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GSE ECON Milestone Study Extravaganza (Part 2)

Total questions: 95

Worksheet time: 1hrs 8mins

Name
Class
Date
1.

What is the MOST restrictive trade barrier between countries?

a)

Embargo

b)

Quota

c)

Standards

d)

Tariff

2.

What term represents why the USA imports shirts and exports airplanes?

a)

Balance of payments

b)

Balance of trade

c)

Comparative advantage

d)

Embargo

3.

If US sugar producers are struggling to compete with foreign sugar producers, which of the following would they mostly likely try to do?

a)

Ask Congress to create more regulations for US sugar producers

b)

Ask Congress to remove quotas on foreign sugar imports

c)

Ask Congress to remove tariffs on foreign sugar imports.

d)

Ask congress to subsidize the US sugar market

4.

The US can produce more than Peru using the same resources. This example is best described by which word?

a)

Absolute advantage

b)

Economic appreciation

c)

Opportunity cost

d)

Trade surplus

5.

A teacher who is lecturing on the advantages and disadvantages of international trade is most likely to include which of the following topics?

a)

CPI and unemployment

b)

Discount rates and reserve ratios

c)

Inflation and stagflation

d)

Standards and quotas

6.

Exchange rates can be best described as

a)

A way to compare the price of one country's currency to another's

b)

A way to compare the quality of the goods produced by each country

c)

A way to measure the size of one nation's economy to another

d)

The amount of money made from compound interest over simple interest

7.

Which of the following would be the most likely reason a government would impose a trade barrier such as a quota or standard?

a)

To increase domestic profits

b)

To increase economic interdependence

c)

To increase the country's comparative advantage

d)

To raise the reserve ratio

8.

Which is the BEST reason for the US to initiate a trade embargo on another country?

a)

The country refuses to lower its exchange rate

b)

The country raises it exchange rate

c)

The country joins NAFTA

d)

The country has made threats against the US

9.

Over the course of one year, the Japanese yen appreciates relative to the British pound. Who would benefit MOST from this occurrence?

a)

British consumers of British goods

b)

British consumers of Japanese goods

c)

Japanese consumers of British goods

d)

Japanese consumers of Japanese goods

10.

A tariff placed on foreign steel imports represents

a)

A balance of payment deficit

b)

A barrier to trade

c)

A subsidy to domestic producers

d)

An increase in domestic production

11.

Those in favor of protectionist trade policies would most likely

a)

Believe that restrictions harm consumers

b)

Call for fewer import restrictions

c)

Cite the need to preserve domestic industries

d)

Support a reduction in tariffs

12.

In the country of Balmoria it takes 8 hours of labor to harvest a bushel of wheat and 7 hours of labor to build a wooden bookcase. In the nearby country of Dashmund, it takes 9 hours of labor to harvest a bushel of wheat and 6 hours to build a wooden bookcase. In terms of labor on these identical goods, which statement describes the situation accurately?

a)

Dashmund has an absolute advantage in both wheat and bookcases

b)

Balmoria has an absolute advantage in both wheat and bookcases

c)

Dashmund has a comparative advantage in wheat harvesting

d)

Balmoria has a comparative advantage in wheat harvesting

13.

Which of the following trading blocks allows the countries of the United States, Mexico, and Canada to trade more freely by removing tariffs?

a)

USMC

b)

EU

c)

NAFTA

d)

WTO

14.

Which of the following trading blocks allows the countries of the United States, Mexico, and Canada to trade more freely by removing tariffs?

a)

USMC

b)

EU

c)

NAFTA

d)

WTO

15.

How can a country maximize the benefits of trade?

a)

By exporting all of its goods

b)

By importing all of its goods

c)

By specializing in goods it produces with the lowest opportunity costs

d)

None of these options

16.

Trade restrictions can have which of the following effects?

a)

Slower economic growth

b)

High transaction costs

c)

Decreased competition

d)

All of the these

17.

Who benefits from a quota on imported goods to the United States?

a)

The U.S. consumer

b)

The U.S. government

c)

U.S. exporters

d)

U.S. producers of the product

18.

Who benefits from a tariff on imports to the U.S.?

a)

Foreign producers

b)

U.S. consumers

c)

U.S. producers

d)

All of the these

19.

Which of the following best describes what a quota accomplishes?

a)

Bar some countries from selling imports to the United States

b)

Impose a limit on the quantity of imports

c)

Impose a tax on U.S. imports

d)

All of the these

20.

What must happen to create a trade deficit?

a)

Imports are at an all-time low

b)

The United States is exporting more than it is importing

c)

The value of merchandise imports is greater than the value of merchandise exports

d)

All of the these

21.

Some Japanese cars were not allowed to be imported because they failed to produce enough miles per gallon. This example is best described by which trade barrier?

a)

Quota

b)

Standard

c)

Subsidy

d)

Tariff

22.

Which of these is the most likely effect of a weak U.S. dollar?

a)

Foreign investment in U.S. businesses will decline

b)

Foreigners will buy fewer U.S. exports

c)

Goods imported from other countries will become more expensive

d)

Travel abroad will become more affordable for Americans

23.

How are NAFTA, the EU, and ASEAN similar?

a)

Each promotes protectionist policies against all nations of the world.

b)

Each promotes free trade with all nations of the world.

c)

Each increases trade barriers among neighboring nations.

d)

Each decreases trade barriers among neighboring nations.

24.

When goods that are produced in the United States are sold to China, the goods are

a)

exported by the United States and imported by China.

b)

imported by the United States and exported by China.

c)

exported by the United States and exported by China.

d)

imported by the United States and imported by China.

25.

If the United States exports cars to France and imports cheese from Switzerland,

a)

the United States has a comparative advantage in producing cheese, and Switzerland has a comparative advantage in producing cars.

b)

the United States has a comparative advantage in producing cars, and Switzerland has a comparative advantage in producing cheese.

c)

the United States and France would both be better off if they each produced cars and cheese.

d)

Comparative advantage cannot be determined without knowing absolute prices.

26.

Trade is beneficial because it

a)

creates jobs for middlemen.

b)

creates jobs for shippers.

c)

allows each nation to apply economic pressure on other nations.

d)

allows each nation to specialize in doing what it does best.

27.

If a country’s currency loses value compared to another country’s currency we have an example of

a)

destabilization.

b)

deregulation.

c)

devaluation.

d)

depreciation.

28.

Those who argue that domestic jobs will be lost if trade restrictions are relaxed or eliminated are known as

a)

Protectionists.

b)

Proportionists.

c)

Proletariats.

d)

Progressives.

29.

Those who argue that domestic jobs will be lost if trade restrictions are relaxed or eliminated are known as

a)

Protectionists.

b)

Proportionists.

c)

Proletariats.

d)

Progressives.

30.

Denmark is an importer of computer chips and is also a price-taker in the chip market. The competitive price of these computer chips is $12. If Denmark imposes a $5 tariff on chips, the result in Denmark would be that the price of computer chips will be

a)

$17 and the quantity purchased will fall.

b)

$12 and the quantity purchased will fall.

c)

$7 and the quantity purchased will increase.

d)

$17 and the quantity purchased will increase.

31.

A tariff and an import quota will both

a)

increase the quantity of imports and raise domestic price.

b)

increase the quantity of imports and lower domestic price.

c)

reduce the quantity of imports and raise domestic price.

d)

reduce the quantity of imports and lower domestic price.

32.

With a flexible rate of exchange, the value of the dollar is set by

a)

government order.

b)

the laws of supply and demand.

c)

the price of gold.

d)

the World Bank.

33.

Which group benefits when the US dollar depreciates against other currencies?

a)

US citizens buying foreign goods and services

b)

US citizens traveling in foreign countries

c)

Foreign governments with US Treasury bonds

d)

Foreign citizens vacationing in the US

34.

What do NAFTA, EU, and ASEAN have in common?

a)

The United States is a member of all three.

b)

All three groups use the same currency.

c)

They are all interested in promoting free trade.

d)

Each group attempts to enforce trade barriers rigidly.

35.

Which BEST describes exchange rates?

a)

The difference between the total number of exports minus the number of imports.

b)

The price of one nation’s currency in terms of another.

c)

An increase in the price of a market basket over a given time period.

d)

An interest rate charged to consumers who take out a loan

36.

Having a comparative advantage in a good means that a country can produce the good

a)

Cheaper than most countries.

b)

Better than every other other country in the world.

c)

At a lower opportunity cost compared to another country.

d)

Comparatively faster than any other country.

37.

Which headline below is an example of using standards as a trade barrier?

a)

“US producers of wheat get big payday from Congress”

b)

“Mexican imports completely abolished”

c)

“Only professionally cleaned oranges allowed in US”

d)

“Limit of 1 million tons of sugar to be imported”

38.

Assume the United States buys $5 million worth of video games from Japan. At the same time, Japan buy $2 million of wheat from the United States. If these were the only two transactions between these countries, which is true of the United States’ balance of trade?

a)

The US has a trade deficit of $3 million.

b)

The US has a trade surplus of $2 million.

c)

The US has a trade deficit of $5 million.

d)

The US has a trade surplus of $5 million.

39.

Placing taxes on imported shoes from Vietnam is an example of a

a)

Balanced budget

b)

Monetary policy

c)

Trade barrier

d)

Trade surplus

40.

What is MOST LIKELY to happen to US imports and exports if the US dollar becomes stronger relative to other currencies?

a)

Both imports and exports will decrease

b)

Both imports and exports will increase

c)

Imports will increase, exports will decrease

d)

Imports will decrease, exports will increase

41.

Turkey trades textiles, food products, and building materials to Germany in exchange for German machinery, technology, and cars. This trade is possible because

a)

Neither country has an absolute advantage in any good

b)

Each country has a comparative advantage in different goods

c)

Both countries share a comparative advantage in the same goods

d)

The countries are forced to trade with each other

42.

Someone who strongly oppose a trade barrier like quotas or tariffs would MOST LIKELY argue that the barrier

a)

Would lead to lower government involvement in the economy.

b)

Will lead to higher prices and fewer imported goods.

c)

Would completely eliminate imported goods.

d)

Might cause more unemployment in domestic industries.

43.

In most cases, tariffs and quotas harm consumers by causing

a)

Unexpected deflation

b)

Higher unemployment

c)

Higher prices and fewer choices

d)

Surpluses and waste

44.

Which situation correctly describes a trade deficit?

a)

Tariffs are higher than income taxes

b)

Exports are greater than imports

c)

Tax revenue is higher than government spending

d)

Imports are greater than exports

45.

International trade MOST OFTEN takes place because of differences in

a)

Trade barriers

b)

Comparative advantage

c)

Exchange rates

d)

Absolute advantage

46.

What trade barrier is beneficial to both domestic producers and domestic consumers of a good?

a)

Quota

b)

Embargo

c)

Subsidy

d)

Tariff

47.

Why is an embargo used in situations where countries have severe political differences?

a)

Embargoes typically ban all trade between two countries

b)

a country can set unfair standards for the opposing country

c)

the taxes collected on Imports can be used for military tactics

d)

an embargo is a way for countries that initially opposed each other to resolve their differences

48.

U.S. auto companies are allowed to obtain steel at reduced cost if they promise to divert 85% of their production to Brazil, an emerging market for automobile sales.

a)

Tariff

b)

Quota

c)

Embargo

d)

Standards

e)

Subsidies

49.

Under pressure from the Food and Drug Administration (FDA), Congress passes a new law requiring all foreign-grown spinach to undergo a thorough screening process before being allowed to enter the United States market.

a)

Tariff

b)

Quota

c)

Embargo

d)

Standards

e)

Subsidies

50.

U.S. State Department officials confirm that the Bush Administration has decided to continue with plans to prohibit all U.S. trade with North Korea until Kim Jong Ill backs down from his nuclear threats.

a)

Tariff

b)

Quota

c)

Embargo

d)

Standards

e)

Subsidies

51.

Under pressure from the U.S. trade representative, Taiwanese textile firms agree to set limits at recent trade talks in Washington, D.C., on the number of textiles that may be imported into the United States.

a)

Tariff

b)

Quota

c)

Embargo

d)

Standards

e)

Subsidies

52.

Venezuela’s Most Favored Nation Trading Status will be revoked if Congress and the President believe that the Venezuelan Government under Hugo Chavez is guilty of human rights abuses and of inspiring insurrection against the United States. All Venezuelan imports (including oil) will experience a sharp increase in taxes if Venezuela is no longer considered a Most Favored Nation.

a)

Tariff

b)

Quota

c)

Embargo

d)

Standards

e)

Subsidies

53.

Use the exchange rate table to answer the question: Based in the table, which currency is the strongest?

a)

US Dollar

b)

Euro

c)

Can’t determine from the information provided

d)

Yen

54.

A business arguing for a trade barrier that would increase business revenue is most likely to lobby for which trade barrier?

a)

Standards

b)

Monopoly

c)

Tariff

d)

Quota

55.

Assume the exchange rate of U.S. dollars to Indian rupees changes from $1 equals 500 Rupees to $1 equals 200 rupees. Which group will be helped by this change?

a)

US exporters of US goods to India

b)

Indian manufacturing firms

c)

Indian citizens holding US dollars

d)

US importers of Indian goods

56.
What capital would a baker need to open a bakery?
a)
The dough used to make the bread.
b)
The oven used to bake the bread.
c)
The employee used to sell the bread.
d)
The land the bakery is on.
57.
Mr. Purcell really wants a 70'' flat screen TV so he spends all of the money in his bank account to get it instead of paying his mortgage. Was his choice rational?
a)
Yes, the marginal benefits exceed the marginal costs.
b)
Yes, the marginal costs exceed the marginal benefits.
c)
No, the marginal benefits exceed the marginal costs.
d)
No, the marginal costs exceed the marginal benefits.
58.
If a government increases production of military weapons, what happens to the production of consumer goods and services?
a)
The demand for consumer products declines
b)
The demand for consumer products increases
c)
The production of consumer products declines
d)
The production of consumer products increases
59.
What are examples of capital used by a business owner to increase production?
a)
Cars, water, factories
b)
Cotton, equipment, land
c)
Clothes, sales people, tools
d)
Machinery, building, computers
60.
How could society benefit when a company charges a higher price on a product that is considered scarce?
a)
Conservation
b)
Decrease in supply
c)
Increase in demand
d)
Less government intervention
61.
What is the opportunity cost when resources are used to produce one good or service?
a)
Increase in supply of other goods and services
b)
Decrease in demand for other goods and services
c)
Increase in production of other goods and services
d)
Decrease in production of other goods and services
62.
What occurs when the marginal benefits of an action exceed the costs?
a)
Producers decrease supply
b)
Consumer wants are diminished
c)
Opportunity costs are determined
d)
A rational decision has occurred
63.
Which action is an example of the government’s role in a command economy?
a)
Determining production schedules
b)
Negotiating tax rates
c)
Responding to consumer demand
d)
Ensuring private profits
64.
What are the FCC, FDA, FDIC, and FTC examples of?
a)
Market stabilization
b)
Unfair discrimination
c)
Income redistribution
d)
Government regulation
65.
What is the role of the government in a pure market economy?
a)
The government makes all economic decisions regarding the production and distribution of goods and services.
b)
The government makes some economic decisions, but other decisions are made by individuals
c)
The government ensures that all economic decisions are made according to a country’s customs and traditions
d)
The government does not make economic decisions; production and distribution are determined only by individuals
66.
Why do governments fund the development of new technologies that businesses can use to produce goods?
a)
New technologies can increase economic growth in a country
b)
New technologies contribute to competition in the global economy
c)
New technologies can encourage competition in a market economy
d)
New technologies produce profits for both businesses and government.
67.
Why does the government provide public goods and services to its citizens?
a)
To give everyone access to these needed commodities
b)
To ensure that the poor have an equal opportunity to thrive
c)
To keep the market from crashing due to private distribution
d)
To prevent the wealthy from controlling too much of the market
68.
How does education influence a person’s standard of living?
a)
More education decreases yearly earnings
b)
More education increases yearly earnings
c)
Less education increases yearly earnings
d)
Education does not influence yearly earnings
69.
Which of the following is a definitive quality of a successful entrepreneur?
a)
A person willing to take risks
b)
A person willing to hire and fire
c)
A person with a college education
d)
A person with an abundance of money
70.
Manufactured goods needed to produce other goods and services are called
a)
Private goods
b)
Capital goods
c)
Consumer Goods
d)
Trade offs
71.
At the Haverford Textile Company, frame tenders in the spinning department produce yarn that company weavers turn into cloth, which is afterward processed by workers in the finishing department and sent to market by people in the shipping department. This best illustrates how businesses:
a)
Diversify their productive output
b)
Seek to increase the value of their human capital
c)
Specialize within the production process
d)
Take advantage of economies of scale
72.
Which of the following best describes the most important role of entrepreneurship in a market economy?
a)
To assume the risks of combining factors of production to create goods and services
b)
To develop and disseminate new managerial techniques for organizing production
c)
To increase competition in industries with monopolistic or oligopolistic market structures
d)
To provide job alternatives to unemployed and underemployed wage earners
73.
Scarcity is defined best by which of the following?
a)
The next best alternative given up when individuals, businesses, and governments confront scarcity by making choices
b)
The insufficiency of a good or service that occurs when the quantity demanded exceeds the quantity supplied
c)
A model that illustrates the trade-offs facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given quantity produced of the other
d)
A basic condition that exists when unlimited wants exceed limited productive resources
74.
MagnaFlare is a corporation that makes road flares. One of the components of MagnaFlare’s flares is ground magnesium. How would the magnesium ore, from which ground magnesium is made, be classified as a factor of production?
a)
Capital
b)
Land
c)
Entrepreneurship
d)
It is not a factor of production, it is a product.
75.
Which of the following provides the BEST definition of economics?
a)
The study of money
b)
The study of how businesses operate
c)
The study of why people behave and make the decisions in the manner they do
d)
The study of how scarce resources are allocated to attain wants
76.
Brian wants to buy a soda and a box of popcorn at the movies. However, he only has enough money for one or the other. If Brian buys the soda, which of the following is his opportunity cost?
a)
The price of the soda
b)
The price of the popcorn
c)
The satisfaction of eating the popcorn
d)
His thirst
77.
The study of how individuals, firms, and nations can BEST allocate their resources is called what?
a)
Entrepreneurship
b)
Economics
c)
Study of production
d)
Capital
78.
Paul wants to buy a classic sports car. Unfortunately, only a limited amount of dealers and collectors have the model car he wants. As a result, Paul will have to pay a high price, if he can even get the car at all. Paul is experiencing what?
a)
An embargo on cars
b)
  Severe inflation
c)
Scarcity
d)
Depression in the car market
79.
The productive resource that brings together other resources to organize a business is:
a)
Physical capital
b)
Venture capital
c)
Entrepreneurship
d)
Productive capital
80.
One type of factor of production is capital. All of the following are examples of capital EXCEPT
a)
Buildings
b)
Machinery
c)
Electrical engineers
d)
A hydroelectric power plant
81.
The potential rewards, such as profit, that are available to an individual if a particular activity is undertaken are known as
a)
Premiums
b)
Gifts
c)
Incentives
d)
Intrinsic value
82.
Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that
a)
Both bear an opportunity cost since they could have done other things instead of see the movie
b)
Both bear the same opportunity cost since they are doing the same thing
c)
The cost of going to the movie is greater for the one who had more choices to do other things
d)
Neither bear an opportunity cost because the tickets were free
83.
An increase in the amount of resources available to an economy can be pictured in a production possibilities curve diagram by
a)
Shifting the production possibilities curve inward
b)
Shifting the production possibilities curve outward
c)
By making the production possibilities curve straighter
d)
Moving from a point inside the production possibilities frontier to a point on the curve.
84.
Which of the following is not scarce?
a)
College education
b)
Medicine
c)
Housing 
d)
Weeds
85.
Why would an entrepreneur want to invent a popular new product in a free market economy rather than a command economy?
a)
He has more job security in a free market economy.
b)
There are fewer market failures.
c)
There will be no competition in his product's market.
d)
There is a greater incentive because of the potential profit he/she can make if the product is in demand.
86.
What is the overall reason that the government reacts to resolve market failures?
a)
To protect property rights of citizens
b)
To act in the public interest and protect the overall economy
c)
To guard against depression by ensuring that banks do not close
d)
To make sure that everyone has access to certain goods and services
87.
Unlike a “service”, a good
a)
Is desirable
b)
Uses resources to satisfy wants
c)
Is physical and tangible
d)
Is abundant and free
88.
Which of the following is a service?
a)
Anything that is scarce and satisfies human wants
b)
Things for which people pay money
c)
An intangible activity that satisfies human wants
d)
Any output produced by a service-sector industry, such as fast food
89.
Michigan has an abundant supply of fresh water. However, an economist would consider it a scarce resource because:
a)
Water is necessary for humans’ physical survival.
b)
Pollution will eventually destroy the life of the Great Lakes.
c)
Water is limited relative to people’s unlimited wants.
d)
Water commands a very high price.
90.
The purpose of government in a command economy is to 
a)
Ensure the availability of consumer products
b)
Encourage entrepreneurs
c)
Make major economic decisions
d)
Promote economic freedom
91.
The combination of personal computers and televisions shown by point w in the figure to the right 
a)
Is an efficient use of society’s resources because it is below the production possibilities frontier
b)
Is more desirable than point x because producing a point w does not put a strain on society’s resources
c)
Is attainable but involves the inefficient use of some of society’s resources
d)
Is beyond the capacity of society to produce
92.
In the figure to the right, the combination of computers and televisions shown by point x
a)
Is not attainable at the point in time for which the graph is drawn
b)
Can be attained only if some of society’s resources are unemployed
c)
Suggests that the law of increasing relative cost does not hold
d)
Results only because society allocates its resources inefficiently
93.
How does profit motivate entrepreneurs to succeed in developing new goods and services?
a)
Profit is an incentive for entrepreneurs to restrict as many goods as they can
b)
Profit acts as an incentive for entrepreneurs to compete in improving goods and services that few consumers demand
c)
Profit acts as an incentive for entrepreneurs to produce and sell goods and services that others want to buy
d)
Profit is an incentive for entrepreneurs to further develop goods and services that have been rejected by the marketplace
94.
In the figure to the right, the opportunity cost of producing 400 yards of cloth instead of 200 yards of cloth is
a)
750 bushels of corn
b)
250 bushels of corn
c)
975 bushels of corn
d)
75 bushels of corn
95.
What is a benefit of using currency in an economy instead of trading goods with a barter system?
a)
It promotes higher prices
b)
It promotes a system of saving
c)
It promotes higher quality merchandise
d)
It promotes exchange in a small geographic area

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