 |
| 1 | |
What is the meaning of the term gains from trade? |
| | A) | The surplus of exports over imports |
| | B) | The increase in output resulting from international trade |
| | C) | The fact that everyone gains from international trade |
| | D) | The increase in revenue that government receives from tariffs |
|
|
|
| 2 | |
What is a tariff? |
| | A) | It is a tax imposed on an import. |
| | B) | It is a tax imposed on an export. |
| | C) | It is a tax imposed on production. |
| | D) | It is a tax imposed on consumption. |
|
|
|
| 3 | |
What are the two largest categories of goods that Canada exports? |
| | A) | Energy and forestry products |
| | B) | Agricultural and forestry products |
| | C) | Forestry products and industrial materials |
| | D) | Automotive products and machinery/equipment products |
|
|
|
| 4 | |
What is the definition of the terms of trade? |
| | A) | It is the average price of a country’s imports divided by the average price of its exports. |
| | B) | It is the average price of a country’s exports divided by the average price of its imports. |
| | C) | They are the rules and regulations governing international trade. |
| | D) | The value of a country’s currency compared with that of its biggest trading partner. |
|
|
|
| 5 | |
What does it mean if the opportunity costs differ between two countries? |
| | A) | Then comparative costs must be the same. |
| | B) | There can be no gains from trade. |
| | C) | It is possible for both countries to gain from specialization and trade. |
| | D) | Then absolute costs must be the same. |
|
|
|
| 6 | |
On what basis are the gains from trade divided between countries? |
| | A) | According to the terms of trade |
| | B) | According to international trade agreements |
| | C) | According to the quantity of resources possessed by each |
| | D) | According to each country’s comparative advantage |
|
|
|
| 7 | |
Under what circumstances will there be no opportunity for mutually advantageous trade between two countries? |
| | A) | When the terms of trade are the same |
| | B) | When comparative costs are the same |
| | C) | When comparative costs are different |
| | D) | When tariffs exist |
|
|
|
| 8 | |
Suppose that originally the average price of Happy Island’s exports was 180 and the average price of its imports was 120. Now, the price of its exports drops to 160, and the price of its imports drops to 100. What effect will this have on Happy Island’s terms of trade? |
| | A) | There will be no change in the terms of trade. |
| | B) | The terms of trade have moved in Happy Island’s favour. |
| | C) | The terms of trade have moved against Happy Island. |
| | D) | The terms of trade have both increased and decreased. |
|
|
|
| 9 | |
All the following, except one, are forms of protectionism. Which is the exception? |
| | A) | Import subsidies |
| | B) | Tariffs |
| | C) | Exchange controls |
| | D) | Quotas |
|
|
|
| 10 | |
Suppose that the cost of producing one unit of wine in Happy Island is two units of rice; in Joy Island, one unit of wine costs four units of rice. What does this mean for the two countries? |
| | A) | Happy Island should specialize in, and export rice to, Joy Island. |
| | B) | Happy Island should specialize in, and export wine to, Joy Island. |
| | C) | Happy Island should specialize in rice but export wine to Joy Island. |
| | D) | Happy Island should specialize in wine but export rice to Joy Island. |
|
|
|
| 11 | |
Suppose that the cost of producing one unit of wine in Happy Island is two units of rice; in Joy Island one unit of wine costs four units of rice. What might be possible terms of trade between the two countries? |
| | A) | 1 rice = 3/8 wine |
| | B) | 1 rice = 3 wine |
| | C) | 1 rice = 6 wine |
| | D) | 1 wine = 1 rice |
|
|
|
| 12 | |
What is the difference between a tariff and a quota? |
| | A) | A tariff causes an increase in the price, whereas a quota does not affect the price. |
| | B) | Both a tariff and a quota will affect the price, but a tariff has no effect on the quantity, whereas a quota will lead to a reduction. |
| | C) | Both a tariff and a quota will affect the price, but a tariff has no effect on the quantity, whereas a quota will lead to an increase. |
| | D) | A quota affects all foreign producers equally, whereas a tariff does not. |
| | E) | A tariff affects all foreign producers equally, whereas a quota does not. |
|
|
|
| 13 | |
Refer to Figure 10.10 to answer this question. What is the opportunity cost of producing 1 apple in Harmony and in Tranquility? |
| | A) | 2 pears in Harmony and 3 pears in Tranquility |
| | B) | 1/2 pear in Harmony and 1/3 pear in Tranquility |
| | C) | 2 pears in Harmony and 1/3 pear in Tranquility |
| | D) | 1/2 pear in Harmony and 3 pears in Tranquility |
| | E) | 3 pears in Harmony and 2 pears in Tranquility |
|
|
|
| 14 | |
Refer to Figure 10.10 to answer this question. What do the comparative opportunity costs in the two countries suggest? |
| | A) | That there are no advantages to be gained from trade. |
| | B) | That Harmony should specialize in apples but export pears. |
| | C) | That Tranquility should specialize in apples but export pears. |
| | D) | That Harmony should specialize in pears but export apples. |
| | E) | That Harmony should specialize in pears and Tranquility should specialize in apples. |
|
|
|
| 15 | |
Refer to Figure 10.10 to answer this question. Suppose that both Harmony and Tranquility are producing 20 pears. What will be the total gains from trade for the two countries? |
| | A) | 20 apples and 0 pears |
| | B) | 30 apples and 10 pears |
| | C) | 20 apples and 10 pears |
| | D) | 20 apples and 30 pears |
| | E) | 0 apple and 20 pears |
|
|
|
| 16 | |
Refer to Figure 10.10 to answer this question. What could be possible terms of trade between the two countries? |
| | A) | 1 apple = 0.25 pear |
| | B) | 1 apple = 2.5 pears |
| | C) | 1 apple = 3 pears |
| | D) | 1 pear = 0.5 apple |
| | E) | 1 pear = 2.5 apples |
|
|
.