EX: 1 Domestic Consumption: Demand Line Domestic Production: Supply line Domestic Price: Pw or World Price Line Consumption: Demand

line Closed Economy Equilibrium Quantity: Equilibrium Quantity Imported: Difference in quantity Quantity Exported: Difference in quantity If Pw is above Equilibrium: Export When Tariff is added Domestic consumption decreases and production increases 1. The textbook claims that the use of a naval blockade as a weapon of war is a paradox because blockades and other trade restrictions NO are ineffective at stopping the movement of goods. do not harm the country on which they are imposed. create an opportunity for profit in the black market. YES are favored by some people in the country they are intended to hurt. benefit most consumers in the country on which they are imposed. Feedback For more information, see p. 487 of your textbook. 2. The effect of the world steel price in this market is to NO increase producer surplus by assuring that no country will sell for less than $D YES establish the minimum price at which importers will be willing to sell to the country depicted in the graph. Inflate the domestic price of steel Serve as a price ceiling in the steel market Increase economic rent earned by holders of import licenses. Feedback For more information, see p. 504 of your textbook. 3. The slope of the line tangent to each point on an economy's PPC equals _______. The ratio of the world prices of the goods produced. YES the opportunity cost of producing one more unit of the good measured on the horizontal axis. NO The opportunity cost of producing one more unit of the good measured on the vertical axis. The opportunity cost of producing one more unit of each good shown on the graph. The opportunity cost of technological improvements that increase total output. Feedback For more information, see p. 489 of your textbook. 4. The consumption combination of 2 tons of rice and 8 tons of wheat is YES infeasible without trade feasible without trade, but not efficient. Feasible without trade, and efficient. Feasible with trade, but not efficient. NO Infeasible whether or not there is trade.

Feedback For more information, see p. 492 of your textbook. 5. A tariff is a tax imposed on ______ good. OK an imported a luxury an illegal the most popular a domestic 6. If this is a closed economy, how much will a bushel of corn cost? $1 OK $3 $5 $7 $9 7. The slope of the PPC for an economy that employs many workers is negative when close to the vertical axis and positive when further away from the vertical axis. Is upward sloping and linear Is downward sloping and linear OK Is smoothly bowed, with a negative slope over its range. Is smoothly bowed, with a positive slope over its range. 8. If the country whose PPC is illustrated has a closed economy, the maximum quantity of wheat its citizens can consume is ______ tons per year. If it has an open economy, the maximum quantity of wheat its citizens can consume is _____ tons per year. NO 6; 6 6; 8 YES 8; 10 8; 8 8; 6 Feedback For more information, see p. 492 of your textbook. 9. The combination of goods and services Mexico's citizens might feasibly consume are called Mexico's total consumption total production OK consumption possibilities production possibilities national output 10. One means of enforcing a quota is to require importers to obtain a sales permit NO pay an import tax YES obtain a license pay a sales tax obtain a political stand Feedback For more information, see p. 503 of your textbook. 1. OK An economy that trades with the rest of the world is a(n) open economy command economy

2. OK

trade economy closed economy autarky Autarky is a situation in which a country is economically dependent on trade self-sufficient underdeveloped developed dependent on a single firm

3. Suppose production in North Eastwood is currently given by Point C. If North Eastwood is an open economy, it could NO trade 50 tons of bread for 150 tons of grapes on the world market, to consume the combination given by Point B. YES trade 50 tons of grapes for 25 tons of bread on the world market to consume a combination that would not have been feasible without trade. increase production of grapes without sacrificing any production of bread. trade 50 tons of bread for 50 tons of grapes on the world market to consume a combination that would not have been feasible without trade. not reach a higher consumption combination without a technological change that shifted its PPC outward. Feedback For more information, see p. 492 of your textbook. 4. What is the world price of sugar without the tariff? $500/ ton OK $1000/ton $1500/ton $2000/ton $3000/ton 5. Which of the following jobs is least likely to be outsourced? YES Flipping hamburgers NO Technical assistance over the phone for your computer Transcription of physicians' records Software design Airline reservation agent Feedback For more information, see p. 508 of your textbook. 6. If this country is producing between point P and G, it will gain by ______ its production of good A and importing more of _______. YES increasing; good B increasing; good A NO decreasing; good B decreasing; good A not changing; good B Feedback For more information, see p. 492 of your textbook. 7. If this is an open economy, quantity supplied of cars (in thousands) by the

domestic producers will be OK 20 40 60 80 100 8. What is the domestic price of sugar in a closed economy? $500/ ton $1000/ton $1500/ton $2000/ton OK $3000/ton 9. The world price of wheat is $10 per ton greater than the domestic price of wheat OK equal to the world price of rice $8 per ton greater than the world price of rice 10. If the domestic quantity supplied of a good is greater than the domestic quantity demanded, the country is likely to be a(n) consumer of the good importer of the good importer and exporter OK exporter of the good self-sufficient economy 1. OK 2. A job is most likely to be outsourced if it involves face-to-face contact cannot be done by a computer does not require complex communication does not require use of computers or other technology requires an advanced degree

If North Eastwood has a closed economy, the maximum amount of bread its citizens can consume is ____ tons per year. 150 OK 175 200 250 impossible to know 3. Amy can produce either 5000 pounds of cheese or 20 cars per year. Mike can produce either 5000 pounds of cheese or 10 cars per year. By the principle of comparative advantage, Mike should specialize in producing both cheese and cars OK cheese cars neither cheese nor cars little of both goods 4.

An economy has two workers, Paula and Ricardo. Everyday they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. What is the opportunity cost for Ricardo to produce one shirt? 1/4 computer OK 1/2 computer 1 computer 2 computers 4 computers 5. If Utopia has a closed economy, the number of cases of tile traded is _____, and if it has an open economy the number of cases traded is _____. 200;450 NO B) 300; 200 YES C) 300; 450 D) 450; 200 E) 300; 300 Feedback For more information, see p. 498 of your textbook. 6. Suppose that a country with a closed economy opens itself to international trade and becomes a net exporter. In that case, domestic suppliers will supply _____ of that good after it opens itself to international trade. OK more same amount none less impossible to tell 7. An increase in the world price of rice would be illustrated on this graph by an outward parallel shift in the consumption possibilities curve. An outward shift in the production possibilities curve OK A more steeply-sloped consumption possibilities curve, tangent to the PPC at a new point. A consumption possibilities curve with a flatter slope, tangent to the PPC at a new point. A change in the horizontal axis intercept of the production possibilities curve. 8. An economy has two workers, Paula and Ricardo. Everyday they work, Paula can produce 4 computers or 16 shirts, and Ricardo can produce 6 computers or 12 shirts. What is the opportunity cost for Paula to produce one computer? 1/4 shirt 1/2 shirt 1 shirt NO 2 shirts YES 4 shirts Feedback For more information, see p. 488 of your textbook. 9. What is the price of a TV in an open economy without a quota? $150 $125

OK 10. OK

$100 $75 $50 A society could achieve a higher level of productivity if _______. each person in the society is a jack-of-all-trades it takes advantage of each individual's comparative advantage. it does not trade with other nations. it does not tax imported goods. it does not limit exports.

1. Suppose that Canada, an industrialized nation, and Mexico a developing nation, both produce cheese and cars. The real wage in Mexico is lower than in Canada. The countries have a free trade agreement. Which country's consumers will benefit from the free trade agreement? Neither Canada OK Both Mexico Not enough information to determine 2. If domestic consumers benefit from free trade of a good, the country must be a(n) ____ of that good. OK net importer net exporter net supplier autarky developing country 3. The increase in the price of sugar created by the tariff will increase domestic production by ____ tons per year, compared to the production of an open economy without the tariff. 10 OK 20 30 40 80 4. The effect of the world steel price in this market is to increase producer surplus by assuring that no country will sell for less than $D OK establish the minimum price at which importers will be willing to sell to the country depicted in the graph. Inflate the domestic price of steel Serve as a price ceiling in the steel market Increase economic rent earned by holders of import licenses. 5. The world price of a good is determined by the country that produces the good. supply of that good in the world market. demand for that good in the world market. OK worldwide demand and supply of that good. negotiation, between the producing countries of that good. 6. If North Eastwood is an open economy currently producing the quantities labeled Point A, the citizens of North Eastwood are able to consume

more grapes than they could without trade, but no more bread. More bread than they could without trade, but no more grapes. NO The combination labeled Point B by trading grapes for bread on the world market. YES Either more bread or more grapes than they could without trade. No more bread or grapes than they could without trade. Feedback For more information, see p. 492 of your textbook. 7. Australia is a net exporter of wool, free trade will benefit the OK domestic producers rich citizens of the Australia poor citizens of the Australia domestic consumers politicians 8. Suppose that Canada, an industrialized nation, and Mexico a developing nation, both produce cheese and cars. The real wage in Mexico is lower than in Canada. The countries have a free trade agreement. Which country benefits from the free trade agreement? Canada Mexico None of them OK Both of them Not enough information to determine. 9. Suppose that Canada, an industrialized nation, and Mexico a developing nation, both produce cheese and cars. The real wage in Mexico is lower than in Canada. The countries have a free trade agreement. Suppose Mexico has a comparative advantage in producing cheese and Canada has a comparative advantage in producing cars. Open trade will hurt Canadian auto workers Canadian car producers Mexican cheese producers YES Mexican car producers NO none of the above Feedback For more information, see p. 496 of your textbook. 10. In an open economy, the price of a bike is $20 $40 $100 OK $140 $160

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