BEO3430 INTERNATIONAL ECONOMIC ANALYSIS: TEST INFORMATION

The test:
includes 30 multiple choice questions
is of 60 minutes duration
covers topics 1 to 4 and calculators are allowed

SAMPLE TEST QUESTIONS

Attempt the sample test first before checking the answers at the end.

1. One of the most important and most visible roles of the IMF is to
(a) Hold regular negotiations over tariff reductions.
(b) Investigate countries that are charged with being unfair traders.
(c) Provide loans to countries that need capital to develop their economies.
(d) Intercede by invitation when countries cannot pay their international debts.
2. Whichofthefollowingistheformulaforaproductsintraindustrytrade(IIT)share?
(a) 1 X M

(b) 1 (X + M)

(c) 1 [ X M / (X + M)]

(d) 1 [ X + M / (X M)]
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3. Internal scale economies tend to lead to industries populated by __________ firms;

external scale economies (with no internal scale economies) tend to lead to industries
populated by __________ firms.

a. Few; many

b. Few; few

c. Many; many

d. Many; few

4. During the time span 1960-2006, the Volume of World Trade has been:

a. Growing at a lower rate compared to the World Production.

b. Growing at the same rate as the World Production.

c. Growing at a higher rate compared to the World Production.

d. Declining due to the Cold War.

5. Which of the following is NOT an expected effect of a tariff or nontariff barrier (NTB) on
a product?

a. An increase in domestic production of the product.

b. An increase in the employment of labor and other resources used in the

domestic production of the product on which the tariff or NTB is being
imposed.

c. An increase in government revenue.

d. An increase in domestic consumption of the product.

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6. Referring to figure 2.1, at a price of $70, the amount of consumer surplus is:

a. $6,000.

b. $8,000.

c. $15,000.

d. $30,000.

7. Referring to figure 2.1, at a price of $70, the amount of producer surplus is:

a. $6,000.

b. $8,000.

c. $15,000.

d. $30,000.

Figure 2.1

Price ($/unit)

150
Supply
120

70

40
Demand
10 Quantity (thousands)
100 200 300
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8. The opening up of free trade brings gains to:

a. All producers.

b. Producers in export industries.

c. Producers in import-competing industries.

d. Workers in import-competing industries.

9. In the case where trade is based on product differentiation:

a. The basis for exporting is the domestic production of unique models or varieties
demanded by some consumers in foreign markets.

b. The basis for importing is that the price of the imports is the same as the price of
domestic products.

c. The basis for importing is that foreign firms benefit from external scale
economies.

d. Both (a) and (b) are correct.

10. With a voluntary export restraint (VER), the economic rent created by the quantitative
limit on trade is collected by:

a. The government of the importing county.

b. Consumers in the importing country.

c. Producers in the importing country.

d. Exporting firms in the exporting country.

11. In the case of a small country, a quota and a tariff are (almost) identical if:

a. The government allocates licenses for free to importers using a rule or process
that involves (almost) no resource cost.

b. The government auctions off licenses to the highest bidder.

c. The government allocates licenses to importers through application and selection

procedures that require the use of substantial resources.

d. The government allocates import licenses directly to the public using a free lottery
system.

12. A nontariff barrier operates by:

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a. Limiting the quantity of imports.

b. Increasing the cost of getting imports to market.

c. Creating uncertainty about the conditions under which imports will be permitted.

d. All of the above.

Answers
1 D
2 C
3 A
4 C
5 D
6 B
7 A
8 B
9 A
10 D
11 B
12 D