Developing countries often justify imposition of tariffs because:
a. it creates a burden on government budget.
b. it is easy to collect direct taxes from people in the developing countries.
c. a large number of people in the developing countries earn a taxable income.
d. developing countries find income taxes difficult to levy and collect.
e. the volume of imports of these countries is considerably low.
Question 2If a nation has a comparative disadvantage in the production of some commodity,
a. it can gain from international trade in that commodity only if it has an absolute advantage in that commodity.
b. it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if they produced it domestically.
c. it cannot gain from international trade in the commodity.
d. it cannot gain from international trade unless it has an absolute advantage in every other commodity.
Question 3Which of the following statements is correct?
a. The ideal solution to a pollution problem is to reduce pollution until it is technologically impossible to reduce it any further.
b. The ideal and fair solution to a pollution problem is to impose identical compliance standards on all polluting firms.
c. Charging firms for transferable emissions permits is a more efficient way of dealing with pollution than are compliance standards.
d. A per-unit pollution tax is a more efficient way of dealing with pollution than is a system of transferable emissions permits.
Question 4People who call for creating a level playing field believe that:
a. a country with relatively low wages is typically a country with an abundance of low-skilled labor.
b. trading on the basis of comparative advantage benefits both domestic and foreign firms.
c. creating a level playing field undermines the basis for specialization and economic efficiency.
d. production in accordance with comparative advantage is unfair.
e. free trade allocates the scarce resources in an efficient way.
Question 5If nations begin to expand their specialization in production for the purpose of trade,
a. consumer surplus will increase, but not total output.
b. total world output will increase, and consumer surplus will increase as well.
c. total world output will increase, but consumer surplus will not increase.
d. neither total output nor consumer surplus will change.
Question 6Which of the following is not true with regard to pollution control through transferable pollution rights?
a. It does not require the government to know in advance the pollution abatement techniques to be utilized.
b. It creates an incentive to develop improved pollution abatement technologies.
c. It ultimately requires all firms to reduce pollution in equal amounts.
d. It established private property rights that can be sold.
Question 7The notion of reciprocity means that one nation will impose import restrictions on another in order to:
a. stimulate an increase in trade restrictions in the latter.
b. stimulate a decrease in trade restrictions in the latter.
c. eliminate trade restrictions immediately in both countries.
d. improve the government revenue collections through tariffs in both countries.
e. enforce standards of product quality in the latter.
Question 8Which of the following is true?
a. A nation cannot have a comparative advantage in the production of every good.
b. A nation cannot have an absolute advantage in the production of every good.
c. A nation can have a comparative advantage in the production of every good, but not an absolute advantage.
d. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage.
Question 9If pollution levels exceed the socially efficient level:
a. the marginal cost of pollution abatement exceeds the marginal benefit of pollution abatement.
b. the marginal cost of pollution abatement is less than the marginal benefit of pollution abatement.
c. the marginal cost of pollution abatement equals the marginal benefit of pollution abatement.
d. nothing can be said about the relationship between the marginal cost and marginal benefit of pollution abatement.
Question 10Steel producers in the United States observe that foreign sales of U.S. steel has drastically declined due to stringent trade policies adopted by the foreign governments and unfair treatment of U.S. steel exports in foreign countries. The lobbying efforts of such loss making U.S. steel manufacturers induces the domestic government to restrict the entry of imported steel and help stimulate the sales of domestically produced steel. Which of the following is most similar to the example mentioned above?
a. A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects
b. A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country
c. An import tariff applied against a foreign monopoly supplying the domestic market
d. Taxes imposed by the government on an import competing industry that generates a negative production externality
e. Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter
Question 11If discussing trade, it is ____ which matters, rather than ____. absolute advantage; comparative advantage
a. absolute advantage; comparative advantage
b. comparative advantage; absolute advantage
c. resource cost; comparative advantage
d. the total amount of the good producible; comparative advantage
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