Absolute advantage is determined by comparing the opportunity costs of producing each good in ...

Absolute advantage is determined by comparing the opportunity costs of producing each good in different countries.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 2

A new U.S. import quota on imported steel would be likely to:
 a. raise the cost of production to steel-using American firms.
  b. generate tax revenue to the government.
 c. decrease U.S. production of steel.
 d. increase the production of steel-using American firms.

Question 3

Which of the following is true of adverse selection?
 a. It can result when one of the parties to a transaction has little information about the quality of the goods involved.
  b. It can cause the quality of goods traded to fall, if quality detection costs are high.
 c. It can be a difficult problem to overcome, because it is not individually rational for the transactor with the superior information to provide a truthful and complete disclosure.
  d. All of the above are true.

Question 4

Trade between industrial countries account for the majority of international trade.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 5

A new U.S. tariff on imported steel would be likely to:
 a. raise the cost of production to steel-using American firms.
  b. generate tax revenue to the government.
 c. increase U.S. production of steel.
 d. all of the above

Question 6

Which of the following is false?
 a. Product liability laws can make it unprofitable to sell shoddy merchandise, providing a substantial incentive to provide safe products independent of government regulations.
  b. Asymmetric information exists when the available information is initially distributed in favor of one party to a transaction relative to another.
  c. In adverse selection situations, it is rational for a seller with more information about a product to provide a truthful and complete disclosure and make that fact known to a potential buyer.
  d. Moral hazard arises in part from the fact that it is costly for an insurer to monitor the behaviors of the insured party.

Question 7

The principle of comparative advantage states that a country should specialize in the production of those goods that have the highest opportunity costs.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 8

A new U.S. tariff on Mexican avocados would be likely to:
 a. raise the price of avocados to U.S. consumers.
 b. increase U.S. consumption of domestically produced avocados.
  c. increase total U.S. consumption of avocados.
 d. do both a. and b.

Question 9

Which of the following is true?
 a. Economic reasoning implies that individuals will acquire all possible information about a choice before making it.
  b. It is not rational for people to make decisions that could turn out to be mistaken.
 c. Reducing information costs to consumers and suppliers could permit more intelligent market decisions and lead to greater satisfaction.
  d. Occupational licensing laws generally act to protect misinformed consumers from getting shoddy services and enhances competition, leading to lower prices.

Question 10

We know that industrial countries tend to trade with other industrial countries. This pattern counters the:
 a. preference theory of comparative advantage.
  b. factor abundance theory of comparative advantage.
  c. concept of intraindustry trade.
  d. product life cycle theory of comparative advantage.
  e. human skills theory of comparative advantage.