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Question 1 of 10

1. Question

10 points

According to our text, free international trade:

in the long run raises total world output and the standard of living of the individual trading countries.
prevents unemployment and inflation (keeps them close to zero percent) in the trading countries in the short run.
provides maximum government autonomy over the monetary system in the trading countries.
hurts domestic industries and lowers the standard of living of most countries in the long run.

Question 2 of 10

2. Question

10 points

Tariffs and quotas:

in the short run, provide a competitive advantage to domestic producers of the protected good.
in the short run, provide a competitive disadvantage to domestic producers of the protected good.
are the main source of tax revenue for the federal government.
have been eliminated by the United States federal government.

Question 3 of 10

3. Question

10 points

According to our text, when countries restrict free trade through tariffs, quotas, or other forms of protectionism, it generally leads to:

a decrease in productivity and a lower standard of living.
increased domestic employment.
an improved balance of payments.
less short-term employment in the protected industry.

Question 4 of 10

4. Question

10 points

Which is a commonly-heard argument in favor of protectionism?

The infant industry argument.
The gross national happiness argument.
The collective bargaining argument.
The protecting immigration and foreign jobs argument.

Question 5 of 10

5. Question

10 points

The Law of Comparative Advantages states that:

if a country has an absolute advantage in producing multiple goods, it should specialize and trade in those goods in which it is comparatively most efficient.
if a country has an absolute advantage in producing all goods, it should specialize and trade in everything that it produces.
countries should not compare each other's standard of living with one another. Compare leads to despair.
The less a country produces of a certain product, the more the people want to consume this product.

Question 6 of 10

6. Question

10 points

In 2010, the United States put tariffs (import taxes) on tires manufactured in China and imported into the United States. As a result:

China increased tariffs on products it buys from the United States. Consequently, prices rise, competition lessens and the overall standard of living of both countries decreases.
worldwide employment increases and the overall standard of living increases.
no more tires made in China will be sold in the United States. Tires made in other parts of the world will be allowed and most likely decrease in price here.
tires in the United States decrease in price; especially those tires made in the United States will decrease in price and employment in this industry will increase.

Question 7 of 10

7. Question

10 points

The United States can produce one smart phone in 10 hours and one barrel of ethanol fuel in 15 hours. Canada, on the other hand, produces one smart phone in 20 hours and one barrel of ethanol fuel in 25 hours. According to the Law of Comparative Advantages, Canada would benefit by specializing in:

ethanol fuel
both products.
smart phones.
Neither product.

Question 8 of 10

8. Question

10 points

Let’s assume that Germany produces one piece of furniture in 20 hours and Ethiopia produces the same product in 10 hours. Also, Germany produces a piece of clothing in 8 hours and Ethiopia produces the same product in 2 hours. Then:

Ethiopia has a comparative advantage in making clothing and should specialize in and sell clothing to Germany in exchange for furniture.
Germany has a comparative advantage in producing clothing and should produce and sell clothing in exchange for furniture made by Ethiopia.
Ethiopia has an absolute advantage in producing both products and should produce both products without engaging in international trade.
Germany has an absolute advantage in making furniture and clothing and should specialize in and sell furniture and clothing to Ethiopia in exchange for money.

Question 9 of 10

9. Question

10 points

You are an economic adviser visiting a Less-Developed Country. What kind of advice would NOT be helpful to the country?

Increase government spending, increase the money supply, and increase imports in order to stimulate overall economic growth.
Implement free market policies and free international trade.
Set up a government that protects civilian rights to produce and consume in a safe environment.
Make sure to keep essential public services, such as roads, highways, sewage systems, police departments, and the judicial system in good condition.

Question 10 of 10

10. Question

10 points

The famous economist ______________ wrote in his famous book ____________ that, according to the law of ___________, countries should specialize in making and internationally trade products that they can produce more efficiently than other countries.

Adam Smith; The Wealth of Nations; absolute advantage
John Adams; Wealthy Nations; absolute trade
John Maynard Keynes; The General Theory of Trade; multiplied advantages
John Holland; Inflate Your Mind; deflating prices

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Unit 10