1) Today, the share of international trade in U.S. GDP is
A) almost 0 percent.
B) about 10 percent.
C) close to 30 percent.
D) more than 99 percent.
2) Since 1950, the balance of trade for United States has
A) gone from a surplus to a deficit.
B) gone from a deficit to a surplus.
C) remained constant.
D) gone from a small deficit to a larger deficit.
3) The ability to produce a good or service at a lower opportunity cost than other producers is called
A) absolute advantage.
B) comparative advantage.
C) implicit advantage.
D) marginal advantage.
4) Suppose Ethan and Ava work in a farm that grows apples and oranges of the same size. In one hour, Ethan can pick 8 pounds of apples or 1 pound of oranges. Ava can pick 6 pounds of apples or 1 pound of oranges. It can be concluded that
A) Ava has a comparative advantage in picking apples.
B) Ava has an absolute advantage in picking apples.
C) Ethan has a comparative advantage in picking apples.
D) Ethan has an absolute advantage in picking oranges.
5) If Abigail can produce 4 tablets or 3 cellphones in a day, while Jacob can produce 1 tablet or 2 cellphones, then it is correct to state that
A) Abigail has a comparative advantage in producing cellphones.
B) Abigail has an absolute advantage in producing tablets but not cellphones.
C) Jacob has a comparative advantage in cellphones.
D) Jacob has an absolute advantage in cellphones.
6) In the long run, if imports increase, then exports
A) will not change.
B) will decrease.
C) will also increase.
D) will become zero.
7) Restricting imports usually leads to
A) a country producing beyond its production possibilities frontier.
B) a country consuming even further beyond its production possibilities frontier.
C) a reduction in exports and employment.
D) a higher per capita level of real consumption.
8) It has been suggested that in order to protect U.S. jobs we need to restrict foreign competition by restricting imports.
A) This is a sound economic statement since the U.S. will still export protecting U.S. jobs.
B) This is a sound economic statement since U.S. firms will have to increase output to make up for the lack of imports leading to increase employment in the U.S.
C) This is not a sound economic statement since employment in the U.S. does not depend on imports and exports.
D) This is not a sound economic statement since import restrictions lead to a reduction in employment in the export industries of the U.S.
9) Selling a good abroad below the price charged in the home market, or at a price below the cost of production is called
A) dumping.
B) import substitution.
C) a quota.
D) a tariff.
10) Using trade restrictions to protect special interests such as the U.S. auto industry
A) results in lower prices for U.S. auto consumers.
B) raises the prices that U.S. consumers must pay for autos.
C) is a very cost-efficient way of dealing with trade problems.
D) is the best long-term solution for threatened U.S. jobs.
11) Quotas and tariffs both serve the purpose of
A) increasing foreign trade.
B) restricting foreign trade.
C) causing domestic producers to lose revenues.
D) lowering prices on imported goods.
12) Tariffs to limit imports to "protect U.S. jobs" will also
A) stimulate exports.
B) limit exports.
C) decrease import prices.
D) reduce domestic production of import-threatened products.
13) The General Agreement on Tariffs and Trade is an international agreement
A) to establish the North American continent as a free trade area.
B) to encourage peaceful settlements of trade disputes, but has no particular point of view about the desirability of higher or lower tariffs.
C) to encourage world trade by lowering tariffs and other trade barriers.
D) to make all tariffs illegal.
14) A voluntary import expansion involves a
A) country agreeing to import more from another country.
B) country agreeing to reduce its trade barriers.
C) country agreeing to an import quota.
D) firm agreeing to expand output.
15) According to the text, approximately how many countries are members of the WTO?
A) 100
B) 135
C) 150
D) 180
16) Which of the following would increase the total amount of trade in the world?
A) trade diversion
B) trade deflection
C) trade retention
D) rules of origin
17) Why do free trade proponents dislike rules of origin in trade agreements?
A) It decreases the amount of international trade in the world.
B) It increases the amount of international trade in the world.
C) It decreases incentives for trade diversion.
D) It increases incentives for trade deflection.