Economics 252 Review Questions Chapter 6

 

(1) The export of motorcycles from the United States to Mexico illustrates a:

(a) trade flow. (b) resource flow. (c) financial flow. (d) technology flow.

 

(2) The purchase of US securities by residents of Canada constitutes a:

(a) trade flow. (b) labor flow. (c) financial flow. (c) technology flow.

 

(3) The emigration of software designers from India to the United States is a(n):

(a) trade flow. (b) resource flow. (c) financial flow. (d) information flow.

 

(4) The purchase by an American firm of the right to produce a prescription drug patented in Germany best illustrates a:

(a) trade flow. (b) capital flow. (c) financial flow. (d) technology flow.

 

(5) The United States' most important trading partner in terms of dollar volume is:

(a) Mexico. (b) Canada. (c) Germany. (d) Japan.

 

(6) In recent years the United States has:

(a) exported more goods and services than it has imported.

(b) imported more goods and services than it has exported.

(c) realized an approximate balance in its imports and exports.

(d) experienced a falling absolute dollar amount of imports and a rising absolute dollar amount of exports.

 

(7) More than half of the U.S. international trade is with:

(a) the nations of Eastern Europe.

(b) the developing countries of Africa, Asia, and Latin America.

(c) other industrialized nations, for example, Canada, Japan, and the countries of Western Europe.

(d) China.

 

 

(8) Protective tariffs are:

(a) maximum limits on the quantity or total value of specific products imported to a nation.

(b) excise taxes or duties placed on imported products.

(c) licensing requirements, unreasonable quality standards, and the like designed to impede imports.

(d) government payments to domestic producers to reduce the world prices of exported goods.

 

 

 

 

 

(9) Export subsidies are:

(a) maximum limits on the quantity or total value of specific products imported to a nation.

(b) excise taxes or duties placed on imported products.

(c) licensing requirements, unreasonable quality standards, and the like designed to impede imports.

(d) government payments to domestic producers to reduce the world prices of exported goods.

 

Utilize Table 1 to answer Questions (10) to (13).

Table 1

 

(10) In Table 1, the equilibrium dollar price of luta is:

(a) $10. (b) $8. (c) $6. (d) $2.

 

 

(11) In Table 1, the luta price of a dollar exchange rate in this market is:

(a) 8 luta for one dollar. (c) 6 luta for one dollar.

(b) .60 luta for one dollar. (d) .125 luta for one dollar.

 

 

(12) In Table 1, suppose that the United States imports more products from Luteland than before. All else equal, the dollar price of luta will:

(a) rise and the dollar will depreciate.

(b) fall and the dollar will depreciate.

(c) fall and the dollar will appreciate.

(d) rise and the dollar will appreciate.

 

 

(13) The General Agreement on Tariffs and Trade (GATT) is based on the principle of:

(a) establishing a single international currency.

(b) tariff reductions through multilateral negotiations.

(c) converting tariffs to import quotas.

(d) establishing common environmental and labor standards for all member nations.

 

 

 

Use Table 2 to answer Questions (14) to (19).

Table 2

 

(14) In Table 2, the domestic opportunity cost of producing 1 ton of steel in Alpha is:

(a) ton of wheat. (b) 1 ton of wheat. (c) 15 tons of wheat. (d) 30 tons of wheat.

 

(15) In Table 2, the domestic opportunity cost of producing 1 ton of steel in Omega is:

(a) ton of wheat. (b) 2 tons of wheat. (c) 3 tons of wheat. (d) 5 tons of wheat.

 

(16) In Table 2, Alpha has a comparative advantage in producing:

(a) neither steel nor wheat. (b) both steel and wheat. (c) steel. (d) wheat.

 

(17) On the basis of information in Table 2,

(a) Alpha should export both steel and wheat to Omega.

(b) Omega should export both steel and wheat to Alpha.

(c) Omega should export steel to Alpha and Alpha should export wheat to Omega.

(d) Alpha should export steel to Omega and Omega should export wheat to Alpha.

 

(18) In Table 2, after specialization, Alpha will produce:

(a) 60 tons of steel and Omega will produce 45 tons of wheat.

(b) 20 tons of steel and Omega will produce 60 tons of wheat.

(c) 60 tons of steel and Omega will produce 60 tons of wheat.

(d) 30 tons of steel and Omega will produce 30 tons of wheat.

 

(19) In Table 2, if Alpha and Omega each were producing at alternatives B before trade, the gain from specialization and trade would be:

(a) 30 tons of wheat.

(b) 30 tons of steel and 30 tons of wheat.

(c) 15 tons of steel.

(d) 60 tons of wheat and 60 tons of steel.

 

 

 

(20) The World Trade Organization (WTO):

(a) sets tariffs to balance international trade among nations.

(b) is an agency of the United Nations.

(c) monitors and mediates trade issues among member nations.

(d) sets exchange rates to balance international trade among nations.

 

 

(21) American critics of the WTO argue that free international trade and investment will:

(a) reduce U.S. imports.

(b) reduce employment in developing nations.

(c) undermine environmental and labor protections in the United States.

(d) increase immigration from low-income to high-income nations.

 

 

(22) Proponents of the WTO argue that free international trade and investment will:

(a) reduce economic growth rates in the industrial economies.

(b) reduce employment in developing nations.

(c) increase world poverty.

(d) increase living standards of all trading nations.

 

 

(23) The countries comprising NAFTA are:

(a) Canada, the United States, and Puerto Rico.

(b) the United States and Mexico.

(c) the European Economic Union, Canada, and the United States.

(d) Canada, the United States, and Mexico.

 

 

(24) Which of the following nations is not a member of the Euro zone?

(a) Italy (b) Finland (c) Germany (d) the United Kingdom (Great Britain)

 

 

(25) . The nations of the Euro zone have:

(a) abandoned their national currencies and switched to a common currency.

(b) abandoned their national currencies and switched to American dollars.

(c) formed a single country called the Union of European Nations (UEN).

(d) recently admitted Canada as a new member.