Economics Unit 4 Review

Why do nations trade?

• so they can specialize

• because they believe that the products they receive are worth more than the products they give up

• because they need to acquire certain raw materials

• all of these

Which of the following statements BEST describes trade between two nations?

• It is mutually beneficial.

• It is legally required.

• It avoids specialization.

• It involves low cost for both nations.

Country A can produce more coal that Country B. An economist would say that Country A has ______________________________ over Country B.

• an export advantage

• a comparative advantage

• an absolute advantage

• a production possibility advantage

A farmer can grow wheat or corn. He grows corn because it will make more money than wheat. The value of the wheat crop he chose not to grow could best be described as

• a comparative advantage

• a comparative disadvantage

• an opportunity cost

• all of these

In international trade, comparative advantage is measured in ___________________.

• foreign exchange

• efficiency

• trade-weighted value

• difference between money paid and money received in trade

______________________ are taxes on ___________________

• Quotas, exports

• Quotas, imports

• Tariffs, exports

• Tariffs, imports

What does a protective tariff seek to protect?

• protectionists

• revenue

• free trade

• domestic industries

In general, what effect does a quota have on the prices of comparable goods in the domestic market?

• It lowers prices slightly.

• It raises prices dramatically.

• It keeps prices from dropping.

• It keeps prices from rising.

Which of the following is most directly affected by an embargo established by the United States?

• US tariffs

• US exports

• US imports

• US free traders

What would a free-trader most likely support?

• the infant industries argument

• a revenue tariff

• NAFTA

• an embargo