Chapter 15 Preliminary Quiz
Comparative Advantage and Protectionism

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. The principle of comparative advantage states that: a. each country will benefit if it specializes in the production and export of those goods that it can produce at relatively low cost. b. each country will benefit if it produces everything by itself. c. each country will benefit if it produces only one good and imports everything else. d. none of the above.
	2. Under free trade, a. each country is better off. b. each country will specialize in the production of its comparative advantage good. c. both a and b. d. neither a nor b.
	3. The ratio of export prices to import prices is called: a. the terms of trade. b. the price ratio. c. the tariff level. d. the size of the quota.
	4. The _______ begins at the country's point of complete specialization and then runs outward at the slope that corresponds to the world price ratio. a. production possibility frontier b. consumption possibility curve c. demand curve d. supply of imports curve
	5. Market failures coupled with free trade can lead economies to a point: a. higher than equilibrium on the supply and demand graph. b. inside the production possibility frontier. c. both a and b. d. neither a nor b.
	6. As a result of trade, we would expect that firms in the comparative advantage industry will see their incomes _____ and firms in comparative disadvantage industries will see their incomes _____. a. rise; rise b. fall; fall c. rise; fall d. fall; rise
	7. A tariff is a _______. A quota is a _______. a. tax levied on imports; limit on the quantity of imports b. tax levied on imports; tariff that exists only on exported goods c. quota placed only on imported goods; limit on the quantity of imports d. limit on the quantity of imports; tax levied on imports
	8. A tariff that is so high that it forces imports to zero is called: a. choking. b. damaging. c. integrating. d. prohibitive.
	9. Tariffs and quotas both cause the market price to _______ and the number of imports to _______ when compared with free trade. a. rise; rise b. rise; fall c. fall; rise d. fall; fall
	10. Revenue from a tariff goes to _______ while revenue from a quota goes to _______. a. foreign producers; the domestic government b. the domestic government; exporters and importers c. foreign producers; exporters and importers d. the domestic government; the foreign government
	11. Which of the following is an effect of the imposition of a tariff? a. It raises prices. b. It causes consumers to reduce their purchases of the tariffed good below efficient levels. c. It raises revenues for the domestic government. d. All of the above.
	12. When a tariff is imposed in order to give a startup industry the chance to get started without a lot of foreign competition, which of the following arguments for a tariff has been used? a. terms-of-trade argument b. optimal-tariff argument c. infant industry argument d. none of the above
	13. The set of tariffs that maximizes real domestic income is called: a. an infant industry tariff. b. an optimal tariff. c. a terms-of-trade tariff. d. none of the above.
	14. Tariffs are a _______ way to decrease unemployment. The use of monetary or fiscal policy is _______. a. good; a bad way to increase employment b. good; another way to decrease unemployment c. bad; a better way to decrease unemployment d. bad; a bad way to increase employment
	15. Which of the following is a free-trade agreement between the United States, Canada, and Mexico? a. GATT b. WTO c. NAFTA d. EU