ECO 201 - CHAPTER 39 EXAM QUESTIONS AND ANSWERS SOLVED CORRECTLY
A trade Blank______ occurs when imports exceed exports. - Answers deficit
How do nations benefit from international trade? - Answers -They can acquire more goods and services.
-They can specialize their production.
-They can enhance their resource productivity.
Economizing requires that any particular good be produced by the nation having the Blank______
domestic opportunity cost, or the Blank______ advantage for that good. - Answers lowest; comparative
The exchange ratio at which two countries trade their products is called the - Answers terms of trade
When does a trade deficit occur? - Answers When imports exceed exports
What tends to happen to a nation that increases its participation in an open economy with an
international sector? - Answers The country produces more of its most profitable goods.
In a model compiled to show the economic relationship between two nations, what can be used to
determine whether each country has an absolute advantage or comparative advantage? - Answers
Production possibilities curves
What is the key determinant in whether a country can gain from specialization in international trade? -
Answers Comparative advantage
What type of graph shows the amounts of two products a nation can obtain by specializing in one
product and trading for the other? - Answers A trading possibilities line
What is the exchange ratio at which two countries trade their products? - Answers The terms of trade
What is the main effect of increasing opportunity costs? - Answers Less-than-complete specialization
In addition to the benefits of human and geographical specialization, what are some side benefits to free
trade? - Answers -It promotes competition.
-It encourages innovation.
A trading possibilities line reveals the amounts of two products a nation can obtain by - Answers
specializing in one product and trading for the other
What is the equilibrium world price? - Answers The price that equates the quantities supplied and
demanded globally through international trade
Assume the domestic price of corn is $1.00 and the quantity of corn produced is 100 tons. If the world
price of corn exceeds $1.00, then U.S. producers will produce Blank______ than 100 tons of corn,
creating a Blank______ that will be Blank______. - Answers more; surplus; exported
, In a two-nation model, international equilibrium is determined by the Blank______ of one country and
the Blank______ of the other country. - Answers import demand, export supply
The interaction of world supply and demand determines the equilibrium - Answers world price
What is a tariff? - Answers A tax on an imported good
What are the four direct effects of a tariff? - Answers -A decline in consumption
-Tariff revenue
-A decline in imports
-Increased domestic production
What is the main economic difference between a tariff and a quota? - Answers A tariff generates
revenue for the domestic government.
The intersection of one nation's import demand curve and another nation's export supply curve
represents - Answers international equilibrium
Tariffs and/or quotas tend to result in Blank______ for domestic consumers and Blank______ for the
producers of the protected goods in the importing economy. - Answers costs; gains
A tariff imposed on Chinese imports into the United States tends to - Answers benefit U.S. producers
and penalize Chinese producers
What are the three basic principles of the General Agreement on Tariffs and Trade (GATT)? - Answers -
Reduce tariffs, using multilateral negotiations.
-Equal, nondiscriminatory treatment of members.
-Eliminate import quotas.
Which statements about tariffs and quotas are true? - Answers -A quota transfers revenue to foreign
producers.
-A quota does not generate revenue for the government.
-A tariff generates revenue for the domestic government.
What institution is in charge of overseeing trade agreements and ruling on disputes relating to them? -
Answers World Trade Organization
What is the European Union (EU)? - Answers A regional free-trade zone
A trade Blank______ occurs when imports exceed exports. - Answers deficit
How do nations benefit from international trade? - Answers -They can acquire more goods and services.
-They can specialize their production.
-They can enhance their resource productivity.
Economizing requires that any particular good be produced by the nation having the Blank______
domestic opportunity cost, or the Blank______ advantage for that good. - Answers lowest; comparative
The exchange ratio at which two countries trade their products is called the - Answers terms of trade
When does a trade deficit occur? - Answers When imports exceed exports
What tends to happen to a nation that increases its participation in an open economy with an
international sector? - Answers The country produces more of its most profitable goods.
In a model compiled to show the economic relationship between two nations, what can be used to
determine whether each country has an absolute advantage or comparative advantage? - Answers
Production possibilities curves
What is the key determinant in whether a country can gain from specialization in international trade? -
Answers Comparative advantage
What type of graph shows the amounts of two products a nation can obtain by specializing in one
product and trading for the other? - Answers A trading possibilities line
What is the exchange ratio at which two countries trade their products? - Answers The terms of trade
What is the main effect of increasing opportunity costs? - Answers Less-than-complete specialization
In addition to the benefits of human and geographical specialization, what are some side benefits to free
trade? - Answers -It promotes competition.
-It encourages innovation.
A trading possibilities line reveals the amounts of two products a nation can obtain by - Answers
specializing in one product and trading for the other
What is the equilibrium world price? - Answers The price that equates the quantities supplied and
demanded globally through international trade
Assume the domestic price of corn is $1.00 and the quantity of corn produced is 100 tons. If the world
price of corn exceeds $1.00, then U.S. producers will produce Blank______ than 100 tons of corn,
creating a Blank______ that will be Blank______. - Answers more; surplus; exported
, In a two-nation model, international equilibrium is determined by the Blank______ of one country and
the Blank______ of the other country. - Answers import demand, export supply
The interaction of world supply and demand determines the equilibrium - Answers world price
What is a tariff? - Answers A tax on an imported good
What are the four direct effects of a tariff? - Answers -A decline in consumption
-Tariff revenue
-A decline in imports
-Increased domestic production
What is the main economic difference between a tariff and a quota? - Answers A tariff generates
revenue for the domestic government.
The intersection of one nation's import demand curve and another nation's export supply curve
represents - Answers international equilibrium
Tariffs and/or quotas tend to result in Blank______ for domestic consumers and Blank______ for the
producers of the protected goods in the importing economy. - Answers costs; gains
A tariff imposed on Chinese imports into the United States tends to - Answers benefit U.S. producers
and penalize Chinese producers
What are the three basic principles of the General Agreement on Tariffs and Trade (GATT)? - Answers -
Reduce tariffs, using multilateral negotiations.
-Equal, nondiscriminatory treatment of members.
-Eliminate import quotas.
Which statements about tariffs and quotas are true? - Answers -A quota transfers revenue to foreign
producers.
-A quota does not generate revenue for the government.
-A tariff generates revenue for the domestic government.
What institution is in charge of overseeing trade agreements and ruling on disputes relating to them? -
Answers World Trade Organization
What is the European Union (EU)? - Answers A regional free-trade zone
