms of American jeans.


d.
e.

makes British sweaters more expensive in terms of American jeans.
makes American jeans more expensive in terms of British sweaters.
[id=8734, Mark=1]50. D

QN=1 (2570)

(4374) Which of the following statements is the MOST accurate? The law of one price

states

a.

in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in different countries must sell for the same price.

b.

in competitive markets free of transportation costs and official barriers to trade,
identical goods sold in different countries must sell for the same price when their
prices are expressed in terms of the same currency.

c.

in competitive markets free of official barrier to trade, identical goods are sold at the
same price regardless of transportation costs.

d.

identical goods sold in different countries must sell for the same price when their
prices are expressed in terms of the same currency.

e.

in competitive markets free of transportation costs and official barrier to trade,
identical goods sold in the same country must sell for the same price when their prices
are expressed in terms of the same currency.
[id=2570, Mark=1]1. B

QN=2 (2565)

(4361) In the Brander-Spencer model the subsidy raises profits by more than the
subsidy because of

a.

the military-industrial complex.

b.

the "multiplier" effect of government expenditures.

c.

the economies of scale once the company enters the market

d.

the forward and backward linkage effects of certain industries.

e.

the deterrent effect of the subsidy on foreign competition.

[id=2565, Mark=1]2. E
QN=3 (2561)

(4359) The United States

a.

provides support for R&D through grant incentives.

b.

provides support for R&D through tax legislation

c.

does not provide more support for R&D as compared to other forms of investment.

d.

provides support for R&D by imposing high tariffs on R&D intensive products.


e.

provides support for R&D by providing direct subsidies for such activities.
[id=2561, Mark=1]3. B

QN=4 (2581)

(4377) How does an increase in the real exchange rate affect exports and imports?

a.

Exports increase; imports change ambiguously.

b.

Exports change ambiguously; imports decrease

c.

Exports decrease; imports increase

d.

Exports increase; imports are constant

e.

Exports increase; imports decrease.
[id=2581, Mark=1]4. A

QN=5 (2583)

(4333) Historians of economic thought often describe ________ written by ________
and published in ________ as the first real exposition of an economic model.

a.

"Of the Balance of Trade," David Hume, 1758

b.

"Of the Balance of Trade," David Hume, 1776

c.

"Wealth of Nations," David Hume, 1758

d.

"Wealth of Nations," Adam Smith, 1758

e.

"Wealth of Nations," Adam Smith, 1776
[id=2583, Mark=1]5. A

QN=6 (2580)

(4354) Sophisticated theoretical arguments supporting import-substitution policies
include

a.

the problem of appropriability.

b.

domestic market failure arguments.

c.

scale economy arguments.

d.

learning curve considerations.

e.

terms of trade effects.
[id=2580, Mark=1]6. A

QN=7 (2579)

(4370) The exchange rate between currencies depends on

a.

national output.

b.

the interest rate that can be earned on deposits of those currencies

c.

the expected future exchange rate

d.

the interest rate that can be earned on deposits of those currencies and the expected

future exchange rate.
e.

the interest rate that can be earned on deposits of those countries and the national
output.
[id=2579, Mark=1]7. D

QN=8 (2601)

(4367) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater
costing 50 British pounds if the exchange rate is 1.50 dollars per one British pound?

a.

60 dollars

b.

75 dollars

c.

80 dollars

d.

50 dollars

e.

70 dollars
[id=2601, Mark=1]8. B

QN=9 (2607)

(15919) If a country produces good Y (measured on the vertical axis) and good X
(measured on the horizontal axis), then the absolute value of the slope of its
production possibility frontier is equal to

a.

the opportunity cost of good X

b.

the price of good Y divided by the price of good X.

c.

the price of good X divided by the price of good Y.

d.

the opportunity cost of good Y.

e.

the cost of capital (assuming that good Y is capital intensive) divided by the cost of
labor.

[id=2607, Mark=1]9. A
QN=10 (2612)

(4362) A country's gross national product (GNP) is

a.

the value of all final goods produced by its factors of production and sold on the
market in a given time period.

b.

the value of all final goods and services produced by its factors of production, excluding
land, and sold on the market in a given time period.

c.

the value of all final goods and services produced by its factors of production and sold
on the market.

d.

the value of all final goods and services produced by its factors of production and sold
on the market in a given time period.

e.

the value of all intermediate goods and services produced by its factors of production

and sold on the market in a given time period
[id=2612, Mark=1]10. D
QN=11 (2609)

(4349) The efficiency case made for free trade is that as trade distortions such as
tariffs are dismantled and removed

a.

government tariff revenue will increase, hence increasing national economic welfare.

b.

government tariff revenue will decrease, and therefore national economic welfare will
increase.

c.

deadweight losses for producers and consumers will decrease, hence increasing
national economic welfare.

d.

deadweight losses for producers and consumers will decrease, hence decreasing
national economic welfare

e.

government tariff revenue will decrease, and therefore national economic welfare will
decrease.

[id=2609, Mark=1]11. C

QN=12 (2634)

(4559) The simultaneous export and import of widgets by the United States is an
example of

a.

increasing returns to scale

b.

imperfect competition.

c.

inter-industry trade

d.

intra-industry trade

e.

the effect of a monopoly on international trade
[id=2634, Mark=1]12. D

QN=13 (2620)

(4546) One way in which the Heckscher-Ohlin model differs from the Ricardo model of
comparative advantage is by assuming that ________ is (are) identical in all countries

a.

opportunity costs

b.

technology

c.

factor endowments

d.

scale of production

e.

factor intensities
[id=2620, Mark=1]13. B

QN=14 (2635)

(4544) International trade can have important effects on the distribution of income
because

a.

of government corruption.

b.

the more powerful country dictates the terms of trade.

c.

rich countries take advantage of poor countries

d.

different countries use different currencies.

e.

different industries employ different factors of production.
[id=2635, Mark=1]14. E

QN=15 (2617)

(4537) In general, which of the following do NOT tend to increase trade between two
countries?

a.

the existence of well controlled borders between countries

b.

larger economies

c.

mutual membership in preferential trade agreements

d.

historical ties

e.

linguistic and/or cultural affinity
[id=2617, Mark=1]15. A

QN=16 (2639)

(4574) Criticisms of the Brander-Spencer model include all EXCEPT which of the
following?

a.

the problem of insufficient information

b.

the problem of simultaneously causing harm to other industries

c.

the problem of harm to interests of consumers

d.

the problem of likely foreign retaliation

e.

the problem of adverse effects of trade policy politics
[id=2639, Mark=1]16. C

QN=17 (2636)

(4532) An important insight of international trade theory is that when two countries
engage in voluntary trade

a.

it is almost never beneficial to both countries.

b.

one country always benefits at the expense of the other.

c.

it only benefits the high wage country.

d.

it only benefits the low wage country.

e.

it is almost always beneficial to both countries


[id=2636, Mark=1]17. E

QN=18 (2653)

(4553) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in
the international marketplace, then

a.

world relative quantity of cloth supplied will increase

b.

world relative quantity of cloth demanded will decrease.

c.

world relative quantity of cloth supplied and demanded will increase

d.

world relative quantity of food will increase.

e.

world relative quantity of cloth supplied and demanded will decrease.
[id=2653, Mark=1]18. A

QN=19 (8633)

(16017) The meaning of "terms of trade" is

a.

the tariffs in place between two trading countries.

b.

the price of a country's exports divided by the price of its imports.

c.

the amount of exports sold by a country.

d.

the quantities of imports received in free trade.

e.

the price conditions bargained for in international markets.

[id=8633, Mark=1]19. B

QN=20 (8627)

(16017) If Australia has more land per worker, and Belgium has more capital per
worker,then if trade began between these two countries

a.

the real income of labor in Belgium would decline.

b.

the real income of capital owners in Australia would increase.

c.

the real income of labor in Australia would decline.

d.

the real income of labor in both countries would decline.

e.

the real income of landowners in Belgium would decline.
[id=8627, Mark=1]20. E

QN=21 (2658)

(4550) Tastes of individuals are represented by

a.

the terms of trade

b.

indifference curves.

c.

isovalue lines

d.

production possibility frontiers.


e.

production functions.
[id=2658, Mark=1]21. B

QN=22 (2673)

(15884) The balance of payments has become a central issue for the United States
because

a.

when the balance of payments is not balanced, society is unbalanced.

b.

the U.S. economy cannot grow when the balance of payments is in deficit.

c.

the U.S. once ran a large trade surplus of about $40 billion.

d.

the U.S. has run huge trade deficits in every year since 1982.

e.

the U.S. never experienced a surplus in its balance of payments.
[id=2673, Mark=1]22. D

QN=23 (8638)

(16017) If the ratio of price of cloth (PC) divided by the price of food (PF) increases in
the international marketplace, then

a.

world relative quantity of cloth supplied will increase.

b.

world relative quantity of cloth demanded will decrease.

c.

world relative quantity of cloth supplied and demanded will increase.

d.

world relative quantity of food will increase.

e.

world relative quantity of cloth supplied and demanded will decrease
[id=8638, Mark=1]23. A

QN=24 (8634)

(16017) The meaning of "terms of trade" is

a.

the tariffs in place between two trading countries.

b.

the price of a country's exports divided by the price of its imports.

c.

the amount of exports sold by a country.

d.

the quantities of imports received in free trade.

e.

the price conditions bargained for in international markets.
[id=8634, Mark=1]24. B

QN=25 (8649)

(16017) The intertemporal tradeoff between present and future consumption is
measured by the

a.

terms of trade

b.

real interest rate.

c.

nominal interest rate


d.

inflation rate.

e.

rate of economic growth.
[id=8649, Mark=1]25. B

QN=26 (2686)

(15902) The Ricardian model attributes the gains from trade associated with the
principle of comparative advantage result to

a.

differences in resources.

b.

differences in technology.

c.

gravity relationships among countries.

d.

differences in preferences.

e.

differences in labor productivity.
[id=2686, Mark=1]26. E

QN=27 (2682)

(15891) In the pre-World War I period, the U.S. exported mainly

a.

weapons.

b.

services.

c.

technology intensive products.

d.

manufactured goods.

e.

primary products including agricultural.
[id=2682, Mark=1]27. E

QN=28 (2676)

(15890) Why does the gravity model work?

a.

Large economies became large because they were engaged in international trade.

b.

Large economies tend to have large incomes and tend to spend more on imports.

c.

Large economies have relatively large incomes, and hence spend more on government
promotion of trade and investment.

d.

Large economies tend to avoid trading with small economies.

e.

Large economies have relatively larger areas which raises the probability that a
productive activity will take place within the borders of that country.
[id=2676, Mark=1]28. B

QN=29 (2707)

(15935) Factors tend to be specific to certain uses and products

a.

in countries lacking comparative advantage.


b.

in countries lacking fair labor laws

c.

in the short run.

d.

in labor-intensive industries.

e.

in capital-intensive industries.
[id=2707, Mark=1]29. C

QN=30 (2701)

(15915) In the two-country model of international labor mobility

a.

migration may reduce global output, although some groups are made better off.

b.

migration results in increased global output, and all groups are made better off.

c.

migration has no effect on global output, although some groups are made worse off.

d.

migration results in increased global output, although some groups are made worse
off.

e.

migration has no effect on global output, although some groups are made better off.
[id=2701, Mark=1]30. D

QN=31 (2708)

(15933) Trade benefits a country by

a.

increasing the wage rate.

b.

increasing available consumption choices.

c.

increasing the real income of all resource owners.

d.

reducing the relative price of the exported good.

e.

reducing the need for specialization in production.
[id=2708, Mark=1]31. B

QN=32 (2703)

(15930) According to the Heckscher-Ohlin model

a.

only the country with the more advanced technology gains from trade.

b.

the gainers from trade could compensate the losers and still retain gains.

c.

everyone gains from trade.

d.

the scarce factor gains from trade and the abundant factor loses.

e.

a country gains from trade if its exports have a high value added.
[id=2703, Mark=1]32. B

QN=33 (2706)

(15929) If a country produces good Y (measured on the vertical axis) and good X
(measured on the horizontal axis), then the absolute value of the slope of its
production possibility frontier is equal to


a.

the opportunity cost of good X

b.

the price of good Y divided by the price of good X.

c.

the price of good X divided by the price of good Y.

d.

the opportunity cost of good Y.

e.

the cost of capital (assuming that good Y is capital intensive) divided by the cost of
labor.
[id=2706, Mark=1]33. A

QN=34 (2725)

(15951) Which of the following is a fixed percentage of the value of an imported
product?

a.

specific tariff

b.

ad valorem tariff

c.

nominal tariff

d.

effective protection tariff

e.

infant industry tariff
[id=2725, Mark=1]34. B

QN=35 (2716)

(15945) When there are external economies of scale, an increase in the size of the
market will

a.

decrease the number of firms and lower the price per unit.

b.

increase the number of firms and lower the price per unit

c.

increase the number of firms and raise the price per unit.

d.

not affect the number of firms, but will lower the price per unit.

e.

decrease the number of firms and raise the price per unit.
[id=2716, Mark=1]35. B

QN=36 (2720)

(15949) A specific tariff provides home producers more protection when

a.

it is levied on manufactured goods rather than primary products.

b.

the home supply outnumbers the foreign imports.

c.

it is applied to a commodity with many grade variations.

d.

the home market buys cheaper products rather than expensive products.

e.

the home demand for a good is elastic with respect to price changes.
[id=2720, Mark=1]36. D


QN=37 (2727)

(15950) A lower tariff on imported steel would most likely benefit

a.

foreign producers at the expense of domestic consumers.

b.

domestic manufacturers of steel.

c.

foreign consumers of steel.

d.

domestic consumers of steel.

e.

workers in the steel industry.
[id=2727, Mark=1]37. D

QN=38 (2748)

(15979) General equilibrium considerations lead to the realization that importsubstituting policies have the effect of

a.

encouraging exports.

b.

creating competitive manufacturing sectors.

c.

generating large tariff revenues for the government.

d.

encouraging an efficient use of a country's resources.

e.

discouraging exports.
[id=2748, Mark=1]38. E

QN=39 (8702)

(16017) Which industrialization policy used by developing countries places emphasis
on the comparative advantage principle as a guide to resource allocation?

a.

international commodity agreements

b.

intra-industry trade practice

c.

Infant Industry promotion

d.

import substitution

e.

export promotion
[id=8702, Mark=1]39. E

QN=40 (8696)

(16017) Export-led growth tends to

a.

lower the overall volume of imports.

b.

exploit domestic comparative advantages

c.

help firms benefit from diseconomies of large-scale production.

d.

lead to unemployment among domestic workers

e.

discourage competition in the global economy.


[id=8696, Mark=1]40. B
QN=41 (8690)

(16017) The infant industry argument is that

a.

developing countries have no chance to compete with industrialized countries.

b.

comparative advantage is irrelevant to economic growth.

c.

developing countries have a comparative advantage in agricultural goods.

d.

developing countries have a potential comparative advantage in manufacturing.

e.

others

[id=8690, Mark=1]41. D

QN=42 (8703)

(16017) If firms in an industry are generating knowledge that other firms can use
without paying for it, this industry is characterized by

a.

social benefits that exceed private benefits.

b.

social benefits that undermine private benefits.

c.

social costs that exceed social benefits.

d.

social costs that exceed private costs.

e.

private benefits that exceed social benefits.
[id=8703, Mark=1]42. A

QN=43 (2767)

(16000) What would best describe the international capital markets?

a.

the market in which residents of different countries trade assets

b.

the market of exchange of stocks

c.

the market of exchange of real-estate

d.

the currency market

e.

the market of exchange of bonds
[id=2767, Mark=1]43. A

QN=44 (2753)

(15983) Ricardian equivalence argues that when the government cuts taxes and raises
its deficit,

a.

consumers anticipate that the low tax rates will continue.

b.

consumers anticipate that they will face lower taxes later to pay for the resulting
government debt.

c.

consumers anticipate that they will face higher taxes later to pay for the resulting
government debt.

d.

consumers anticipate it will affect their future taxes, in general in the direction of


lowering future taxes.
e.

consumers anticipate that they will higher services from the government.
[id=2753, Mark=1]44. C

QN=45 (2755)

(15985) How many dollars would it cost to buy an Edinburgh Woolen Mill sweater
costing 50 British pounds if the exchange rate is 1.50 dollars per one British pound?

a.

62.5 dollars

b.

50 dollars

c.

60 dollars

d.

75 dollars

e.

80 dollars
[id=2755, Mark=1]45. D

QN=46 (2769)

(16001) Describe three types of gains from trades?

a.

trades of imports for exports, trades of exports for imports, and trades of natural
resources for financial assets

b.

trades of exchange rates for goods or services, trades of goods or services for property,
and trades of gold for textiles

c.

trades of current goods for future services, trades of currency for gold, and trades of
one type of currency for another

d.

trades of services for goods, trades of currency for services, and trades of one type of
currency for another

e.

trades of goods or services for goods or services, trades of goods or services for assets,
and trades of assets for assets
[id=2769, Mark=1]46. E

QN=47 (2770)

(15998) For most practical matters, economists assume that

a.

most individuals are risk neutral

b.

most individuals are risk lovers

c.

individuals are risk lovers.

d.

individuals are risk neutral

e.

individuals are risk averse
[id=2770, Mark=1]47. E

QN=48 (8729)

(16017) Government purchases are defined as


a.

all goods and services purchased by the federal, state, or local government.

b.

all goods and services purchased by the federal or state government.

c.

all goods and services purchased by the federal government.

d.

goods and services purchased from the government.

e.

only goods purchased by federal, state, or local governments.
[id=8729, Mark=1]48. A

QN=49 (8741)

(16017) Which of the following is NOT a major actor in the foreign exchange market?

a.

non-bank financial institutions

b.

commercial banks

c.

corporations

d.

tourists

e.

central banks
[id=8741, Mark=1]49. D

QN=50 (8733)

(16017) If the goods' money prices do not change, an appreciation of the dollar against
the pound

a.

makes British jeans more expensive in Britain.

b.

makes British sweaters cheaper in terms of American jeans.

c.

makes American jeans cheaper in terms of British sweaters.

d.

doesn't change the relative price of sweaters and jeans.

e.

makes British sweaters more expensive in terms of American jeans.

[id=8733, Mark=1]50. B