PART II

TEST BANK
CHAPTER 1
THE INTERNATIONAL ECONOMY
MULTIPLE-CHOICE QUESTIONS
1. A primary reason why nations conduct international trade is because:
a. Some nations prefer to produce one thing while others produce other things
b. Resources are not equally distributed among all trading nations
c. Trade enhances opportunities to accumulate profits
d. Interest rates are not identical in all trading nations
2. A main adantage of speciali!ation results from:
a. "conomies of large#scale production
b. The speciali!ing country behaing as a monopoly
c. Smaller production runs resulting in lower unit costs
d. $igh wages paid to foreign wor%ers
&. International trade in goods and serices is sometimes used as a substitute for all of the following e'cept:
a. International moements of capital
b. International moements of labor
c. (omestic production of the same goods and serices
d. (omestic production of different goods and serices
). If a nation has an open economy* it means that the nation:
a. Allows priate ownership of capital
b. $as fle'ible e'change rates
c. $as fi'ed e'change rates
d. +onducts trade with other countries
,. International trade forces domestic firms to become more competitie in terms of:
International trade forces domestic firms to become more competitie in terms of: a. The
introduction of new products
b. -roduct design and quality
c. -roduct price
d. All of the aboe
).
Chapter 1: The International Economy )/
.. The moement to free international trade is most li%ely to generate short#term unemployment in which
industries0
a. Industries in which there are neither imports nor e'ports
b. Import#competing industries
c. Industries that sell to domestic and foreign buyers
d. Industries that sell to only foreign buyers
/. International trade is based on the idea that:
a. "'ports should e'ceed imports
b. Imports should e'ceed e'ports
c. Resources are more mobile internationally than are goods
d. Resources are less mobile internationally than are goods
1. Arguments for free trade are sometimes disregarded by politicians because:
a. 2a'imi!ing domestic efficiency is not considered important
b. 2a'imi!ing consumer welfare may not be a chief priority
c. There e'ist sound economic reasons for %eeping one3s economy isolated from other economies
d. "conomists tend to faor highly protected domestic mar%ets
4. $ow much physical output a wor%er producers in an hour3s wor% depends on:
a. The wor%er3s motiation and s%ill
b. The technology* plant* and equipment in use
c. $ow easy the product is to manufacture
d. All of the aboe
15. The largest amount of trade with the 6nited States in recent years has been conducted by:
a. +anada
b. 7ermany
c. 2e'ico
d. 6nited 8ingdom
11. Increased foreign competition tends to:
a. Intensify inflationary pressures at home
b. Induce falling output per wor%er#hour for domestic wor%ers
c. -lace constraints on the wages of domestic wor%ers
d. Increase profits of domestic import#competing industries
12. 9999999999 is the ability of a firm:industry* under free and fair mar%et conditions* to design* produce* and
mar%et goods and serices that are better and:or cheaper than those of other firms:industries.
a. +ompetitieness
b. -rotectionism
c. +omparatie adantage
d. Absolute adantage
)1 Test Bank for International Economics, 9e
1&. A firm3s 9999999999* relatie to that of other firms* is generally regarded as the most important
determinant of competitieness.
a. Income leel
b. Tastes and preferences
c. "nironmental regulation
d. -roductiity
1). ;ree traders maintain that an open economy is adantageous in that it proides all of the following e'cept:
a. Increased competition for world producers
b. A wider selection of products for consumers
c. The utili!ation of the most efficient production methods
d. Relatiely high wage leels for all domestic wor%ers
1,. Recent pressures for protectionism in the 6nited States hae been motiated by all of the following e'cept:
a. 6.S. firms shipping component production oerseas
b. $igh profit leels for American corporations
c. Sluggish rates of productiity growth in the 6nited States
d. $igh unemployment rates among American wor%ers
1.. International trade tends to cause welfare losses to at least some groups in a country:
a. The less mobile the country3s resources
b. The more mobile the country3s resources
c. The lower the country3s initial liing standard
d. The higher the country3s initial liing standard
1/. ;or a nation to ma'imi!e its productiity in a global economy:
a. <nly imports are necessary
b. <nly e'ports are necessary
c. =oth imports and e'ports are necessary
d. >either imports nor e'ports are necessary
11. A feasible effect of international trade is that:
a. A monopoly in the home mar%et becomes an oligopoly in the world mar%et
b. An oligopoly in the home mar%et becomes a monopoly in the world mar%et
c. A purely competitie firm becomes an oligopolist
d. A purely competitie firm becomes a monopolist
14. International trade in goods and serices tends to:
a. Increase all domestic costs and prices
b. 8eep all domestic costs and prices at the same leel
c. ?essen the amount of competition facing home manufacturers
d. Increase the amount of competition facing home manufacturers
25. The real income of domestic producers and consumers can be increased by:
a. Technological progress* but not international trade
b. International trade* but not technological progress
c. Technological progress and international trade
d. >either technological progress nor international trade
Chapter 1: The International Economy )4
21. In the 6nited States* automobiles are:
a. Imported* but not e'ported
b. "'ported* but not imported
c. Imported and e'ported
d. >either e'ported nor imported
22. Technological improements are similar to international trade since they both:
a. -roide benefits for all producers and consumers
b. Increase the nation3s aggregate income
c. Reduce unemployment for all domestic wor%ers
d. "nsure that industries can operate at less than full capacity
2&. A sudden shift from import tariffs to free trade may induce short#term unemployment in:
a. Import#competing industries
b. Industries that are only e'porters
c. Industries that sell domestically as well as e'port
d. Industries that neither import nor e'port
2). Recent empirical studies indicate that productiity performance in industries is:
a. (irectly related to globali!ation of industries
b. Inersely related to globali!ation of industries
c. >ot related to globali!ation of industries
d. Any of the aboe
2,. "mpirical research indicates that 9999999999 best enhances productiity gains for firms and industries.
a. ?ocal competition
b. Regional competition
c. 7lobal competition
d. >o competition
2.. =y the mid#1445s* 9999999999 ban%s had become the world3s largest in terms of total assets.
a. =ritish
b. 7erman
c. @apanese
d. American
2/. A reduced share of the world e'port mar%et for the 6nited States would be attributed to:
a. (ecreased productiity in 6.S. manufacturing
b. $igh incomes of American households
c. Relatiely low interest rates in the 6nited States
d. $igh leels of inestment by American corporations
21. The dominant trading nation in the world mar%et following Aorld Aar II was:
a. 6nited 8ingdom
b. 7ermany
c. South 8orea
d. 6nited States
,5 Test Bank for International Economics, 9e
24. A closed economy is one in which:
a. Imports e'actly equal e'ports* so that trade is balanced
b. (omestic firms inest in industries oerseas
c. The home economy is isolated from foreign trade
d. Saing e'actly equals inestment at full employment
&5. Relatie to countries with low ratios of e'ports to gross domestic product* countries haing high e'port to
gross domestic product ratios are 9999999999 ulnerable to changes in the world mar%et.
a. ?ess
b. 2ore
c. "qually
d. Any of the aboe
TRUE-FALSE QUESTIONS
T ; 1. The two most important trading partners of the 6nited States are +anada and 2e'ico.
T ; 2. The 6nited States e'ports a larger percentage of its gross domestic product than @apan*
7ermany* and +anada.
T ; &. <pening the economy to international trade tends to lessen inflationary pressures at home.
T ; ). The benefits of international trade accrue in the forms of lower domestic prices* deelopment
of more efficient methods and new products* and a greater range of consumption choices.
T ; ,. In an open trading system* a country will import those commodities that it produces at
relatiely low cost while e'porting commodities that can be produced at relatiely high cost.
T ; .. Although free trade proides benefits for consumers* it is often argued that import protection
should be proided to domestic producers of strategic goods and materials ital to the nation3s
security.
T ; /. In the long run* competitieness depends on an industry3s natural resources* its stoc% of
machinery and equipment* and the s%ill of its wor%ers in creating goods that people want to
buy.
T ; 1. If a nation has an open economy* it means that the nation allows priate ownership of capital.
T ; 4. Increased foreign competition tends to increase profits of domestic import#competing
companies.
T ; 15. Restrictie trade policies hae resulted in 6.S. producers of minerals and metals supplying all
of the 6.S. consumers3 needs.
Chapter 1: The International Economy ,1
ANSWERS
Answers to Mut!"e-C#o!$e Quest!ons
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Answers to True-F&se Quest!ons
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15. F