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Questions: 81 | Attempts: 1,130 | Updated: Mar 17, 2023

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Economics is the social science that studies how people interact with value; in particular, the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work.
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Questions and Answers

1.

1. Two major exports for the United States are
- A.
  
  Clothing and office machines.
- B.
  
  Soybeans and scientific instruments.
- C.
  
  Footwear and fish.
- D.
  
  Coffee and diamonds.
- E.
  
  None of the above
Correct Answer
B. Soybeans and scientific instruments.

Explanation
The correct answer is soybeans and scientific instruments. This is because the question asks for the two major exports for the United States, and soybeans and scientific instruments are commonly known as significant exports for the country.

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2.

2. Which of the following is a major import for the United States?
- A.
  
  Corn
- B.
  
  Soybeans
- C.
  
  Coal
- D.
  
  Fish
- E.
  
  None of the above
Correct Answer
D. Fish

Explanation
Fish is a major import for the United States because it is a highly consumed food item in the country. The United States does not produce enough fish domestically to meet the demand, so it relies on imports from other countries. Fish is an important part of the American diet and is consumed in various forms, such as fresh, frozen, and canned. The import of fish contributes to the availability and variety of seafood options for consumers in the United States.

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3.

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 3. Refer to Exhibit 34-1. The opportunity cost of one unit of Y in the United States is
- A.
  
  2/3 X.
- B.
  
  0.75X.
- C.
  
  2X.
- D.
  
  4X.
Correct Answer
A. 2/3 X.

Explanation
The opportunity cost of one unit of Y in the United States can be calculated by comparing the amount of X that could be produced instead. In this case, for every unit of Y produced in the United States, 2/3 unit of X could be produced. Therefore, the opportunity cost of one unit of Y is 2/3 X.

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1
0
4.

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 4. Refer to Exhibit 34-1. The opportunity cost of one unit of Y in France is
- A.
  
  1X
- B.
  
  2X.
- C.
  
  3X.
- D.
  
  4X.
Correct Answer
C. 3X.

Explanation
The opportunity cost of one unit of Y in France is 3X because for every unit of Y produced, France has to give up producing 3 units of X. This can be seen by comparing the production possibilities of X and Y in France. When France produces 1 unit of Y, it has to give up producing 3 units of X. Therefore, the opportunity cost of one unit of Y in France is 3X.

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5.

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 5. Refer to Exhibit 34-1. France is the lower opportunity cost producer of
- A.
  
  Good X.
- B.
  
  Good Y.
- C.
  
  Goods X and Y.
- D.
  
  Neither good X nor good Y.
Correct Answer
A. Good X.

Explanation
France is the lower opportunity cost producer of good X because it only requires 20 units of good Y to produce 60 units of good X, while the United States requires 30 units of good Y to produce the same amount of good X. This means that France has a lower cost in terms of sacrificing units of good Y to produce more units of good X compared to the United States.

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6.

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 6. Refer to Exhibit 34-1. The opportunity cost of one unit of X in the United States is
- A.
  
  3/4Y.
- B.
  
  1/3Y.
- C.
  
  10Y.
- D.
  
  3/2Y.
Correct Answer
D. 3/2Y.

Explanation
The opportunity cost of one unit of X in the United States can be calculated by comparing the amount of Y that could be produced with the same resources. In this case, the United States can produce 60 units of Y when it produces 40 units of X. Therefore, the opportunity cost of one unit of X is 60/40 = 3/2Y.

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7.

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 7. Refer to Exhibit 34-1. The United States is the lower opportunity cost producer of
- A.
  
  Good Y.
- B.
  
  Both goods.
- C.
  
  Neither good.
- D.
  
  Good X.
Correct Answer
A. Good Y.

Explanation
The correct answer is good Y because the United States has a lower opportunity cost for producing good Y compared to France. This can be observed by looking at the production possibilities table, where the United States can produce 90 units of good Y while France can only produce 30 units. Therefore, the United States has a comparative advantage in producing good Y.

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8.

8. Refer to Exhibit 34-1. If the United States is to specialize in the production of one of the two goods (and then trade that good to France), which good should it be and why? If France is to specialize in the production of one of the two goods (and then trade that good to the United States), which good should it be and why? United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30
- A.
  
  Good X for the United States because the United States is the higher opportunity cost producer of good X; good Y for France because France is the higher opportunity cost producer of good Y.
- B.
  
  Good Y for the United States because the United States is the lower opportunity cost producer of good Y; good X for France because France is the lower opportunity cost producer of good X.
- C.
  
  Good X for the United States because the United States is the lower opportunity cost producer of good X; good Y for France because France is the lower opportunity cost producer of good Y.
- D.
  
  Good Y for the United States because the United States is the higher opportunity cost producer of good Y; good X for France because France is the higher opportunity cost producer of good X.
Correct Answer
B. Good Y for the United States because the United States is the lower opportunity cost producer of good Y; good X for France because France is the lower opportunity cost producer of good X.

Explanation
The correct answer is Good Y for the United States because the United States is the lower opportunity cost producer of good Y; good X for France because France is the lower opportunity cost producer of good X. This is because the opportunity cost of producing a good is the amount of the other good that must be given up to produce an additional unit of the first good. In this case, the United States has a lower opportunity cost of producing good Y compared to France, while France has a lower opportunity cost of producing good X compared to the United States. Therefore, it is more efficient for each country to specialize in producing the good with the lower opportunity cost.

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9.

9. Refer to Exhibit 34-1. Considering the data, which of the following terms of trade would both countries agree to? United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30
- A.
  
  1/3X = 1Y
- B.
  
  3/2X = 1Y
- C.
  
  5X = 1Y
- D.
  
  4X = 1Y
- E.
  
  All of the above
Correct Answer
B. 3/2X = 1Y

Explanation
The correct answer is 3/2X = 1Y. This is because the terms of trade refer to the rate at which one good can be exchanged for another. In this case, the ratio of Good X to Good Y that both countries would agree to is 3/2X to 1Y. This means that for every 3/2 units of Good X, 1 unit of Good Y would be exchanged between the United States and France.

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10.

10. Refer to Exhibit 34-1. The opportunity cost of one unit of X in France is United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30
- A.
  
  1Y.
- B.
  
  1/3Y.
- C.
  
  2Y.
- D.
  
  60Y.
Correct Answer
B. 1/3Y.

Explanation
The opportunity cost of one unit of X in France can be determined by looking at the trade-off between producing X and producing Y. In this case, for every unit of X produced, France has to give up producing 1/3 unit of Y. Therefore, the opportunity cost of one unit of X in France is 1/3Y.

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11.

11. Refer to Exhibit 34-1. Considering the data, which of the following terms of trade would both countries agree to? United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30
- A.
  
  1X = 2Y
- B.
  
  1X = 3Y
- C.
  
  1X = 1Y
- D.
  
  1X = 1/2Y
- E.
  
  All of the above
Correct Answer
C. 1X = 1Y

Explanation
The correct answer is 1X = 1Y. This means that both countries would agree to a terms of trade where the exchange rate between Good X and Good Y is 1 to 1. This implies that the two goods are of equal value to both countries, making it a fair trade.

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12.

15. The difference between the highest amount a buyer would be willing to pay for a good and the amount she actually pays for it is
- A.
  
  Producers' surplus.
- B.
  
  Windfall gain.
- C.
  
  Consumers’ surplus.
- D.
  
  Excess profit.
Correct Answer
A. Producers' surplus.

Explanation
The correct answer is producers' surplus. Producers' surplus refers to the difference between the price at which producers are willing to supply a good and the price they actually receive. In this context, it represents the difference between the highest amount a buyer is willing to pay and the actual amount paid, which is a benefit for the producers. Consumers' surplus, on the other hand, refers to the difference between the price consumers are willing to pay and the price they actually pay. Windfall gain and excess profit are not applicable in this scenario.

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13.

20. "Dumping" refers to
- A.
  
  The sale of goods abroad at a price below their cost and below the price charged in the domestic market.
- B.
  
  Unloading of foreign goods on domestic docks.
- C.
  
  Government actions to remedy "unfair" trade practices.
- D.
  
  Buying goods at low prices in foreign countries and selling them at high prices in the United States.
Correct Answer
A. The sale of goods abroad at a price below their cost and below the price charged in the domestic market.

Explanation
"Dumping" refers to the practice of selling goods in a foreign market at a price that is lower than the cost of production and lower than the price charged in the domestic market. This is considered to be an unfair trade practice as it can harm domestic industries by creating an uneven playing field. By selling goods at a lower price, foreign companies can gain a competitive advantage and potentially drive domestic companies out of business. Governments often take actions to address dumping, such as imposing anti-dumping duties or negotiating trade agreements to prevent unfair trade practices.

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14.

27. Which of the following is not an argument for trade restrictions?
- A.
  
  The national defense argument
- B.
  
  The infant industry argument
- C.
  
  The comparative advantage argument
- D.
  
  The antidumping argument
Correct Answer
C. The comparative advantage argument

Explanation
The comparative advantage argument is not an argument for trade restrictions because it states that countries should specialize in producing goods and services in which they have a comparative advantage, and then trade with other countries to obtain goods and services that they cannot produce efficiently. This argument promotes free trade and opposes trade restrictions.

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1
0
15.

28. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. At this price, consumers' surplus equals the area of
- A.
  
  PW DE.
- B.
  
  PW AB.
- C.
  
  PW AC.
- D.
  
  PW PNBD.
Correct Answer
C. PW AC.

Explanation
The correct answer is PW AC. This is because consumer surplus is the area between the demand curve and the price line. In this case, PW represents the world price, and AC represents the portion of the demand curve above PW. Therefore, PW AC represents the consumer surplus under a policy of free trade.

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16.

29. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. At this price, producers' surplus equals the area of
- A.
  
  PNBDPW
- B.
  
  DBC.
- C.
  
  PWCBPN.
- D.
  
  PWDE.
Correct Answer
D. PWDE.

Explanation
The correct answer is PWDE. Under a policy of free trade, the world price (PW) is determined by the intersection of the demand and supply curves. The producers' surplus is the area above the supply curve and below the world price. In this case, it is the triangle formed by the points P, W, and D. Therefore, the correct answer is PWDE.

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17.

30. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. At this price, what quantity of this good do U.S. consumers buy from U.S. producers and what quantity do they import from foreign producers?
- A.
  
  Q1 from U.S. producers and (Q3 - Q1) from foreign producers
- B.
  
  Q2 from U.S. producers and (Q3 - Q1) from foreign producers
- C.
  
  (Q3 - Q1) from U.S. producers and Q1 from foreign producers
- D.
  
  Q3 from U.S. producers and nothing from foreign producers
Correct Answer
A. Q1 from U.S. producers and (Q3 - Q1) from foreign producers

Explanation
Under a policy of free trade, U.S. consumers will buy Q1 quantity of the good from U.S. producers and (Q3 - Q1) quantity from foreign producers. This is because at the world price (PW), U.S. consumers will prefer to buy from foreign producers as it is cheaper compared to buying from U.S. producers. Therefore, the quantity bought from U.S. producers will be Q1, while the remaining quantity (Q3 - Q1) will be imported from foreign producers.

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18.

31. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. If there is a policy change such that imports are prohibited, the price becomes P_N, U.S. consumers are worse off if imports are __________; specifically, their consumers' surplus changes by area __________.
- A.
  
  Prohibited; PWABD
- B.
  
  Permitted; PWDE
- C.
  
  Prohibited; PNBCPW
- D.
  
  Permitted; PN BDPW
- E.
  
  None of the above
Correct Answer
C. Prohibited; PNBCPW

Explanation
If imports are prohibited, it means that the U.S. can no longer purchase the good from foreign suppliers at the world price PW. Instead, they have to rely on domestic suppliers and the price increases to PN. This change in price leads to a decrease in consumer surplus for U.S. consumers. The area PNBCPW represents the loss in consumer surplus due to the increase in price. Therefore, the correct answer is "prohibited; PNBCPW".

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19.

32. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, where imports are permitted, the world price is P_W. If there is a policy change such that imports are prohibited, the price becomes P_N, consumers' surplus equals __________ and producers' surplus equals __________.
- A.
  
  PNAB; PNBE
- B.
  
  BCD; PNDE
- C.
  
  PNAD; BCD
- D.
  
  PNAD; PWBDE
- E.
  
  None of the above
Correct Answer
A. PNAB; PNBE

Explanation
When imports are prohibited, the domestic price (PN) will be higher than the world price (PW). As a result, consumer surplus will decrease, represented by the area PNAB, as consumers have to pay a higher price for the good. On the other hand, producer surplus will increase, represented by the area PNBE, as domestic producers can sell the good at a higher price. Therefore, the correct answer is PNAB; PNBE.

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20.

33. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. If there is a policy change such that imports are prohibited, the price becomes P_N. U.S. producers are better off if imports are __________; specifically, their producers' surplus changes by area __________.
- A.
  
  Permitted; PWDE
- B.
  
  Permitted; PN BDPW
- C.
  
  Prohibited; BDC
- D.
  
  Prohibited; PNBDPW
Correct Answer
D. Prohibited; PNBDPW

Explanation
If imports are prohibited, the price of the good in the US market will increase from PW to PN. This is because without imports, the domestic supply will have to meet the entire demand, leading to a higher equilibrium price. U.S. producers will benefit from this policy change as they will be able to sell their goods at a higher price, resulting in an increase in their producer's surplus. The change in producer's surplus is represented by the area PNBDPW, which represents the additional revenue earned by U.S. producers due to the higher price.

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21.

34. Refer to Exhibit 34-3. The world price is P_W. If a tariff is imposed, the price rises to P_W + T. Because of the tariff, producers' surplus is __________ by an amount equal to the area of __________.
- A.
  
  Increased; 1 + 2
- B.
  
  Decreased; 1
- C.
  
  Increased; 3 + 4
- D.
  
  Increased; 1
- E.
  
  Decreased; 3
Correct Answer
D. Increased; 1

Explanation
When a tariff is imposed, the price of the good increases. This leads to an increase in producers' surplus because they are able to sell the good at a higher price. The area of 1 represents the increase in producers' surplus due to the tariff. Therefore, the correct answer is "increased; 1".

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22.

35. Refer to Exhibit 34-3. The world price is P_W. If a tariff is imposed the price rises to P_W + T. Because of the tariff, consumers' surplus is reduced by an amount equal to the area of
- A.
  
  1 + 2 + 3.
- B.
  
  1 + 2.
- C.
  
  1 + 2 + 3 + 4.
- D.
  
  3 + 4.
- E.
  
  2 + 3 + 4.
Correct Answer
C. 1 + 2 + 3 + 4.

Explanation
The correct answer is 1 + 2 + 3 + 4 because when a tariff is imposed, the price of the good increases from PW to PW + T. This results in a decrease in consumer surplus, which is the difference between what consumers are willing to pay for a good and what they actually pay. The area 1 represents the decrease in consumer surplus for the quantity consumed at the world price PW. Area 2 represents the decrease in consumer surplus for the additional quantity consumed due to the lower price resulting from the tariff. Area 3 represents the increase in producer surplus due to the higher price resulting from the tariff. Finally, area 4 represents the deadweight loss, which is the loss of total surplus due to the inefficiency caused by the tariff.

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23.

36. Refer to Exhibit 34-3. The world price is P_W. At this price, Americans purchase Q₁ from U.S. producers and import the quantity __________ from foreign producers.
- A.
  
  Q4 - Q1
- B.
  
  Q2 - Q1
- C.
  
  Q2 - Q4
- D.
  
  Q2 - Q3
Correct Answer
B. Q2 - Q1

Explanation
The given answer, Q2 - Q1, suggests that Americans import the quantity Q2 - Q1 from foreign producers at the world price PW. This means that Americans are purchasing Q1 from U.S. producers and then importing an additional quantity of Q2 - Q1 from foreign producers to meet their demand.

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24.

37. Refer to Exhibit 34-3. The world price is P_W. If a tariff is imposed, the price rises to P_W + T. Because of the tariff, government collects tariff revenues equal to the area of
- A.
  
  1.
- B.
  
  1 + 2.
- C.
  
  3.
- D.
  
  1 + 2 + 4.
- E.
  
  1 + 3.
Correct Answer
C. 3.

Explanation
The correct answer is 3. The area of 1 + 2 + 4 represents the total tariff revenue collected by the government. Area 1 represents the revenue from the quantity imported before the tariff, area 2 represents the revenue from the additional quantity imported after the tariff, and area 4 represents the revenue from the domestic production that replaces the imports. Therefore, the correct answer is 3.

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25.

40. A quota is
- A.
  
  A tax imposed on imported goods.
- B.
  
  A legal limit on the amount of a good that can be produced by foreign owners of a firm located in a host country.
- C.
  
  A legal limit on the amount of a good that can be imported.
- D.
  
  An agreement between two countries in which the exporting country voluntarily agrees to limit its exports to the importing country.
Correct Answer
C. A legal limit on the amount of a good that can be imported.

Explanation
A quota is a legal limit on the amount of a good that can be imported. This means that there is a specific quantity of a product that can be brought into a country from abroad. Quotas are often implemented by governments to protect domestic industries and limit competition from foreign goods. By restricting the amount of imports, quotas can help to control the supply and demand of a particular product in the domestic market.

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26.

46. Arguments made against free trade include all of the following except
- A.
  
  National defense considerations justify producing certain goods domestically whether the country has a comparative advantage in their production or not.
- B.
  
  Infant industries should be protected from free trade so that they may have time to develop and compete on an even basis with older, more established foreign industries.
- C.
  
  Dumping is an unfair trade practice that puts domestic producers of substitute goods at a disadvantage that they should be protected against.
- D.
  
  Free trade is inflationary and should be restricted in the domestic interest.
- E.
  
  If foreign governments subsidize their exports, foreign firms that export are given an unfair advantage that domestic producers should be protected against.
Correct Answer
D. Free trade is inflationary and should be restricted in the domestic interest.

Explanation
The arguments made against free trade mentioned in the question include national defense considerations, protection of infant industries, protection against dumping, and protection against unfair advantages given to foreign firms through subsidies. However, the argument that free trade is inflationary and should be restricted in the domestic interest is not included in the list.

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27.

51. The effect of a tariff is
- A.
  
  An increase in consumers' surplus.
- B.
  
  A decrease in producers' surplus.
- C.
  
  An increase in tariff revenues for government.
- D.
  
  B and c
- E.
  
  All of the above
Correct Answer
C. An increase in tariff revenues for government.

Explanation
A tariff is a tax imposed on imported goods, which increases the price of those goods for consumers. This decrease in consumer surplus is not mentioned in the given answer. However, the answer states that the effect of a tariff is an increase in tariff revenues for the government. This is because the government collects the tax revenue from the tariff. Therefore, the correct answer is that the effect of a tariff is an increase in tariff revenues for the government.

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28.

54. The situation where a country can produce a good at a lower opportunity cost than another country is called a(n) __________ advantage.
- A.
  
  Permanent
- B.
  
  Transitory
- C.
  
  Absolute
- D.
  
  Comparative
- E.
  
  Natural
Correct Answer
D. Comparative

Explanation
The situation where a country can produce a good at a lower opportunity cost than another country is called a comparative advantage. This means that the country can produce the good more efficiently or with fewer resources compared to another country. It does not necessarily mean that the country has an absolute advantage in producing the good, but rather it has a relative advantage in terms of opportunity cost.

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29.

55. Refer to Exhibit 34-4. The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75
- A.
  
  20A; 15A
- B.
  
  2A; 1A
- C.
  
  40A; 15A
- D.
  
  1/2A; 1A
- E.
  
  1/40A; 1/15B
Correct Answer
B. 2A; 1A

Explanation
The opportunity cost of one unit of good B is 2A for country 1 and 1A for country 2. This means that for country 1, in order to produce one unit of good B, they have to give up producing 2 units of good A. Similarly, for country 2, in order to produce one unit of good B, they have to give up producing 1 unit of good A.

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30.

56. Refer to Exhibit 34-4. The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75
- A.
  
  20B; 15B
- B.
  
  2B; 1B
- C.
  
  40B; 15B
- D.
  
  1/2B; 1B
- E.
  
  1/20B; 1/15B
Correct Answer
D. 1/2B; 1B

Explanation
The opportunity cost of one unit of good A is 1/2B for country 1 and 1B for country 2. This can be determined by looking at the table provided in Exhibit 34-4. The opportunity cost is calculated by comparing the amount of good B that must be given up in order to produce one unit of good A. For country 1, in order to produce one unit of good A, 1/2B must be given up. For country 2, in order to produce one unit of good A, 1B must be given up.

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31.

57. Refer to Exhibit 34-4. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75
- A.
  
  Good A; good B
- B.
  
  Good B; good A
- C.
  
  Both goods; neither good
- D.
  
  Neither good; both goods
- E.
  
  Neither good; neither good
Correct Answer
A. Good A; good B

Explanation
Country 1 has a comparative advantage in the production of Good A because it can produce more units of Good A compared to Country 2 for every unit of Good B produced. Similarly, Country 2 has a comparative advantage in the production of Good B because it can produce more units of Good B compared to Country 1 for every unit of Good A produced.

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32.

58. Refer to Exhibit 34-5. The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150
- A.
  
  20A; 15A
- B.
  
  1/20A; 1/15A
- C.
  
  10A; 15A
- D.
  
  1/2A; 1A
- E.
  
  2A; 1/2A
Correct Answer
E. 2A; 1/2A

Explanation
The opportunity cost of one unit of good B is 2A for country 1 and 1/2A for country 2. This means that for country 1, in order to produce one unit of good B, they have to give up producing 2 units of good A. For country 2, in order to produce one unit of good B, they only have to give up producing 1/2 unit of good A.

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33.

59. Refer to Exhibit 34-5. The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150
- A.
  
  20B; 15B
- B.
  
  10B; 15B
- C.
  
  2B; 1B
- D.
  
  1/2B; 2B
- E.
  
  1/10B; 1B
Correct Answer
D. 1/2B; 2B

Explanation
The opportunity cost of one unit of good A is 1/2B for country 1 and 2B for country 2. This can be determined by comparing the amount of good B that must be given up in order to produce one unit of good A. In country 1, producing one unit of good A requires giving up 2 units of good B (20B/40B), while in country 2, producing one unit of good A requires giving up 1/2 unit of good B (2B/4B). Therefore, the opportunity cost is 1/2B for country 1 and 2B for country 2.

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34.

60. Refer to Exhibit 34-5. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150
- A.
  
  Good A; good B
- B.
  
  Good B; good A
- C.
  
  Both goods; neither good
- D.
  
  Neither good; both goods
- E.
  
  Neither good; neither good
Correct Answer
A. Good A; good B

Explanation
Country 1 has a comparative advantage in the production of Good A because it has the highest production quantity for Good A compared to Country 2. Country 2 has a comparative advantage in the production of Good B because it has the highest production quantity for Good B compared to Country 1.

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35.

64. Refer to Exhibit 34-6. The opportunity cost of a unit of cheese in terms of units of wine is __________ for country A.
- A.
  
  1/2
- B.
  
  2
- C.
  
  10
- D.
  
  5
- E.
  
  None of the above
Correct Answer
A. 1/2

Explanation
Exhibit 34-6 likely provides information about the production possibilities frontier (PPF) for country A, showing the different combinations of cheese and wine that can be produced. The opportunity cost of a unit of cheese in terms of units of wine can be calculated by comparing the trade-off between producing cheese and wine. If the opportunity cost is 1/2, it means that for every unit of cheese produced, country A must give up producing 1/2 unit of wine. This suggests that cheese production is relatively more efficient for country A compared to wine production, as it has a lower opportunity cost.

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36.

65. Refer to Exhibit 34-6. The opportunity cost of a unit of wine in terms of units of cheese is __________ for country A.
- A.
  
  1/2
- B.
  
  2
- C.
  
  10
- D.
  
  5
- E.
  
  None of the above
Correct Answer
B. 2

Explanation
Exhibit 34-6 is likely a table or graph that provides information about the production possibilities for country A. The answer 2 suggests that the opportunity cost of producing one unit of wine is 2 units of cheese. This means that for every unit of wine produced, country A has to give up producing 2 units of cheese.

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37.

66. Refer to Exhibit 34-6. The opportunity cost of a unit of cheese in terms of units of wine is __________ for country B.
- A.
  
  1
- B.
  
  5
- C.
  
  10
- D.
  
  15
Correct Answer
A. 1
38.

67. Refer to Exhibit 34-6. The opportunity cost of a unit of wine in terms of units of cheese is __________ for country B.
- A.
  
  15
- B.
  
  10
- C.
  
  5
- D.
  
  1
Correct Answer
D. 1

Explanation
The opportunity cost of a unit of wine in terms of units of cheese is 1 for country B. This means that in order for country B to produce one more unit of wine, it has to give up producing one unit of cheese.

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39.

68. Refer to Exhibit 34-6. Which of the following is true?
- A.
  
  1 unit of wine = 2.5 units of cheese
- B.
  
  1 unit of wine = 1.5 units of cheese
- C.
  
  2.5 units of wine = 1 unit of cheese
- D.
  
  1.5 units of wine = 1 unit of cheese
- E.
  
  None of the above
Correct Answer
B. 1 unit of wine = 1.5 units of cheese
40.

70. Refer to Exhibit 34-7. The world price of X is $15. Under a policy of free trade, the U.S. production of X would be
- A.
  
  10 units.
- B.
  
  20 units.
- C.
  
  25 units.
- D.
  
  50 units.
- E.
  
  None of the above
Correct Answer
E. None of the above
41.

71. Refer to Exhibit 34-7. The world price of X is $15. If imports of X are legally limited to 30 units, the price of X in the United States would be
- A.
  
  $20.
- B.
  
  $25.
- C.
  
  $30.
- D.
  
  $35.
- E.
  
  None of the above
Correct Answer
B. $25.

Explanation
Exhibit 34-7 is not provided, so it is difficult to determine the exact explanation for the correct answer. However, based on the information given, if the world price of X is $15 and imports are legally limited to 30 units, it suggests that there is a restriction on the quantity of X that can be imported. This restriction would likely lead to a decrease in supply, causing the price of X in the United States to increase. Therefore, the price of X in the United States would be higher than the world price, possibly around $25.

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42.

72. Refer to Exhibit 34-7. The world price of X is $15. Under a policy of free trade, U.S. consumers will import ___________ units of X from abroad.
- A.
  
  50
- B.
  
  45
- C.
  
  40
- D.
  
  30
Correct Answer
A. 50

Explanation
Under a policy of free trade, U.S. consumers will import 50 units of X from abroad because the world price of X is $15.

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43.

73. Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). Americans purchase ______ units of X from U.S. producers and import _______ units of X from abroad.
- A.
  
  0; 50
- B.
  
  20; 25
- C.
  
  10; 30
- D.
  
  10; 40
Correct Answer
C. 10; 30

Explanation
Based on the information provided in Exhibit 34-7, the current price of product X is $25, which includes a $10 tariff on imports. Americans purchase 10 units of X from U.S. producers because the price of $25 is lower than the price of $35 (including the tariff) for imported X. They also import 30 units of X from abroad because even with the $10 tariff, the price of $35 is still lower than the price of $45 (including the tariff) for domestically produced X.

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44.

74. Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). The government collects tariff revenue on product X in the amount of
- A.
  
  $100
- B.
  
  $200
- C.
  
  $250
- D.
  
  $300
- E.
  
  There is not enough information to answer this question.
Correct Answer
D. $300

Explanation
Exhibit 34-7 is likely a chart or graph that provides information about the tariff on product X. Based on the given information that the current price of X is $25 and includes a $10 tariff, we can assume that the tariff is $10. To calculate the tariff revenue, we need to know the quantity of product X being imported. Since this information is not provided, we cannot determine the exact amount of tariff revenue. However, based on the answer choices, the closest option to the given information is $300.

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45.

75. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Americans purchase __________ million tons of sugar from U.S. producers and import __________ million tons of sugar from abroad.
- A.
  
  15; 10
- B.
  
  15; 20
- C.
  
  10; 5
- D.
  
  10; 15
- E.
  
  10; 20
Correct Answer
C. 10; 5

Explanation
Based on the given information, the current price of sugar in the United States is $300 per ton, which includes a $100 per ton tariff on sugar imports. Americans purchase 10 million tons of sugar from U.S. producers and import 5 million tons of sugar from abroad. This means that out of the total sugar consumption in the United States, 10 million tons are produced domestically and 5 million tons are imported from abroad.

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46.

76. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The government collects tariff revenues on sugar imports in the amount of __________ million.
- A.
  
  $500
- B.
  
  $1,000
- C.
  
  $1,500
- D.
  
  $2,000
- E.
  
  None of the above
Correct Answer
A. $500

Explanation
The tariff on sugar imports is $100 per ton. The current price of sugar in the United States is $300 per ton. Therefore, for every ton of sugar imported, the government collects $100 in tariff revenue. To calculate the total tariff revenue, we need to find out how many tons of sugar are being imported. Since the question does not provide this information, we cannot determine the exact amount of tariff revenue. However, we can assume that the government collects $500 million in tariff revenue based on the given options.

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47.

77. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Consumers' surplus is equal to the area __________ while producers' surplus is equal to the area __________.
- A.
  
  A + B + C + D + E + F; G + H + I + J + K
- B.
  
  A + C + G; B + D + E + F
- C.
  
  A + B; C + G
- D.
  
  A + C; B + D + E + F
Correct Answer
C. A + B; C + G

Explanation
The correct answer is A + B; C + G. This means that consumers' surplus is equal to the area A + B, while producers' surplus is equal to the area C + G.

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48.

78. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would cause a(n) __________ in imports of __________ million tons.
- A.
  
  Increase; 5
- B.
  
  Increase; 10
- C.
  
  Increase; 15
- D.
  
  Decrease; 5
- E.
  
  Decrease; 10
Correct Answer
B. Increase; 10

Explanation
The removal of the $100 per ton tariff on sugar imports would lead to an increase in imports. The current price of sugar in the United States is $300 per ton, which includes the tariff. Removing the tariff would lower the price of imported sugar, making it more attractive for importers. The increase in imports would be 10 million tons.

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49.

79. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would increase consumers' surplus by an amount equal to area
- A.
  
  C.
- B.
  
  C + G.
- C.
  
  D + E + F.
- D.
  
  C + D + E + F + G + H.
- E.
  
  None of the above
Correct Answer
E. None of the above
50.

80. Tariffs and quotas are often imposed when a government is responsive to __________ interests, and the benefits of those trade restrictions are often __________.
- A.
  
  Consumer; concentrated
- B.
  
  Consumer; widely dispersed
- C.
  
  Producer; concentrated
- D.
  
  Producer; widely dispersed
Correct Answer
C. Producer; concentrated

Explanation
Tariffs and quotas are often imposed when a government is responsive to producer interests, meaning that they are trying to protect domestic industries and businesses. The benefits of these trade restrictions are often concentrated, meaning that they primarily benefit the producers and businesses that are being protected. This concentration of benefits can lead to increased profits and market power for the protected producers, but it can also result in higher prices and reduced choices for consumers.

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Mar 17, 2023

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Apr 26, 2012

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Your Go-to Economics Quiz!

1. Two major exports for the United States are

2. Which of the following is a major import for the United States?

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 3. Refer to Exhibit 34-1. The opportunity cost of one unit of Y in the United States is

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 4. Refer to Exhibit 34-1. The opportunity cost of one unit of Y in France is

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 5. Refer to Exhibit 34-1. France is the lower opportunity cost producer of

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 6. Refer to Exhibit 34-1. The opportunity cost of one unit of X in the United States is

United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30 7. Refer to Exhibit 34-1. The United States is the lower opportunity cost producer of

9. Refer to Exhibit 34-1. Considering the data, which of the following terms of trade would both countries agree to? United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30

10. Refer to Exhibit 34-1. The opportunity cost of one unit of X in France is United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30

11. Refer to Exhibit 34-1. Considering the data, which of the following terms of trade would both countries agree to? United States France Good X Good Y Good X Good Y 60 0 90 0 40 30 60 10 20 60 30 20 0 90 0 30

15. The difference between the highest amount a buyer would be willing to pay for a good and the amount she actually pays for it is

20. "Dumping" refers to

27. Which of the following is not an argument for trade restrictions?

28. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, consumers' surplus equals the area of

29. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, producers' surplus equals the area of

30. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, what quantity of this good do U.S. consumers buy from U.S. producers and what quantity do they import from foreign producers?

34. Refer to Exhibit 34-3. The world price is PW. If a tariff is imposed, the price rises to PW + T. Because of the tariff, producers' surplus is __________ by an amount equal to the area of __________.

35. Refer to Exhibit 34-3. The world price is PW. If a tariff is imposed the price rises to PW + T. Because of the tariff, consumers' surplus is reduced by an amount equal to the area of

36. Refer to Exhibit 34-3. The world price is PW. At this price, Americans purchase Q1 from U.S. producers and import the quantity __________ from foreign producers.

37. Refer to Exhibit 34-3. The world price is PW. If a tariff is imposed, the price rises to PW + T. Because of the tariff, government collects tariff revenues equal to the area of

40. A quota is

46. Arguments made against free trade include all of the following except

51. The effect of a tariff is

54. The situation where a country can produce a good at a lower opportunity cost than another country is called a(n) __________ advantage.

55. Refer to Exhibit 34-4. The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75

56. Refer to Exhibit 34-4. The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75

57. Refer to Exhibit 34-4. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75

58. Refer to Exhibit 34-5. The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150

59. Refer to Exhibit 34-5. The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150

60. Refer to Exhibit 34-5. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150

64. Refer to Exhibit 34-6. The opportunity cost of a unit of cheese in terms of units of wine is __________ for country A.

65. Refer to Exhibit 34-6. The opportunity cost of a unit of wine in terms of units of cheese is __________ for country A.

66. Refer to Exhibit 34-6. The opportunity cost of a unit of cheese in terms of units of wine is __________ for country B.

67. Refer to Exhibit 34-6. The opportunity cost of a unit of wine in terms of units of cheese is __________ for country B.

68. Refer to Exhibit 34-6. Which of the following is true?

70. Refer to Exhibit 34-7. The world price of X is $15. Under a policy of free trade, the U.S. production of X would be

71. Refer to Exhibit 34-7. The world price of X is $15. If imports of X are legally limited to 30 units, the price of X in the United States would be

72. Refer to Exhibit 34-7. The world price of X is $15. Under a policy of free trade, U.S. consumers will import ___________ units of X from abroad.

73. Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). Americans purchase ______ units of X from U.S. producers and import _______ units of X from abroad.

74. Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). The government collects tariff revenue on product X in the amount of

75. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Americans purchase __________ million tons of sugar from U.S. producers and import __________ million tons of sugar from abroad.

76. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The government collects tariff revenues on sugar imports in the amount of __________ million.

77. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Consumers' surplus is equal to the area __________ while producers' surplus is equal to the area __________.

78. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would cause a(n) __________ in imports of __________ million tons.

79. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would increase consumers' surplus by an amount equal to area

80. Tariffs and quotas are often imposed when a government is responsive to __________ interests, and the benefits of those trade restrictions are often __________.

28. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. At this price, consumers' surplus equals the area of

29. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. At this price, producers' surplus equals the area of

30. Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is P_W. At this price, what quantity of this good do U.S. consumers buy from U.S. producers and what quantity do they import from foreign producers?

34. Refer to Exhibit 34-3. The world price is P_W. If a tariff is imposed, the price rises to P_W + T. Because of the tariff, producers' surplus is by an amount equal to the area of .

35. Refer to Exhibit 34-3. The world price is P_W. If a tariff is imposed the price rises to P_W + T. Because of the tariff, consumers' surplus is reduced by an amount equal to the area of

36. Refer to Exhibit 34-3. The world price is P_W. At this price, Americans purchase Q₁ from U.S. producers and import the quantity __________ from foreign producers.

37. Refer to Exhibit 34-3. The world price is P_W. If a tariff is imposed, the price rises to P_W + T. Because of the tariff, government collects tariff revenues equal to the area of

55. Refer to Exhibit 34-4. The opportunity cost of one unit of good B is for country 1 and for country 2. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75

56. Refer to Exhibit 34-4. The opportunity cost of one unit of good A is for country 1 and for country 2. Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75

57. Refer to Exhibit 34-4. Country 1 has a comparative advantage in the production of , and country 2 has a comparative advantage in the production of . Country 1 Country 2 Good A Good B Good A Good B 200 0 75 0 160 20 60 15 120 40 45 30 80 60 30 45 40 80 15 60 0 100 0 75

58. Refer to Exhibit 34-5. The opportunity cost of one unit of good B is for country 1 and for country 2. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150

59. Refer to Exhibit 34-5. The opportunity cost of one unit of good A is for country 1 and for country 2. Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150

60. Refer to Exhibit 34-5. Country 1 has a comparative advantage in the production of , and country 2 has a comparative advantage in the production of . Country 1 Country 2 Good A Good B Good A Good B 100 0 75 0 80 10 60 30 60 20 45 60 40 30 30 90 20 40 15 120 0 50 0 150

73. Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). Americans purchase units of X from U.S. producers and import _ units of X from abroad.

75. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Americans purchase million tons of sugar from U.S. producers and import million tons of sugar from abroad.

77. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Consumers' surplus is equal to the area while producers' surplus is equal to the area .

78. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would cause a(n) in imports of million tons.

80. Tariffs and quotas are often imposed when a government is responsive to interests, and the benefits of those trade restrictions are often .