Test Bank For International Economics 15th Edition by Robert Carbaugh

1. The mercantilists would have objected to:

a. Export promotion policies initiated by the government

b. The use of tariffs or quotas to restrict imports

c. Trade policies designed to accumulate gold and other precious metals

d. International trade based on open markets

ANSWER: d

POINTS: 1

DIFFICULTY: Easy

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Knowledge

2. Unlike the mercantilists, Adam Smith maintained that:

a. Trade benefits one nation only at the expense of another nation

b. Government control of trade leads to maximum economic welfare

c. All nations can gain from free international trade

d. The world’s output of goods must remain constant over time

ANSWER: c

POINTS: 1

DIFFICULTY: Easy

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Knowledge

3. The trading principle formulated by Adam Smith maintained that:

a. International prices are determined from the demand side of the market

b. Differences in resource endowments determine comparative advantage

c. Differences in income levels govern world trade patterns

d. Absolute cost differences determine the immediate basis for trade

ANSWER: d

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Knowledge

4. Unlike Adam Smith, David Ricardo’s trading principle emphasizes the:

a. Demand side of the market

b. Supply side of the market

c. Role of comparative costs

d. Role of absolute costs

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Knowledge

5. When a nation requires fewer resources than another nation to produce a product, the nation is said to have a:

a. Absolute advantage in the production of the product

b. Comparative advantage in the production of the product

c. Lower marginal rate of transformation for the product

d. Lower opportunity cost of producing the product

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Comprehension

6. According to the principle of comparative advantage, specialization and trade increase a nation’s total output since:

a. Resources are directed to their highest productivity

b. The output of the nation’s trading partner declines

c. The nation can produce outside of its production possibilities curve

d. The problem of unemployment is eliminated

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Comprehension

7. In a two-product, two-country world, international trade can lead to increases in:

a. Consumer welfare only if output of both products is increased

b. Output of both products and consumer welfare in both countries

c. Total production of both products, but not consumer welfare in both countries

d. Consumer welfare in both countries, but not total production of both products

ANSWER: b

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Comprehension

8. As a result of international trade, specialization in production tends to be:

a. Complete with constant costs–complete with increasing costs

b. Complete with constant costs–incomplete with increasing costs

c. Incomplete with constant costs–complete with increasing costs

d. Incomplete with constant costs–incomplete with increasing costs

ANSWER: b

POINTS: 1

DIFFICULTY: Challenging

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Historical Development of Modern Trade Theory

KEYWORDS: BLOOM’S: Comprehension

9. A nation that gains from trade will find its consumption point being located:

a. Inside its production possibilities curve

b. Along its production possibilities curve

c. Outside its production possibilities curve

d. None of the above

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Reflective Thinking – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: International trade and fi – DISC: International trade and finance

TOPICS: Production Possibilities Schedules

KEYWORDS: BLOOM’S: Application

Table 2.1. Output Possibilities of the U.S. and the U.K.

Output per Worker per day

Country Tons of Steel Televisions

United States 5 45

United Kingdom 10 20

10. Referring to Table 2.1, the United States has the absolute advantage in the production of:

a. Steel

b. Televisions

c. Both steel and televisions

d. Neither steel nor televisions

ANSWER: c

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: Gains from trade, speciali – DISC: Gains from trade, specialization and trade

TOPICS: Production Possibilities Schedules

KEYWORDS: BLOOM’S: Analysis

11. Referring to Table 2.1, the United Kingdom has a comparative advantage in the production of:

a. Steel

b. Televisions

c. Both steel and televisions

d. Neither steel nor televisions

ANSWER: a

POINTS: 1

DIFFICULTY: Moderate

NATIONAL STANDARDS: United States – BPROG: Analysis

STATE STANDARDS: United States – PA – DISC: Gains from trade, speciali – DISC: Gains from trade, specialization and trade

TOPICS: Production Possibilities Schedules

KEYWORDS: BLOOM’S: Analysis