International Economics Unit 1 Set 3
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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Unit 1 Set 3
Q1 | International trade is based on the idea that:
- Exports should exceed imports
- Imports should exceed exports
- Resources are more mobile internationally than are goods
- Resources are less mobile internationally than are goods
Q2 | Arguments for free trade are sometimes disregarded by politicians because:
- Maximizing domestic efficiency is not considered important
- Maximizing consumer welfare may not be a chief priority
- There exist sound economic reasons for keeping one’s economy isolated from other economies.
- Economists tend to favor highly protected domestic markets
Q3 | Increased foreign competition tend to
- Intensify inflationary pressure at home
- Induce falling output per worker-hour for domestic workers
- Place constraints on the wages of domestic workers
- Increase profits of domestic import-competing industrie
Q4 | Free trade is based on the principle of:
- Comparative advantage
- Comparative scale
- Economies of advantage
- Production possibility advantage
Q5 | In 2003, the US had the largest total amount of imports from and exports to
- China.
- Mexico.
- Canada.
- Germany.
Q6 | Evidence shows that
- the effect of borders is not important when comparing international trade with trade between regions within a country.
- the amount of trade that a country undertakes is not related to its geography.
- the amount of trade between countries is not related to the cultural affinity between the countries.
- countries farther apart have less trade between them on average.
Q7 | The North American Free Trade Agreement
- has reduced the usefulness of the gravity model.
- has shown that international borders no longer affect the amount of trade between countries.
- has reduced tariffs and other trade restrictions among British Columbia, Manitoba and Ontario.
- has reduced tariffs and other trade restrictions among Canada, Mexico and the US.
Q8 | While technologies have reduced the negative effect that distance has on trade,
- the effect of international borders has not been reduced through trade agreements.
- the effects of the Internet and airplanes on trade have been negligible.
- political factors have historically been more influential in determining the amount of trade than available technologies.
- cultural clashes have recently reduced the amount of US trade compared to US trade in 1950.
Q9 | Most international trade today is classified as trade in
- Agricultural products
- Services
- Manufactured products
- Dairy products
Q10 | Approximately what percent of US imports occur through transactions conducted by amultinational corporation?
- 5%
- 10%
- 25%
- 40%
Q11 | Outsourcing refers to the case in which
- a firm exports out of a country rather than selling products within a country.
- a firm imports into a country rather than buying products from within a domestic country.
- consumers find out the source of where production occurs.
- a firm moves part of its business operations out of the domestic country.
Q12 | Gross domestic product measures
- the gross weight of products that are imported into a domestic country.
- the gross weight of products that are exported from a domestic country.
- the gross profits from all final goods and services produced in an economy.
- the total value of all final goods and services produced within an economy.
Q13 | In the Ricardian model:
- Trade will happen even if countries are identical.
- Differences in factor endowments give rise to trade.
- There is only one factor of production.
- There is only one industry in each country.
Q14 | The Ricardian model exhibits gains from trade:
- Only if each country has an absolute advantage in one of the industries.
- For both trading countries.
- Only for one of the trading countries.
- Only if countries specialize completely.
Q15 | Country A has 5000 units of labor. It takes 50 units of labor to produce one computer and 1 unit to create a Web page. What is the opportunity cost of a Web page in terms of computers?
- 50
- 0.0002
- 100
- 0.02
Q16 | The opportunity cost of producing computers in terms of Web pages is 50 in Country A and is 10 in Country B. Based on the Ricardian model, what can we conclude about the pattern of trade?
- Country A will export computers and import Web pages.
- We need to know what the relative price of computers in terms of web pages is to answer this question.
- We need to know what wages are to answer this question.
- Country A will export Web pages and import computers.
Q17 | Which of the following is NOT an assumption in the Ricardian model?
- Labor productivity in each country is fixed.
- Labor can freely move across countries.
- Each country has only one factor of production and its amount is fix
Q18 | Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below:Computers Web pages Country A 50 1 Country B 100 1 Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be:
- (or 1/100)
- 0.013 (or 1/75)
- Impossible to determine without knowing the relative price of computers in terms of Web pages.
- (or 1/50)
Q19 | Country A and Country B produce computers and Web sites. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 At which of the following relative prices (computers in terms of Web sites) will Country B produce both goods under free trade?
- 50
- 75
- 100
- 25
Q20 | In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by:
- Relative demand and relative supply for each trading country.
- Relative demand and relative supply on the world market.
- Relative opportunity costs in the two countries.
- Relative wages.
Q21 | Which of the following is true?
- Trade only hurts countries with lower wages.
- Countries that open up for trade see their wages rise over time relative to U.S. wages.
- Trade necessarily hurts poorer countries.
- none
Q22 | The welfare effects of a quota depend to a considerable extent upon
- Who has the quota license
- The size of the quota
- Elasticities of domestic demand and supply
- All of the above
Q23 | __________ are profits that accrue to whomever has the right to import the good thatis restricted by the quota.
- Quota license
- Quota rents
- Quota prices
- None of the above
Q24 | The home-country government can confiscate the revenue effect of an import quotaif
- Quota licenses are given to foreign exporting companies
- Quota licenses are auctioned to the highest-bidding importing company
- If quota licenses are given to domestic consumers of the good
- Both (a) and (c)
Q25 | Governments around the world tend to auction quota licenses
- Never
- Seldom
- Often
- Always