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The graph shows the production possibilities curves for two hypothetical nations, Orin and Pohl, which each make two hypothetical products, jaxs and keps. Which of the following statements is correct? A) Orin has a comparative advantage in both jaxs and keps. B) Pohl has a comparative advantage in jaxs. C) The opportunity cost of making jaxs is lower in Orin than in Pohl. D) Orin is more efficient than Pohl. The graph shows the production possibilities curves for two hypothetical nations, Orin and Pohl, which each make two hypothetical products, jaxs and keps. Which of the following statements is correct?


A) Orin has a comparative advantage in both jaxs and keps.
B) Pohl has a comparative advantage in jaxs.
C) The opportunity cost of making jaxs is lower in Orin than in Pohl.
D) Orin is more efficient than Pohl.

E) A) and D)
F) A) and B)

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Refer to the diagram, where S<sub>d</sub> and D<sub>d</sub> are the domestic supply and demand for a product and P<sub>c</sub> is the world price of that product. With a per-unit tariff in the amount P<sub>c</sub> Pₜ , price and total quantity sold will be A) Pₜ and x. B) P<sub>c</sub> and z. C) Pₜ and y. D) Pₐ and x. Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per-unit tariff in the amount Pc Pₜ , price and total quantity sold will be


A) Pₜ and x.
B) Pc and z.
C) Pₜ and y.
D) Pₐ and x.

E) C) and D)
F) B) and C)

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When a nation starts opening up to international trade, it will see falling prices for


A) goods that it exports.
B) goods that it imports.
C) goods that it has a comparative advantage in.
D) all goods traded.

E) A) and C)
F) All of the above

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Which of the following statements is false?


A) In recent years, the United States has had large annual trade deficits in goods.
B) The United States imports some of the same categories of goods as it exports.
C) China has the largest share of world exports.
D) As a percentage of GDP, U.S. exports are the highest among the industrially advanced nations.

E) C) and D)
F) B) and C)

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Refer to the diagram, which pertains to two nations and a specific product. In equilibrium, the nation represented by lines FA and FC will A) export H to the country represented by lines GB and GD. B) import H from the country represented by lines GB and GD. C) pay price F for its imports. D) receive price G for its exports. Refer to the diagram, which pertains to two nations and a specific product. In equilibrium, the nation represented by lines FA and FC will


A) export H to the country represented by lines GB and GD.
B) import H from the country represented by lines GB and GD.
C) pay price F for its imports.
D) receive price G for its exports.

E) None of the above
F) A) and D)

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Whenever a foreign producer is selling a product like steel at a lower price than domestic producers, then dumping is being practiced and must be corrected.

A) True
B) False

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Frederic Bastiat's "Petition of the Candlemakers" most directly refutes which of the following arguments for protectionism?


A) increased domestic employment argument
B) infant industry argument
C) cheap foreign labor argument
D) diversification-for-stability argument

E) A) and D)
F) None of the above

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The data in the accompanying production possibilities tables (in millions of units) suggest that production in A) Germany is subject to increasing opportunity costs and in the United States to constant opportunity costs. B) the United States is subject to increasing opportunity costs and in Germany to constant opportunity costs. C) both Germany and the United States is subject to constant opportunity costs. D) both Germany and the United States is subject to increasing opportunity costs. The data in the accompanying production possibilities tables (in millions of units) suggest that production in


A) Germany is subject to increasing opportunity costs and in the United States to constant opportunity costs.
B) the United States is subject to increasing opportunity costs and in Germany to constant opportunity costs.
C) both Germany and the United States is subject to constant opportunity costs.
D) both Germany and the United States is subject to increasing opportunity costs.

E) B) and D)
F) B) and C)

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The equilibrium world price of a product equates the quantities of exports supplied and imports demanded.

A) True
B) False

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Economists generally view offshoring as detrimental to the U.S. economy.

A) True
B) False

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Assume that a VER (voluntary export restraint) is imposed on an imported product. The difference between the domestic price and the world price is captured by


A) the government.
B) foreign exporters.
C) domestic consumers.
D) domestic workers.

E) B) and D)
F) B) and C)

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Refer to the graph, which shows the domestic demand and supply curves for a specific product in a hypothetical nation called Econland. At what price will Econland be neither importing nor exporting the product? A) $1.00 B) $1.50 C) $2.00 D) $2.50 Refer to the graph, which shows the domestic demand and supply curves for a specific product in a hypothetical nation called Econland. At what price will Econland be neither importing nor exporting the product?


A) $1.00
B) $1.50
C) $2.00
D) $2.50

E) B) and D)
F) A) and D)

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A key difference between import quotas and voluntary export restraints (VERs) is that the


A) domestic government administers the former, whereas the foreign government administers the latter.
B) foreign government administers the former, whereas the domestic government administers the latter.
C) one is a tax, whereas the other is a quantity limit.
D) one raises the price of the imported product involved, whereas the other one does not.

E) B) and D)
F) B) and C)

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Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic A) shortage of 160 units, which it will meet with 160 units of imports. B) shortage of 160 units, which will increase the domestic price to $1.60. C) surplus of 160 units, which it will export. D) surplus of 160 units, which will reduce the world price to $1.00. Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic


A) shortage of 160 units, which it will meet with 160 units of imports.
B) shortage of 160 units, which will increase the domestic price to $1.60.
C) surplus of 160 units, which it will export.
D) surplus of 160 units, which will reduce the world price to $1.00.

E) A) and B)
F) A) and C)

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The accompanying table gives data for Country Y. Column 1 is the price of a product. Column 2 is the quantity demanded domestically (Q<sub>d</sub>) , and Column 3 is the quantity supplied domestically (Qₛ<sub>d</sub>) . If the world price of the product is $6, then Country Y will A) export 100 units of the product B) import 100 units of the product. C) export 300 units of the product. D) import 400 units of the product. The accompanying table gives data for Country Y. Column 1 is the price of a product. Column 2 is the quantity demanded domestically (Qd) , and Column 3 is the quantity supplied domestically (Qₛd) . If the world price of the product is $6, then Country Y will


A) export 100 units of the product
B) import 100 units of the product.
C) export 300 units of the product.
D) import 400 units of the product.

E) B) and D)
F) B) and C)

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Answer the question using the accompanying cost ratios for two products, fish (F) and chicken (C) , in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that these are the only two nations in the world.Singsong: 1F = 2CHarmony: 1F = 4CWhich one of the following would not be feasible terms for trade between Singsong and Harmony?


A) 1 fish for 2½ chicken
B) 1 fish for 3 chicken
C) 1 chicken for 1/5 of a fish
D) 1 chicken for 1/3 of a fish

E) A) and B)
F) B) and C)

Correct Answer

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Specialization and trade based on comparative advantage allow nations to attain the following results, except


A) higher combined output.
B) higher consumption and standard of living.
C) rising total employment.
D) consuming combinations of products that are outside their PPCs.

E) None of the above
F) A) and B)

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In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of A) imperfect substitutability of resources between beer and pizza production. B) constant costs. C) decreasing costs. D) increasing costs. In the accompanying diagrams, solid lines are production possibilities curves, and the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of


A) imperfect substitutability of resources between beer and pizza production.
B) constant costs.
C) decreasing costs.
D) increasing costs.

E) C) and D)
F) B) and D)

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Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. The assumption made about the domestic production opportunity costs in both countries is that they are A) constant. B) variable. C) increasing. D) decreasing. Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. The assumption made about the domestic production opportunity costs in both countries is that they are


A) constant.
B) variable.
C) increasing.
D) decreasing.

E) B) and D)
F) A) and B)

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Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. Answer the question on the basis of the accompanying production possibilities tables for two countries, Latalia and Trombonia. Which of the following would be feasible terms for trade between Latalia and Trombonia? A) 1 ton of beans for 1 ton of pork B) 2 tons of beans for 1 ton of pork C) 6 tons of beans for 1 ton of pork D) 4 tons of beans for 1 ton of pork Which of the following would be feasible terms for trade between Latalia and Trombonia?


A) 1 ton of beans for 1 ton of pork
B) 2 tons of beans for 1 ton of pork
C) 6 tons of beans for 1 ton of pork
D) 4 tons of beans for 1 ton of pork

E) B) and D)
F) A) and B)

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