An economist might argue that U.S. national defense should be funded through tax revenues because:
a. U.S. citizens are not very patriotic.
b. the government is always a more efficient provider of goods than the private market.
c. the government always seeks to act benevolently on behalf of its citizens.
d. individuals who refuse to contribute to a national defense fund cannot be excluded from benefiting from national defense.
Question 2The intended gains from U.S. tariffs and other trade restrictions can backfire if foreign governments retaliate by imposing additional trade restrictions on U.S. goods sold in their countries.
a. True
b. False
Indicate whether the statement is true or false
Question 3Short-term international investment helps to create a greater level of liquidity, more stable exchange rates, and therefore a decreased likelihood of financial crisis.
a. True
b. False
Indicate whether the statement is true or false
Question 4When city beautification programs are funded privately:
a. only contributing citizens are likely to benefit from a more beautiful city.
b. only free riders are likely to benefit from a more beautiful city.
c. an underallocation of resources toward the beautification project is likely to occur relative to what is socially efficient.
d. none of the above
Question 5If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat then the other country must have the comparative advantage producing sugar.
a. True
b. False
Indicate whether the statement is true or false
Question 6The financial crises of the 1990s have conclusively proved that globalization causes financial crises.
a. True
b. False
Indicate whether the statement is true or false
Question 7When a good is nonrivalrous in consumption, then:
a. consumption by an additional individual will significantly reduce the benefits derived by others from a public good.
b. individuals who refuse to pay for a public good cannot be excluded from benefiting from it.
c. consumption by an additional individual does not prevent others from benefiting from a public good.
d. individuals who refuse to pay for a public good can be excluded from benefiting from it.
Question 8The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.
a. True
b. False
Indicate whether the statement is true or false
Question 9The smaller the amount of short-term money invested in a country, the greater the potential for a crisis if investors lose confidence in the country.
a. True
b. False
Indicate whether the statement is true or false
Question 10The free-rider problem arises when:
a. goods cease to be scarce.
b. goods are produced by the government.
c. goods can't be provided exclusively to paying customers.
d. the marginal benefit to a private individual outweighs the marginal cost of producing a good.
Question 11Tariffs contribute to higher prices of textile products imported into the United States, but import quotas on textiles brought into the United States do not.
a. True
b. False
Indicate whether the statement is true or false
Question 12Investors may be caught by surprise when devaluation occurs, particularly if the government does not disclose its international reserve position in a timely and informative manner.
a. True
b. False
Indicate whether the statement is true or false
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