estion 1

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Legislation requiring domestic manufacturers to install pollution abatement equipment tends to
promote:
Select one:

a. Higher production costs and an increase in output (internalize positive externalities)

b. Higher production costs and a decrease in output (internalize negative externalities)

c. Lower production costs and an increase in output

d. Lower production costs and a decrease in output

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The correct answer is: Higher production costs and a decrease in output (internalize negative
externalities)

Question 2
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A nation that gains from trade will find its consumption point being located:
Select one:

a. Inside its production possibilities curve

b. Along its production possibilities curve

c. Outside its production possibilities curve

d. None of the above

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The correct answer is: Outside its production possibilities curve

Question 3
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Concerning international trade restrictions, which of the following is false? Trade restrictions:
Select one:

a. Limit specialization and the division of labor

b. Reduce the volume of trade and the gains from trade

c. Cause nations to produce inside their production possibilities curves

d. May result in a country producing some of the product of its comparative disadvantage
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The correct answer is: Cause nations to produce inside their production possibilities curves

Question 4
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Unlike the mercantilists, Adam Smith maintained that:
Select one:

a. Trade benefits one nation only at the expense of another nation

b. Government control of trade leads to maximum economic welfare

c. All nations can gain from free international trade

d. The world's output of goods must remain constant over time

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The correct answer is: All nations can gain from free international trade

Question 5
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A lower tariff on imported aluminum would most likely benefit:
Select one:

a. Foreign producers at the expense of domestic consumers

b. Domestic manufacturers of aluminum

c. Domestic consumers of aluminum

d. Workers in the domestic aluminum industry

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The correct answer is: Domestic consumers of aluminum

on 6
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Among the determinants underlying a country's international competitiveness in business
services (e.g., construction) are:
Select one:

a. The potential scale economies afforded by a markets size

b. Abundance of equipment including data processing facilities and computers

c. Skills and capabilities of employees and their wage rates

d. All of the above

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The correct answer is: All of the above

Question 7
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Production gains from trade refer to the increased output of goods and services made possible
by the international division of ________________.
Select one:

a. labor and specialization.

b. supply chain routes.

c. human geography.

d. Sinopec Group.
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Your answer is correct.
The correct answer is: labor and specialization.

Question 8
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Concerning the influence that transportation costs have on the location of industry, which of the
following industries has generally attempted to locate production facilities close to resource
supplies?
Select one:
a. Autos

b. Steel

c. Soft drinks

d. Valuable electronics goods

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The correct answer is: Steel

Question 9
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Of the many arguments in favor of tariffs, the one that has enjoyed the most significant
economic justification has been the:
Select one:

a. Infant industry argument

b. Cheap foreign labor argument

c. Balance of payments argument

d. Domestic living standard argument

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The correct answer is: Infant industry argument

Question 10
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Proponents of ____ maintain that government should enact policies that encourage the
development of emerging, sunrise industries.
Select one:

a. Product life cycle policy

b. Static comparative advantage policy

c. Intraindustry trade policy

d. Industrial policy

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The correct answer is: Industrial policy

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Hong Kong is relatively abundant in labor, while Canada is relatively abundant in capital. In both
countries the production of shirts is relatively more labor intensive than the production of
computers. According to the factor endowment theory, Hong Kong will have a[n]:
Select one:

a. Absolute advantage in the production of shirts and computers

b. Absolute advantage in the production of computers

c. Comparative advantage in the production of shirts

d. Comparative advantage in the production of computers

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The correct answer is: Comparative advantage in the production of shirts

Question 12
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A product will be internationally traded as long as the pre-trade price differential between the
trading partners is:
Select one:

a. Greater than the cost of transporting it between them

b. Equal to the cost of transporting it between them

c. Less than the cost of transporting it between them

d. None of the above

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The correct answer is: Greater than the cost of transporting it between them

Question 13
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Most economists maintain that the major factor underlying wage stagnation in the United States
in the 1990s has been:
Select one:

a. Import competition

b. Technological change

c. Rising real value of the minimum wage

d. Increasing union membership

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The correct answer is: Technological change
Question 14
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International trade is based on the idea that:
Select one:

a. Exports should exceed imports

b. Imports should exceed exports

c. Resources are more mobile internationally than are goods

d. Resources are less mobile internationally than are goods

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The correct answer is: Resources are less mobile internationally than are goods

Question 15
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The principal benefit of tariff protection goes to:
Select one:

a. Domestic consumers of the good produced

b. Domestic producers of the good produced

c. Foreign producers of the good produced

d. Foreign consumers of the good produced

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The correct answer is: Domestic producers of the good produced
estion 16
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Which of the following is a fallacy of international trade?
Select one:

a. Trade is a zero-sum activity

b. Exports increase employment in exporting industries

c. Import restrictions increase employment in import-competing industries

d. Tariffs and quotas reduce trade volume

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The correct answer is: Trade is a zero-sum activity

Question 17
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Most economists believe gaining knowledge of _________________ is key to understanding
global trade.
Select one:

a. Smith's theory of absolute advantage

b. Water's theory of perfect sense

c. Game theorists use of the Nash equilibrium concept

d. Ricardo's theory of comparative advantage

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The correct answer is: Ricardo's theory of comparative advantage

Question 18
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The earliest statement of the principle of comparative advantage is associated with:
Select one:

a. Adam Smith

b. David Ricardo

c. Eli Heckscher

d. Bertil Ohlin
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The correct answer is: David Ricardo

Question 19
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Referring to Table 2.2, the opportunity cost of one VCR in South Korea is:
Select one:
a. 1/2 ton of steel

b. 1 ton of steel

c. 1 1/2 tons of steel

d. 2 tons of steel

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The correct answer is: 2 tons of steel

Question 20
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The simultaneous import and export of computers by Germany is an example of:
Select one:

a. Intraindustry trade

b. Interindustry trade

c. Perfect competition

d. Imperfect competition
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The correct answer is: Intraindustry trade

Question 21
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When considering the effects of transportation costs, the conclusions of our trade model must
be modified. This is because transportation costs result in:
Select one:

a. Lower trade volume, higher import prices, smaller gains from trade

b. Lower trade volume, lower import prices, smaller gains from trade

c. Higher trade volume, higher import prices, smaller gains from trade

d. Higher trade volume, lower import prices, greater gains from trade
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The correct answer is: Lower trade volume, higher import prices, smaller gains from trade

Question 22
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Concerning possible determinants of international trade, which are sources of comparative
advantage? Differences in:
Select one:

a. Methods of production

b. Tastes and preferences

c. Technological know-how

d. All of the above

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The correct answer is: All of the above

Question 23
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Question text
Assume that Country A, in the absence of trade, finds itself relatively abundant in labor and
relatively scarce in land. The factor endowment theory reasons that with free trade, the internal
distribution of national income in Country A will change in favor of:
Select one:

a. Labor

b. Land

c. Both labor and land

d. Neither labor nor land

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The correct answer is: Labor

Question 24
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Economists agree that wages of unskilled workers are being held down by
Select one:

a. International trade

b. Technology improvements

c. Lack of education

d. A combination of a, b, and c

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The correct answer is: A combination of a, b, and c

Question 25
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____ is the ability of a firm/industry, under free and fair market conditions, to design, produce,
and market goods and services that are better and/or cheaper than those of other
firms/industries.
Select one:

a. Competitiveness

b. Protectionism

c. Comparative advantage

d. Absolute advantage
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The correct answer is: Competitiveness

Question 26
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Boeing Inc. has criticized The Airbus Companys competitiveness on the grounds that Airbus
benefits from:
Select one:

a. Import tariffs protecting Airbus in the European market

b. Import quotas protecting Airbus in the European market

c. Lenient environmental standards of European governments

d. Production subsidies supplied by European governments

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The correct answer is: Production subsidies supplied by European governments
Question 27
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International trade forces domestic firms to become more competitive in terms of:
Select one:

a. The introduction of new products

b. Product design and quality

c. Product price

d. All of the above

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The correct answer is: All of the above

Question 28
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Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as
the US demands at $8 per bottle. If the US imposes a quota of 15 bottles of wine, how much
revenue will the US government collect?
Select one:

a. 0

b. $35

c. $70

d. $105
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The correct answer is: 0

Question 29
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The Smoot-Hawley Tariff Act of 1930 has generally been associated with:
Select one:

a. Falling tariffs

b. Increases in the volume of trade

c. Intensifying the worldwide depression

d. Efforts to liberalize nontariff trade barriers

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The correct answer is: Intensifying the worldwide depression

Question 30
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Which of the following policies permits a specified quantity of goods to be imported at one tariff
rate and applies a higher tariff rate to imports above this quantity?
Select one:

a. Tariff quota

b. Import tariff

c. Specific tariff

d. Ad valorem tariff
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The correct answer is: Tariff quota

Question 31
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Question text
Increased foreign competition tends to:
Select one:

a. Intensify inflationary pressures at home

b. Induce falling output per worker-hour for domestic workers

c. Place constraints on the wages of domestic workers

d. Increase profits of domestic import-competing industries

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The correct answer is: Place constraints on the wages of domestic workers

Question 32
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A firm's ____, relative to that of other firms, is generally regarded as the most important
determinant of competitiveness.
Select one:

a. Income level

b. Tastes and preferences

c. Governmental regulation

d. Productivity

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The correct answer is: Productivity

Question 33
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According to the principle of comparative advantage, specialization and trade increase a
nation's total output since:
Select one:

a. Resources are directed to their highest productivity

b. The output of the nation's trading partner declines

c. The nation can produce outside of its production possibilities curve

d. The problem of unemployment is eliminated

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The correct answer is: Resources are directed to their highest productivity

Question 34
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A main advantage of specialization results from:
Select one:

a. Economies of large-scale production

b. The specializing country behaving as a monopoly

c. Smaller production runs resulting in lower unit costs

d. High wages paid to foreign workers

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The correct answer is: Economies of large-scale production

Question 35
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If a nation has an open economy, it means that the nation:
Select one:

a. Allows private ownership of capital

b. Has flexible exchange rates

c. Has fixed exchange rates

d. Conducts trade with other countries

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The correct answer is: Conducts trade with other countries

Question 36
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Unlike Adam Smith, David Ricardo's trading principle emphasizes the:
Select one:

a. Demand side of the market

b. Supply side of the market

c. Role of comparative costs

d. Role of absolute costs

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The correct answer is: Role of comparative costs
Question 37
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A primary reason why nations conduct international trade is because:
Select one:

a. Some nations prefer to produce one thing while others produce other things

b. Resources are not equally distributed among all trading nations

c. Trade enhances opportunities to accumulate profits

d. Interest rates are not identical in all trading nations

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The correct answer is: Resources are not equally distributed among all trading nations

Question 38
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Referring to Table 2.1, the United States has the absolute advantage in the production of:
Select one:

a. Steel

b. Televisions
c. Both steel and televisions

d. Neither steel nor televisions

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The correct answer is: Televisions

Question 39
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Arguments for free trade are sometimes disregarded by politicians because:
Select one:

a. Maximizing domestic efficiency is not considered important

b. Maximizing consumer welfare may not be a chief priority

c. There exist sound economic reasons for keeping one's economy isolated from other economies

d. Economists tend to favor highly protected domestic markets

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The correct answer is: Maximizing consumer welfare may not be a chief priority

Question 40
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How much physical output a worker produces in an hour's work depends on:
Select one:

a. The worker's motivation and skill

b. The technology, plant, and equipment in use

c. How easy the product is to manufacture

d. All of the above

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The correct answer is: All of the above

Question 41
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Refer to Table 2.1. If trade opens up between the United States and the United Kingdom,
American firms should specialize in producing:
Select one:

a. Steel

b. Televisions

c. Both steel and televisions

d. Neither steel nor televisions

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The correct answer is: Televisions

Question 42
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Referring to Figure 2.1, the relative cost of aluminum in terms of steel is:
Select one:

a. 4.0 tons

b. 2.0 tons

c. 0.5 tons

d. 0.25 tons
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The correct answer is: 2.0 tons

Question 43
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Question text
Multilateral trade negotiations have led to
Select one:

a. Continued trade liberalization

b. Financial liberalization

c. Increased investment

d. All of the above

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The correct answer is: All of the above

Question 44
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Suppose that Canada eliminates its tariff on steel imports, permitting foreign-produced steel to
enter the Canadian market. Steel prices to Canadian consumers would be expected to:
Select one:

a. Increase, and the foreign demand for Canadian exports would increase

b. Decrease, and the foreign demand for Canadian exports would increase

c. Increase, and the foreign demand for Canadian exports would decrease

d. Decrease, and the foreign demand for Canadian exports would decrease
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The correct answer is: Decrease, and the foreign demand for Canadian exports would increase

Question 45
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Referring to Table 2.1, the

Uhttps://login.ufred.ca/pluginfile.php/189692/question/questiontext/361334/35/254305/Table
%202.1.jpgnited Kingdom has a comparative advantage in the production of:
Select one:

a. Steel

b. Televisions

c. Both steel and televisions

d. Neither steel nor televisions

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The correct answer is: Steel

Question 46
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Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as
the US demands at $8 per bottle. How much will the US produce and import in these
circumstances?
Select one:

a. 5 bottles, 40 bottles

b. 40 bottles, 0 bottles

c. 5 bottles, 35 bottles

d. 5 bottles, 0 bottles
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The correct answer is: 5 bottles, 35 bottles

Question 47
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Consider Figure 5.2. In the absence of international dumping, ABC Inc. maximizes profits by
selling ____ calculators at a price of $____; the firm realizes profits totaling $____.
Select one:

a. 27, $5, $54

b. 27, $5, $36

c. 24, $4, $46

d. 24, $4, $28

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The correct answer is: 27, $5, $54

Question 48
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Which of the following would least likely apply to the product life cycle theory?
Select one:

a. Calculators and computers

b. Coal and crude oil

c. Home movie cameras

d. Office machinery
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The correct answer is: Coal and crude oil

Question 49
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A closed economy is one in which:
Select one:

a. Imports exactly equal exports, so that trade is balanced

b. Domestic firms invest in industries overseas

c. The home economy is isolated from foreign trade

d. Saving exactly equals investment at full employment

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The correct answer is: The home economy is isolated from foreign trade

Question 50
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Refer to Table 2.2. According to the principle of comparative advantage:

Select one:

a. South Korea should export steel

b. South Korea should export steel and VCRs

c. Japan should export steel

d. Japan should export steel and VCRs

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The correct answer is: South Korea should export steel