Chapter 20—International Trade
TRUE/FALSE
1. Tariffs contribute to higher prices of textile products imported into the United States, but
... [Show More] import
quotas on textiles brought into the United States do not.
ANS: F PTS: 1
2. The inevitable cost of protecting domestic industries from foreign competition will be higher prices for
domestic consumers.
ANS: T PTS: 1
3. If two countries produce both wheat and sugar and one country has the comparative advantage in
producing wheat than the other country must have the comparative advantage producing sugar.
ANS: T PTS: 1
4. The 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.
ANS: T PTS: 1
5. Major U.S. exporters would be likely to oppose the sort of protectionist policies favored by domestic
producers that compete with imports.
ANS: T PTS: 1
6. Import tariffs in the United States are likely to reduce U.S. exports, both because of the resulting
decrease in foreign earnings of dollars from exports to the United States and because of the likelihood
of increases in other countries' import restrictions against U.S. goods.
ANS: T PTS: 1
7. It is possible for some individuals within countries to lose from reducing international trade barriers.
ANS: T PTS: 1
8. A country with relatively abundant supplies of labor is unlikely to have a comparative advantage in the
production of labor intensive goods.
ANS: F PTS: 1
9. A nation can gain from international trade when the relative domestic prices of the nation differs from
that in other countries, and it imports goods for which it is a high opportunity cost producer.
ANS: T PTS: 1
10. Generally, restrictions limiting imports will also help domestic producers who are exporters.
ANS: F PTS: 1
11. A U.S. tariff on French wine will likely benefit U.S. wine producers and the U.S. government (by
increasing tax revenue), but harm U.S. wine drinkers and French wine producers.
ANS: T PTS: 1
12. A country has an absolute advantage over another if it can produce a good with fewer resources.
ANS: T PTS: 1
13. Trade occurs when a country has an absolute advantage and not just a comparative advantage over
another country.
ANS: F PTS: 1
14. A country that is half as productive at producing some goods as another country, but is one quarter as
productive at producing others, will not be able to gain from trade.
ANS: F PTS: 1
15. Import quotas contribute to higher prices of products imported into the U.S., but tariffs do not.
ANS: F PTS: 1
16. If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses
one week's time to produce twelve yards of cloth or six barrels of wine, England has the comparative
advantage in both goods.
ANS: F PTS: 1
17. The quantity supplied by domestic producers in an importing country must be less than the quantity
demanded by its population.
ANS: T PTS: 1
18. A tariff on a good increases the domestic price of the good, increases domestic production of the good,
reduces the amount of the good sold, and decreases imports of the good.
ANS: T PTS: 1
19. Import quotas generate more government revenue than a tariff that is designed to allow the same level
of imports.
ANS: F PTS: 1
20. If it can be shown that a tariff on steel imports will increase employment in the steel industry, we can
be sure that the effect of the tariff on U.S. employment will also be positive.
ANS: F PTS: 1
21. When a country allows trade and becomes an exporter of goods everyone benefits.
ANS: F PTS: 1 [Show Less]