EC 239
Introduction to International Trade
Instructor: Sharif F. Khan
Department of Economics
Wilfrid Laurier University
Winter 2010
Assignment 5 (Optional)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) A country cannot produce a mix of products with a higher value than where 1) _______
A) the isovalue line is tangent to the production possibility frontier.
B) the isovalue line is above the production possibility frontier.
C) the isovalue line is below the production possibility frontier.
D) the isovalue line is tangent with the indifference curve.
E) the isovalue line intersects the production possibility frontier.
2) The concept "terms of trade" means 2) _______
A) the amount of exports sold by a country.
B) the quantities of imports received in free trade.
C) the price conditions bargained for in international markets.
D) the price of a country's exports divided by the price of its imports.
E) None of the above.
3) If PC/PF were to increase, 3) _______
A) the cloth exporter would increase the quantity of cloth produced.
B) the food exporter would increase the quantity of food exports.
C) the cloth exporter would increase the quantity of cloth exports.
D) Both A and C.
E) None of the above.
4) When the production possibility frontier shifts out relatively more in one direction, we have 4)
_______
A) biased growth.
B) imbalanced growth.
C) balanced growth.
D) unbiased growth.
E) immiserizing growth.
5) If the poor USAID recipient countries have a higher marginal propensity to consume each and every
product than does the United States, then such aid will 5) _______
A) worsen the U.S. terms of trade.
B) improve the U.S. terms of trade.
C) leave the world terms of trade unaffected.
D) worsen the terms of trade of both donor and recipient countries.
E) None of the above.
6) If the U.S. (a large country) imposes a tariff on its imported good, this will tend to 6) _______
A) raise the world price of the good imported by the United States.
B) improve the terms of trade of all countries.
C) cause a deterioration of U.S. terms of trade.
D) have no effect on terms of trade.
E) improve the terms of trade of the United States.
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7) If a small country were to levy a tariff on its imports then this would 7) _______
A) change the terms of trade.
B) have no effect on that country's economic welfare.
C) increase the country's economic welfare.
D) decrease the country's economic welfare.
E) None of the above.
8) If a country lent money to another, this must 8) _______
A) improve the terms of trade of the recipient country.
B) lower the terms of trade of the recipient country.
C) lower the terms of trade of both countries.
D) improve the terms of trade of the donor country.
E) None of the above.
9) Immiserizing growth could occur to 9) _______
A) a poor country experiencing capital-intensive biased growth.
B) a poor country experiencing export-biased economic growth.
C) a poor country experiencing import-biased economic growth.
D) a poor country experiencing growth in its non-traded sector.
E) None of the above.
10) If Slovenia is a small country in world trade terms, then if it imposes a large series of tariffs on many
of its imports, this would 10) ______
A) decrease its marginal propensity to consume.
B) improve its terms of trade.
C) have no effect on its terms of trade.
D) deteriorate its terms of trade.
E) None of the above.
11) If Slovenia were a large country in world trade, then if it instituted a large set of subsidies for its
exports, this must 11) ______
A) deteriorate its terms of trade.
B) improve its terms of trade.
C) have no effect on its terms of trade.
D) decrease its marginal propensity to consume.
E) None of the above.
12) If the United States exports skilled-labor intensive products and services, then we should expect unions
representing unskilled labor to 12) ______
A) lobby against the imposition of tariffs.
B) lobby in favor of improved terms of trade.
C) lobby in favor of tariffs.
D) be indifferent to the issue of tariffs.
E) Not enough information.
13) Internal economies of scale 13) ______
A) may be associated with a perfectly competitive industry.
B) cannot be associated with a perfectly competitive industry.
C) are associated only with sophisticated products such as aircraft.
D) cannot form the basis for international trade.
E) None of the above.
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14) Where there are economies of scale, an increase in the size of the market will 14) ______
A) decrease the number of firms and raise the price per unit.
B) increase the number of firms and lower the price per unit.
C) decrease the number of firms and lower the price per unit.
D) increase the number of firms and raise the price per unit.
E) None of the above.
15) The simultaneous export and import of widgets by the United States is an example of 15) ______
A) increasing returns to scale.
B) imperfect competition.
C) intra-industry trade.
D) inter-industry trade.
E) None of the above.
16) If output more than doubles when all inputs are doubled, production is said to occur under conditions
of 16) ______
A) increasing returns to scale.
B) imperfect competition.
C) intra-industry trade.
D) inter-industry trade.
E) None of the above.
17) In industries in which there are scale economies, the variety of goods that a country can produce is
constrained by 17) ______
A) the fixed cost.
B) anti-trust legislation.
C) the size of the market.
D) the size of the labor force.
E) None of the above.
18) An industry is characterized by scale economies, and exists in two countries. Should these two
countries engage in trade such that the combined market is supplied by one country's industry, then 18)
______
A) consumers in the importing country would suffer higher prices and fewer varieties.
B) consumers in both countries would enjoy fewer varieties available but lower prices.
C) consumers in the exporting country would suffer higher prices and fewer varieties.
D) consumers in both countries would suffer higher prices and fewer varieties.
E) None of the above.
19) Two countries engaged in trade in products with no scale economies, produced under conditions of
perfect competition, are likely to be engaged in 19) ______
A) monopolistic competition.
B) intra-industry trade.
C) Heckscher-Ohlin trade.
D) inter-industry trade.
E) None of the above.
20) History and accident determine the details of trade involving 20) ______
A) scale economies.
B) Heckscher-Ohlin model consideration.
C) taste reversals.
D) Ricardian and Classical comparative advantage.
E) None of the above.
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21) Intra-industry trade will tend to dominate trade flows when which of the following exists? 21)
______
A) Homogeneous products that cannot be differentiated
B) Large differences between relative country factor availabilities
C) Small differences between relative country factor availabilities
D) Constant cost industries
E) None of the above.
22) The most common form of price discrimination in international trade is 22) ______
A) non-tariff barriers.
B) dumping.
C) Voluntary Export Restraints.
D) preferential trade arrangements.
E) None of the above.
23) Specific tariffs are 23) ______
A) import taxes stated in specific legal statutes.
B) the same as import quotas.
C) import taxes calculated as a fraction of the value of the imported goods.
D) import taxes calculated as a fixed charge for each unit of imported goods.
E) None of the above.
24) If a good is imported into (large) country H from country F, then the imposition of a tariff in country H
24) ______
A) raises the price of the good in both countries (the "Law of One Price").
B) lowers the price of the good in both countries.
C) raises the price of the good in H and lowers it in F.
D) raises the price in country H and cannot affect its price in country F.
E) lowers the price of the good in H and could raise it in F.
25) The effective rate of protection measures 25) ______
A) the "true" ad valorum value of a tariff.
B) the protection given by the tariff to domestic value added.
C) the efficiency with which the tariff is collected at the customhouse.
D) the quota equivalent value of a tariff.
E) None of the above.
26) A lower tariff on imported steel would most likely benefit 26) ______
A) foreign producers at the expense of domestic consumers.
B) workers in the steel industry.
C) domestic consumers of steel.
D) domestic manufacturers of steel.
E) None of the above.
27) When a government allows raw materials and other intermediate products to enter a country duty free,
this generally results in a(an) 27) ______
A) effective tariff rate less than the nominal tariff rate.
B) rise in both nominal and effective tariff rates.
C) nominal tariff rate less than the effective tariff rate.
D) fall in both nominal and effective tariff rates.
E) None of the above.
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28) Of the many arguments in favor of tariffs, the one that has enjoyed significant economic justification
has been the 28) ______
A) cheap foreign labor argument.
B) infant industry argument.
C) even playing field argument.
D) domestic living standard argument.
E) balance of payments argument
29) The main redistribution effect of a tariff is the transfer of income from 29) ______
A) domestic producers to domestic government.
B) domestic producers to domestic buyers.
C) domestic government to domestic consumers.
D) domestic buyers to domestic producers.
E) None of the above.
30) Should the home country be "large" relative to its trade partners, its imposition of a tariff on imports
would lead to an increase in domestic welfare if the terms of the trade rectangle exceed the sum of the 30)
______
A) consumption effect plus redistribution effect.
B) revenue effect plus redistribution effect.
C) protective effect plus revenue effect.
D) protective distortion effect plus consumption distortion effect.
E) None of the above.
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