While it is possible to erect barriers to foreign competition and save domestic jobs, restricting international trade may impose large costs on an economy.
a. True
b. False
Indicate whether the statement is true or false
Question 2When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.
a. True
b. False
Indicate whether the statement is true or false
Question 3The world output is higher if the countries follow restrictive trade policies rather than free trade.
a. True
b. False
Indicate whether the statement is true or false
Question 4Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.
a. True
b. False
Indicate whether the statement is true or false
Question 5When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.
a. True
b. False
Indicate whether the statement is true or false
Question 6International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.
a. True
b. False
Indicate whether the statement is true or false
Question 7In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand.
a. True
b. False
Indicate whether the statement is true or false
Question 8The most successful free trade agreements achieve all of the following goals, except:
a. benefiting exporters by increasing exports to member countries.
b. ensuring that production occurs on the basis of comparative advantage.
c. benefiting consumers by making a wider variety of goods available at a lower price.
d. stimulating trade creation to allow the benefits of trade to be realized.
e. protecting domestic industries from foreign competition.
Question 9The trade-creation effect refers to:
a. a reduction in economic efficiency as a result of a preferential trade agreement.
b. a production shift to a higher-cost producer as a result of a preferential trade agreement.
c. the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home.
d. diversion of production from a country that has comparative advantage.
e. a production shift to a country that does not have comparative advantage.
Question 10Trade diversion reduces worldwide efficiency, because:
a. production is diverted to the country with the comparative advantage.
b. production is diverted from the country with the comparative advantage.
c. unnecessary trade restrictions are created in the economies.
d. consumption is diverted to the country having inadequate demand.
e. the cost of transshipment of the goods increases thus raising their prices in the world market.
Question 11In 1992 the EEC was replaced by the EU with an agreement to:
a. reduce trade barriers among the member countries.
b. reduce trade barriers against nonmember countries.
c. mutually restrict imports from nonmember countries.
d. create a single market for goods and services in western Europe.
e. enable the countries of Western Europe to emerge as major world powers.
Question 12The European Economic Community was created in 1957 by:
a. France, the United Kingdom, Italy, Belgium, the Netherlands, and Luxembourg.
b. France, West Germany, Italy, Belgium, the Netherlands, and Luxemburg.
c. France, West Germany, Italy, Belgium, the Netherlands, and the United Kingdom.
d. France, West Germany, Italy, the United Kingdom, Belgium, the Netherlands, and Luxembourg.
e. France, West Germany, Italy, Belgium, the United Kingdom, and Luxembourg.
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