,CHAPTER 1—THE INTERNATIONAL ECONOMY AND GLOBALIZATION
MULTIPLE CHOICE
1. A primary reason why nations conduct international trade is because:
a. Some nations prefer to produce one thing while others produce other things
b. Resources are not equally distributed among all trading nations
c. Trade enhances opportunities to accumulate profits
d. Interest rates are not identical in all trading nations
ANS: B PTS: 1
2. A main advantage of specialization results from:
a. Economies of large-scale production
b. The specializing country behaving as a monopoly
c. Smaller production runs resulting in lower unit costs
d. High wages paid to foreign workers
ANS: A PTS: 1
3. International trade in goods and services is sometimes used as a substitute for all of the following
except:
a. International movements of capital
b. International movements of labor
c. Domestic production of the same goods and services
d. Domestic production of different goods and services
ANS: D PTS: 1
4. If a nation has an open economy, it means that the nation:
a. Allows private ownership of capital
b. Has flexible exchange rates
c. Has fixed exchange rates
d. Conducts trade with other countries
ANS: D PTS: 1
5. International trade forces domestic firms to become more competitive in terms of:
a. The introduction of new products
b. Product design and quality
c. Product price
d. All of the above
ANS: D PTS: 1
6. The movement to free international trade is most likely to generate short-term unemployment in which
industries?
a. Industries in which there are neither imports nor exports
b. Import-competing industries
c. Industries that sell to domestic and foreign buyers
d. Industries that sell to only foreign buyers
ANS: B PTS: 1
, 7. International trade is based on the idea that:
a. Exports should exceed imports
b. Imports should exceed exports
c. Resources are more mobile internationally than are goods
d. Resources are less mobile internationally than are goods
ANS: D PTS: 1
8. Arguments for free trade are sometimes disregarded by politicians because:
a. Maximizing domestic efficiency is not considered important
b. Maximizing consumer welfare may not be a chief priority
c. There exist sound economic reasons for keeping one's economy isolated from other
economies
d. Economists tend to favor highly protected domestic markets
ANS: B PTS: 1
9. How much physical output a worker producers in an hour's work depends on:
a. The worker's motivation and skill
b. The technology, plant, and equipment in use
c. How easy the product is to manufacture
d. All of the above
ANS: D PTS: 1
10. The largest amount of trade with the United States in recent years has been conducted by:
a. Canada
b. Germany
c. Chile
d. United Kingdom
ANS: A PTS: 1
11. Increased foreign competition tends to:
a. Intensify inflationary pressures at home
b. Induce falling output per worker-hour for domestic workers
c. Place constraints on the wages of domestic workers
d. Increase profits of domestic import-competing industries
ANS: C PTS: 1
12. ____ is the ability of a firm/industry, under free and fair market conditions, to design, produce, and
market goods and services that are better and/or cheaper than those of other firms/industries.
a. Competitiveness
b. Protectionism
c. Comparative advantage
d. Absolute advantage
ANS: A PTS: 1
13. A firm's ____, relative to that of other firms, is generally regarded as the most important determinant
of competitiveness.
a. Income level
b. Tastes and preferences
c. Governmental regulation
d. Productivity
, ANS: D PTS: 1
14. Free traders maintain that an open economy is advantageous in that it provides all of the following
except:
a. Increased competition for world producers
b. A wider selection of products for consumers
c. The utilization of the most efficient production methods
d. Relatively high wage levels for all domestic workers
ANS: D PTS: 1
15. Recent pressures for protectionism in the United States have been motivated by all of the following
except:
a. U.S. firms shipping component production overseas
b. High profit levels for American corporations
c. Sluggish rates of productivity growth in the United States
d. High unemployment rates among American workers
ANS: B PTS: 1
16. International trade tends to cause welfare losses to at least some groups in a country:
a. The less mobile the country's resources
b. The more mobile the country's resources
c. The lower the country's initial living standard
d. The higher the country's initial living standard
ANS: A PTS: 1
17. For a nation to maximize its productivity in a global economy:
a. Only imports are necessary
b. Only exports are necessary
c. Both imports and exports are necessary
d. Neither imports nor exports are necessary
ANS: C PTS: 1
18. A feasible effect of international trade is that:
a. A monopoly in the home market becomes an oligopoly in the world market
b. An oligopoly in the home market becomes a monopoly in the world market
c. A purely competitive firm becomes an oligopolist
d. A purely competitive firm becomes a monopolist
ANS: A PTS: 1
19. International trade in goods and services tends to:
a. Increase all domestic costs and prices
b. Keep all domestic costs and prices at the same level
c. Lessen the amount of competition facing home manufacturers
d. Increase the amount of competition facing home manufacturers
ANS: D PTS: 1
20. The real income of domestic producers and consumers can be increased by:
a. Technological progress, but not international trade
b. International trade, but not technological progress
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