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WorksheetsKTQT PART 2
Total questions: 95
Worksheet time: 48mins
The Heckscher-Ohlin theorem states that a country will have comparative advantage in the good whose production is relatively intensive in the ________ with which the country is relatively abundant.
tastes
technology
factor/resource
opportunity cost
One of the predictions of the Heckscher-Ohlin model is that:
countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other.
countries will tend to specialize, but not completely, in their comparative advantage good.
reciprocal demand leads to an equilibrium terms of trade by inducing changes in both demand and supply.
all of the above.
Wassily Leontief used an input-output table in order to test the
Ricardian theory of comparative advantage
Heckscher Ohlin theory of comparative advantage
Linder theory of overlapping demand
all of the above
The Heckscher-Ohlin assumes that _______ are identical between countries.
tastes and preferences
technology levels
factor endowments
both (a) and (b)
In his empirical tests, Wassily Leontief used an input-output table to
calculate the capital and labor required to produce $1 million of U.S. exports and imports.
calculate the labor productivity of American workers relative to foreign workers.
calculate the capital productivity of American capital relative to foreign capital.
all of the above
In his empirical test of comparative advantage, Wassily Leontief found that
U.S. exports are capital intensive relative to U.S. imports
U.S. imports are labor intensive relative to U.S. exports
U.S. exports are neither labor nor capital intensive
none of the above
Leontief’s results were considered paradoxical because the United Stated was believed to be
technologically efficient relative to the rest of the world
capital abundant relative to the rest of the world
labor abundant relative to the rest of the world
all of the above
According to the Heckscher-Ohlin model
everyone automatically gains from trade
the gainers from trade outnumber the losers from trade
the scarce factor necessarily gains from trade
none of the above
Wassily Leontief’s results can be interpreted as
evidence against the Ricardian model
evidence against the Heckscher-Ohlin model
support for the Ricardian model
support for the Heckscher-Ohlin model
Advocates of industrial policy maintain that government should
pursue free trade as a policy that leads to maximum global efficiency
grant subsidies to firms offering potential comparative advantage
provide loans to domestic workers in exporting industries
increase interest rates on loans made to firms in import-competing industries
The factor endowment theory was pioneered by:
Adam Smith
David Ricardo
Wassily Leontief
Eli Heckscher and Bertil Ohlin
By adjusting the model of comparative advantage to include transportation costs along with production costs, we would expect
the prices of traded goods to be lower than when there are no transportation costs
specialization to stop when the production costs of the trading partners equalize
the volume of trade to be less than when there are no transportation costs
the gains from trade to be greater than when there are no transportation costs
Assume that Country A is relatively abundant in labor and Country B is relatively abundant in land. Note that wages are the returns to labor and rents are the returns to land. According to the factor price equalization theorem, once Country A begins specializing according to comparative advantage and trading with Country B
wages and rents should fall in Country A
wages and rents should rise in Country A
wages should rise and rents should fall in Country A
wages should fall and rents should rise in Country A
According to the factor price equalization theorem, the __________ factor should oppose free trade policies in any given country,
abundant
scarce
neither
can’t tell without more information
A product will be traded only if the pretrade price difference between the two countries
is less than the cost of transporting it between them
is greater than the cost of transporting it between them
equals the cost of transporting it between them
more information is needed to answer this question
Intraindustry trade can be explained by all of the following except
high transportation costs as a proportion of product value
different growing seasons of the year for agricultural products
product differentiation for goods such as automobiles
high per capita incomes in exporting countries
A tax of 20 cents per unit of imported cheese would be an example of a (an):
Compound tariff
Effective tariff
Ad valorem tariff
Specific tariff
A tax of 15 percent per imported item would be an example of a (an):
Ad valorem tariff
Specific tariff
Effective tariff
Compound tariff
Which type of tariff is expressly forbidden by the U.S. Constitution?
Import tariff
Export tariff
Specific tariff
Ad valorem tariff
Which trade policy results in the government levying both a specific tariff and an ad-valorem tariff on imported goods:
Compound tariff
Nominal tariff
Effective tariff
Revenue tariff
For advanced countries such as the United States, tariffs on imported raw materials tend to be
equal to tariffs on imported manufactured goods
lower than tariffs on imported manufactured goods
higher than tariffs on imported manufactured goods
the highest of all tariffs
If we consider the impact on both consumers and producers, then protection of the steel industry is:
In the interest of the U.S. as a whole, but not in the interest of the state of Pennsylvania, where steel mills are located
In the interest of the U.S. as a whole and in the interest of the state of Pennsylvania
Not in the interest of the U.S. as a whole, but it might be in the interest of the state of Pennsylvania
Not in the interest of the U.S. as a whole, nor in the interest of the state of Pennsylvania
If I purchase a stereo from South Korea, I obtain the stereo and South Korea obtains the dollars. But if I purchase a stereo produced in the United States, I obtain the stereo and the dollars remain in America. This line of reasoning is:
valid for stereos, but nor for most products imported by the U.S.
valid for most products imported by the U.S., but not for stereos
deceiving since Koreans eventually spend the dollars on U.S. goods
deceiving since the dollars spent on a stereo built in the U.S. eventually wind up overseas
Ad valorem tariffs are collected as
fixed amounts of money per unit traded
a percentage of the price of the product
a percentage of the quantity of imports
all of the above
Specific tariffs are collected as
fixed amount of money per unit traded
a percentage of the price of the product
a percentage of the quantity of imports
all of the above
Most tariffs have
only revenue effects
only protective effects
both protective and revenue effects
neither protective or revenue effects
The effective rate of protection
distinguishes between tariffs that are effective and those that are ineffective
is the minimum level at which a tariff becomes effective in limiting imports
shows how effective a tariff is in raising revenue for the government
shows the increase in value added for domestic production that a particular tariff structure makes possible, in percentage terms
A foreign-trade zone (FTZ) is
a regional area within which trade with foreign nations is allowed
a free trade agreement among several nations
designed to limit exports of manufactured goods by placing export taxes on goods made within the zone
designed to promote exports by deferring import duties on intermediate inputs and waving such duties if the final product is re-exported rather than sold domestically
A tariff that prohibits imports has only
a revenue effect and redistribution effect
revenue effect and protection effect
consumption effect and protection effect
redistribution effect and consumption effect
If a nation fitting the criteria for the small nation model imposes a 10 percent tariff on imports of autos
the price of autos within the nation will rise by 10 percent
the price of autos within the nation will rise by less than 10 percent
the price of autos within the nation will rise by more than 10 percent
the price of autos will not rise because of internal competition
According to the ______ argument for protection, tariffs can shield new industries from import competition until they have grown strong and efficient enough to withstand the competition by foreign producers.
scientific tariff argument
infant industry argument
Tariffs can shield new industries from import competition until they have grown strong and efficient enough to withstand the competition by foreign producers.
scientific tariff argument
infant industry argument
beggar they neighbor argument
foreign dumping argument
_____ represents the difference between what consumers have to pay for a product and what they are willing and able to pay.
producer surplus
deadweight surplus
government surplus
consumer surplus
If a nation fitting the criteria for the large nation model imposes an import tariff
the domestic price of the product will increase by more than the tariff itself
the domestic price of the product will increase by the same amount as the tariff
the domestic price of the product will increase by less than the tariff
none of the above
The difference between what consumers have to pay for a particular and what they are willing to pay is known as
consumer surplus
producer surplus
deadweight costs
deadweight surplus
A tariff can _________ raise a country’s welfare
never
sometimes
always
In developed countries, tariffs on raw materials tend to be
highest of all
higher than on manufactured goods
equal to tariffs on manufactured goods
lower than on manufactured goods
With free trade, the total quantity of imports would equal
10,000 units
40,000 units
42,000 units
50,000 units
With free trade, the total value of imports would equal
$100,000
$400,000.
$600,000
$800,000.
With the tariff, the quantity of imports falls to
12,000 units
20,000 units
30,000 units
42,000 units
With the tariff, the government collects
$75,000.
$100,000.
$125,000.
$150,000.
The deadweight cost of the tariff equals
$10,000.
$25,000.
$50,000.
$75,000.
Domestic producers gain _________ because of the tariff.
$50,000.
$75.000
$120,000
$150,000.
A tariff of ________ would be prohibitive, causing imports to fall to zero.
$10
$15
$20
$25
In today’s world, most countries impose tariffs
only on imports
only on exports
on both imports and exports
on imports, exports and nontraded goods
If a small country imposes a tariff on an imported good, its terms of trade will
improve
worsen
not change
any of the above
If the world price of steel is $500 a ton, a specific tariff of $50 is equivalent to an ad valorem tariff of
5 percent
10 percent
15 percent
20 percent
If a country an imposes an import tariff, its welfare can improve if
the country is a "small country" rather than a "large country‖
its terms of trade improve enough
the tariff enhances the welfare of its trading partners
its government's tax revenue increases because of the tariff
Suppose that the United States imposes a tariff on ballpoint pens of 25 cents per pen plus 12 percent of the pen's value. This is an example of a (an)
specific tariff
ad valorem tariff
compound tariff
effective tariff
A tariff ______ increase a country’ overall welfare.
will always
will never
can sometimes
Suppose that the nominal tariff rate on finished computers is 12 percent and that the weighted average of the nominal tariff rates on the inputs used in producing computers is 18 percent. Thus, the effective rate of protection for the computer industry must
be less than 12 percent, and can be negative
be less than 12 percent, but must be greater than zero
equal 6 percent
exceed 30 percent
Suppose that the offshore assembly provisions (OAP) of the United States are granted to finished computers that are imported and also produced domestically. This policy will tend to
cause foreign assemblers of computers to use more computer components that are supplied by countries other than the United States
increase the price of computers to consumers in the United States
Increase the production of computers in the United States
increase the production of computer components in the United States
Concerning a government's trade policy, all of the following generally apply except
economic downturn and recession generally result in greater protectionism
because domestic consumers outnumber domestic producers, po
licy, all of the following generally apply except
economic downturn and recession generally result in greater protectionism
because domestic consumers outnumber domestic producers, policy makers usually enact Free-trade policies to satisfy the consumer majority
when domestic exporting companies are organized, policy tends to favor freer trade
policy tends to favor freer trade in countries whose imports are inputs into critical industries
If no imported inputs (hard-disk drive) go into the domestic production of a final product (desktop computer), then the
nominal tariff rate on the final product equals the effective tariff rate on the product
nominal tariff rate on the final product is greater than the effective tariff rate on the product
nominal tariff rate on the final product is less than the effective tariff rate on the final product
none of the above
Concerning import tariffs of the United States, empirical studies tend to conclude that these tariffs are
progressive and thus bear down on the wealthy
regressive and thus bear down on the poor
proportional and thus bear down on all consumers in the same manner
deflationary and thus result in reductions in the price of imports
The national security argument for protection is more likely to be valid when
the purpose is to maintain protection for an indefinite time period
the industry is characterized by increasing returns to scale
the economy operates during a recession
the protected industry provides invaluable goods during periods of war
Suppose that the tariff rate on the final product is 5 percent. If no imported inputs are used in the domestic production of the final product, the effective tariff rate is
3 percent
5 percent
8 percent
12 percent
Suppose there is no tariff on imported inputs and the ratio of the value of imported inputs to the value of the final product is 0.5. If the nominal tariff rate on the final product is 10 percent, the effective tariff rate equals
5 percent
10 percent
15 percent
20 percent
If a tariff and import quota lead to equivalent increases in the domestic price of steel, then:
the quota results in efficiency reductions but the tariff does not
the tariff results in efficiency reductions but the quota does not
they have different impacts on how much is produced and consumed
they have different impacts on how income is distributed
If a tariff and import quota lead to equivalent increases in the domestic price of steel, then:
the quota results in efficiency reductions but the tariff does not
the tariff results in efficiency reductions but the quota does not
they have identical impacts on how much is produced and consumed
they have identical impacts on how income is distributed
Under a tariff-rate quota:
the within-quota tariff rate exceeds the over-quota tariff rate
the over-quota tariff rate exceeds the within-quota tariff rate
the within-quota tariff rate equals the over-quota tariff rate
the within-quota tariff rate plus over-quota tariff rate equal 100 percent
Suppose that the domestic government allows a specific number of goods to be imported each year, but it does not specify from where the product is shipped or who is permitted to import. Such a trade barrier is known as
an import tariff
a tariff-rate quota
a selective quota
a global quota
Antidumping duties are used to
offset the margin of dumping
punish domestic consumers for buying high-priced imported goods
discourage foreign governments from subsidizing their exporters
reduce the tariff revenues of the domestic government
In the absence of trade, Norway’s equilibrium price and quantity equal
$1,500 and 2,800 computers
$2,000 and 1,600 computers
$2,500 and 2,000 computers
$3,500 and 2,000 computers
With free trade, suppose that the rest of the world can supply computers to Norway at a price of $1,500. Norway’s imports will now equal ______. Compared to what occurred in the absence of trade, Norway’s consumer surplus will _____ and its producer surplus will ______. Can you calculate these amounts? Try plotting the information of this table on a sheet of graph paper.
1,600 computers, decrease, increase
1,600 computers, increase, decrease
1,200 computers, decrease, increase
1,200 computers, increase, decrease
To reduce imports, suppose that the government of Norway imposes a quota equal to 800 computers. Compared to what occurred under free trade, Norway’s consumer surplus will ______ and its producer surplus will ______. Can you calculate these amounts? Try plotting the information of this table on a sheet of graph paper.
increase, increase
increase, decrease
decrease, increase
decrease, decrease
From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods sold to the United States:
help more than they hurt
hurt more then they help
are equivalent to an import quota
are equivalent to an export quota
During periods of growing domestic demand, an import quota
is less restrictive on a country’s imports than a tariff
is more restrictive on a country’s imports than a tariff
has the same restrictive effect on a country’s imports as a tariff
will always generate increased tax revenue for the government
In the absence of trade, Canada’s equilibrium price and quantity equal
$65 and 40 calculators
$55 and 20 calculators
$45 and 25 calculators
$30 and 40 calculators
With free trade, suppose that the rest of the world can supply calculators to Canada at a price of $30. Canada’s imports would now equal ______ and its consumer surplus would ______ relative to what occurred in the absence of trade. What is the change in consumer surplus? Refer to the figure that you have plotted.
20 calculators, increase
25 calculators, decrease
25 calculators, increase
30 calculators, increase
To aid its calculator producers, suppose that the government provides them a subsidy of $10 for each calculator produced. The amount of imports now equals ______ and the deadweight loss of the subsidy to the Canadian economy equals ______.
20 calculators, $50
20 calculators, $100
25 calculators, $50
25 calculators, $100
Export subsidies levied by foreign governments on products in which the United States has comparative disadvantage:
lower the welfare of all Americans
lead to increases in U.S. consumer surplus
encourage U.S. production of competing goods
encourage U.S. workers to demand higher wages
If import licenses are auctioned off to domestic importers in a competitive market, their scarcity value (revenue effect) accrues to:
foreign corporations
foreign workers
domestic corporations
the domestic government
A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a given time period is referred to as a (an):
domestic subsidy
export subsidy
import quota
export quota
Import quotas tend to result in all of the following except:
domestic producers of the imported good being harmed
domestic consumers of the imported good being harmed
prices increasing in the importing country
prices falling in the exporting country
A tariff-rate quota
is a limit on the number of tariffs that a country can place on imports
uses a single tariff along with import quotas to restrict imports
is designed to avoid the price increases caused by simple tariffs
is a two-tier tariff system intended to restrict imports
To maintain that South Koreans are dumping their DVDs in the United States is to maintain that:
Koreans are selling DVDs in the U.S. below their production cost
Koreans are selling DVDs in the U.S. above their production cost
the cost of manufacturing DVDs in Korea is lower in Korea than in the U.S. since wages are lower in Korea
the cost of manufacturing DVDs in Korea is higher in Korea than in the U.S. since wages are higher in Korea
If the home country government grants a subsidy on a domestically produced good, domestic producers tend to:
capture the entire subsidy in the form of higher profits
increase their level of production
reduce wages paid to domestic workers
consider the subsidy as an increase in production cost
Throughout the world, governments tend to auction quota licenses to their highest bidder
always
often
seldom
never
For years the U.S. government levied quotas on inexpensive oil imported from the Middle East. The quotas led to cost increases for U.S. consumers totaling $3 billion for oil products. An apparent justification for this policy was that:
U.S. oil companies and workers deserved higher incomes
U.S. oil was of superior quality and merited higher prices
one should not be too dependent on foreign suppliers of crucial resources
the U.S. government needed the quota revenue to balance its budget
In certain industries, Japanese employers hesitate to lay off workers. Therefore, they sometimes have excess supplies of goods that they cannot sell on the home market without lowering prices. To hold down losses, they sell goods in overseas markets at prices well beneath those in Japan. This practice is best referred to as:
orderly marketing
trigger pricing
domestic content pricing
dumping
Quotas are government imposed limits on the ________ of goods trade between countries.
prices
quantity
revenue
costs
________ are quotas that lead to a complete abolishment of trade.
embargoes
voluntary export restraints
nontariff barriers
orderly marketing agreements
Similar to import tariffs, import quotas tend to result in
higher prices and reduced imports
increased government revenue
increased consumer surplus
decreased producer surplus
The welfare effects of a quota depend to a considerable extent upon
who has the quota license
the size of the quota
elasticities of domestic demand and supply
all of the above
__________ are profits that accrue to whomever has the right to import the good that is restricted by the quota.
quota license
quota rents
quota prices
none of the above
The home-country government can confiscate the revenue effect of an import quota if
quota licenses are given to foreign exporting companies
quota licenses are auctioned to the highest-bidding importing company
if quota licenses are given to domestic consumers of the good
both (a) and (c)
Governments around the world tend to auction quota licenses
never
seldom
often
always
A(n) __________ is an example of a quota where foreigners hold quota licenses.
export quota
embargo
auction quota
tariff quota
International dumping may involve
selling goods to foreigners at a price below that charged domestic consumers
selling goods to foreigners at a price below the cost of production
antidumping duties being levied on the imported, dumped goods
all of the above
Nontariff trade barriers could include all of the following except
domestic content laws
government procurement policies
health, safety, and environmental standards
antidumping/countervailing duties applied to imports
A production subsidy that is granted to a producer of an import-competing good
does not require governmental taxes to finance it
yields the same deadweight welfare loss as an import tariff or import quota
has only a consumption effect deadweight loss
has only a protective effect deadweight loss
A tariff-rate quota is essentially a
two-tier tariff applied to a country's imports
three-tier tariff applied to a country's imports
two-tier quota applied to a country's exports
three-tier quota applied to a country's exports
A ______ attempts to limit outsourcing of jobs to foreigners by requiring that a minimum percentage of a product's value must be produced domestically if that good is to be sold in the domestic market.
domestic subsidy
voluntary restraint agreement
domestic content requirement
tariff-rate quota
