Economics Midterm MBA

7/29/2019 Economics Midterm MBA

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1. Question : Which of the following is evidence that tariffs have curbed internationalspecialization?

Student Answer:Production is less specialized across cities within a country than

across countries.

There have been few efforts to reduce tariffs in the last 50 years.

Tariffs on agricultural products generally exceed tariffs onmanufactured goods.

Production is more specialized across regions of the US thanbetween the US and Canada.

None of the above.

Points Received: 2 of 2

Comments:

2. Question : Customs revenues represent what percent of US government revenue?

Student Answer:less than 1%

5%

7%

10%

25%


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3. Question : Since the early 1930's U.S. tariff rates have decreased around

Student Answer: 90%.

67%.

33%.

20%.


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10%.


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4. Question : Average tariffs on manufactured goods are around what level?

Student Answer:less than 1%

3%

10%

25%

40%


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5. Question : In the 1930s, the world volume of trade decreased, chiefly as a result of

Student Answer:the Smoot-Hawley Act.

a decline in world-wide tariffs.

the Great Depression.

all of the above.

a) and (c).


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6. Question : A reduction in tariffs leads to

Student Answer:a terms of trade loss to the exporter, if the importer is large.

a terms of trade gain for a small country.


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a terms of trade loss for a small country.

a terms of trade gain to the exporter, if the importer is large.

none of the above.


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7. Question : Reciprocal tariff cutting

Student Answer:must lead to all countries gaining.

must lead to one country gaining at another's expense.

is never consistent with the political economy of tariffs.

may lead to a deterioration in all countries terms of trade.

none of the above.


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8. Question : During the last 40 years tariff barriers were substantially reduced. Whathappened to nontariff barriers in developed countries over the sameperiod?

Student Answer:They were reduced more than tariffs.

They were reduced, but less than tariffs.

They remained relatively constant.

They increased significantly.

There are no clear studies of the trend on nontariff barriers.


Comments:


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9. Question : The Tokyo Round of GATT talks was concerned with

Student Answer:a cut in tariffs of about 35 percent.

reductions in non-tariff barriers to trade.

increased tariffs on agricultural products.

establishment of the World Trade Organization.

improved monitoring of trade disputes.


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10. Question : The Uruguay Round of GATT talks established policies for

Student Answer:tariff cuts of around 40 percent.

protection of intellectual property rights.

reductions in non-tariff barriers to trade.

the establishment of the World Trade Organization.

all of the above.


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11. Question : NAFTA is an example of a

Student Answer:voluntary export restraint.

common market.

free-trade area.

customs union.

economic union.


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12. Question : Which of the following are true for the "gravity model" of trade?

Student Answer:It is intended to explain bilateral trade flows.

Empirically estimates that an increase in GDP, but not in per capitaGDP, will increase trade by relatively more than the increase in GDP.

Empirically finds that trade and the distance between countries arenegatively related.

Empirically finds that poorer countries are more likely to trade witheach other than are wealthier countries.

All of the above.


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13. Question : The volume of trade diversion can be best detected by examiningchanges in

Student Answer:the share of each country's consumption supplied by domestic

manufacturers.

the volume of trade.

the share of imports coming from exporters in partner countries.

growth of national incomes.

movements in prices between member countries and the rest of theworld.


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14. Question : The formation of a customs union may lead to dynamic gains in theform of


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Student Answer:scale economies.

increased competition.

protection of industries with learning effects.

increased incentives to innovate.

all of the above.


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15. Question : Consider a framework where markets are monopolistic competitive. The

formation of a customs union

Student Answer:will lead to larger more efficient plants.

must lead to welfare losses.

will not lead to any trade diversion.

will increase the rate of capital formation.

will not lead to dynamic gains.


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16. Question : Country A is considering forming a customs union with either B or C. Aand C have very similar factor endowments while A and B are verydifferent. Relative to a customs union between A and C, a customs unionbetween A and B will lead to

Student Answer:more trade diversion, less trade creation.

less trade diversion, less trade creation.

less trade diversion, more trade creation.

more trade diversion with the same amount of trade creation.

more trade diversion, more trade creation.


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Comments:

17. Question : Distortions and problems generally faced by centrally plannedeconomies include

Student Answer:the lack of incentives for managers or plants to operate efficiently.

the separation of production quantity decisions and the needs andwishes of the purchasers.

the failure of final goods to be similar to what consumers wouldchoose in a free market.

the excess supply of some goods and excess demand for other

goods.

all of the above.


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18. Question : In a centrally planned economy, prices are needed to

Student Answer:ration goods to consumers.

determine the pattern of production.

allocate resources across industries.

trade goods in international markets.

determine patterns of comparative advantage.


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19. Question : The Asian NICs include

Student Answer:South Korea, Hong Kong, Singapore and Taiwan.


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Malaysia, Indonesia and Thailand.

Laos and Cambodia.

a and b

all of the above.


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20. Question : In the past two decades, the Asian NICs have

Student Answer:increased their policies of infant-industry protection.

expanded their policies toward import substitution.

captured less of offshore production processing activities in sectorssuch as footwear, clothing and electronics.

none of the above.

all of the above.


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21. Question : Which of the following are sources of gains from trade?

Student Answer:increased product variety

specialization of production

increased competition

a and b

all of the above.


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22. Question : A movement from autarky to free trade will cause a monopolist to

Student Answer:reduce prices and output.

increase prices and output.

increase prices and reduce output.

reduce prices and increase output.

reduce prices and not change output.


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23. Question : In the absence of trade a monopolist will

Student Answer:produce more than the competitive output.

set price equal to marginal cost.

produce less than the competitive output.

set price below marginal cost.

have zero profits.


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24. Question : In the move from autarky to free trade, the price of a good produced by amonopolist could rise if the monopolist is in the _________ sector and

Student Answer:export , the nation has a strong comparative advantage in the good.

import, the nation has a strong comparative advantage in the good.

import, the nation has a strong comparative disadvantage in thegood.

import, the move to free trade forces it to act more competitively.

The price cannot rise.


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25. Question : Welfare in a competitive economy without trade is

Student Answer:lower than in a monopolistic economy without trade.

higher than in a competitive economy with trade.

low due to a lack of international specialization in production.

higher than a monopolistic economy in a large trading world.

none of the above.


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26. Question : A movement from autarky to trade with export monopolists will cause

Student Answer:the domestic price of the export good to fall.

the domestic price of the export good to rise.

a decrease in the output of the export good.

both b and c.

an ambiguous movement in the domestic price of the export good.


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27. Question : Allowing a monopoly in an export sector

Student Answer:can improve the economy's welfare if the country is small.

always will lower domestic welfare.

can improve domestic welfare if the industry exports a largeproportion of its output.


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must lower domestic welfare if the industry exports a small

proportion of its output.

must lower domestic welfare if there is also a monopolist in theimport sector.


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28. Question : A country importing from a monopolist

Student Answer:will have a difficult time identifying the precisely best policy to

gain some of the welfare the monopolist is keeping.

can use an import duty to reduce demand for the monopolist'sgood.

can use an import duty to reduce the foreign monopolist's price.

none of the above.

all of the above.


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29. Question : Dumping is the practice of

Student Answer:buying goods from the cheapest possible source.

burning some goods to avoid immiserizing growth.

selling good cheaply to damage foreign competitors.

levying an import duty to protect against a foreign monopolist.

none of the above.


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30. Question : An export monopolist

Student Answer:leads to domestic welfare losses as the price of exported goods is

too high.

leads to domestic welfare gains as the price of domestic goodsrises.

leads to some domestic welfare gains as prices of exported goodsare higher.

does not affect domestic welfare and reduces foreign welfare.

none of the above.


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31. Question : In the lobbying model of political choice, tariffs are chosen

Student Answer:to maximize social welfare.

that redistribute income from a minority to a majority.

usually in the interests of consumers.

to maximize tariff revenue.

according to the interests of special interest groups.


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32. Question : It is observed that tariffs generally are raised in order to protect unskilledlabor, and are often raised when an industry's competitive positionbecomes threatened. This evidence lends support to which theory of

political choice?

Student Answer:lobbying

voting model

conservative social welfare function


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both a and c

both b and c


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33. Question : Tariff protection in the U.S. tends to favor

Student Answer:industries that also have heavy nontariff protection.

geographically dispersed industries.

low-wage industries.

small-scale industries.

all of the above.


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34. Question : Consider a country that is experiencing welfare losses as a result of rapidgrowth of its export sector. This country could counteract the effects ofthis growth by

Student Answer:if they are small, putting tariffs on imports.

using export subsidies.

if they are large, levying export taxes.

puffing tariffs on imports, regardless of country size.

none of the above.


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35. Question : A tariff improves domestic welfare as a result of


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Student Answer:changes in the terms of trade.

changes in the volume of trade.

changes in production.

none of the above.

potentially, all of the above.


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36. Question : Trade with tariffs and subsidies will be preferable to autarky

Student Answer:never.

always for a large country.

if there is negative net tariff revenue.

if there is a small change in world prices as a result of the tariff

if there is positive net tariff revenue.


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37. Question : A tariff will attract foreign investment by

Student Answer:reducing demand for foreign made products.

reducing the size of domestic export production.

lowering the price of imported goods.

none of the above.

all of the above.


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38. Question : Tariffs affect employment by

Student Answer:increasing employment in all sectors.

decreasing employment in all sectors.

decreasing employment in the import sector and increasing it in theexport sector.

increasing employment in the import sector and decreasing it in theexport sector.

reducing aggregate unemployment.


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39. Question : A small country which exports food and imports only clothing levies atariff on all clothing imports. The country then grows by 25 percentmeasured at domestic prices. In which of the following scenarios doesthe country have the highest welfare after growth?

Student Answer:The growth is most concentrated in clothing, but both industries

grow.

Only the food industry expands.

The growth is in the exact proportions of home prices.

Only the clothing industry expands.

The growth is most concentrated in food, but both industries grow.


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40. Question : In a specific factors model, if tariff is placed on clothing, then theowners of the factor specific to other goods will lobby for

Student Answer:tariffs on their goods.

export subsidies on their goods.


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taxes on laborers in the clothing sector.

all of the above.

no change; the tariff will make them better off.


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41. Question : If L = 200 and L = 10, and the world demand for food is perfectlyinelastic at 100, then

Student Answer:home must be incompletely specialized.

foreign production must be incompletely specialized.

foreign will produce all clothing.

home will produce all food.

world demand cannot be met.


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42. Question : It is observed that in a two-country Ricardian trading world, one countryis incompletely specialized and the other is not. Then the world relativeprice of the two goods

Student Answer:must equal the labor input ratio in the specialized country.

must lie between the two country's labor input ratios.

must be equal to one.

must equal the labor input ratio in the incompletely specialized

country.

cannot be inferred from the above information.


Comments:


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43. Question : In the Ricardian model, equilibrium relative wages depend on

Student Answer:world demand for each good.

labor's productivity in each good it actually produces.

world relative prices.

none of the above.

all of the above.


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44. Question : Consider a two-country world with trade where both countries arecompletely specialized. An increase in the price of clothing must

Student Answer:decrease nominal wages in the clothing producing country.

increase nominal wages in the clothing producing country.

increase nominal wages in the food producing country.

decrease nominal wages in the food producing country.

will not change nominal wages in either country.


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45. Question : Compensation to labor is $16 in the US and $2.40 in Mexico. This canbe explained by

Student Answer:technology differences.

better trained workers in the US.

more capital in the US.

better capital in the US.

all of the above.


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46. Question : Consider if home produces goods 1 and 2 and the foreign countryproduces good 3. An improvement in the technology for producing good1 with no change in the price of good 3 will lead to

Student Answer:p1 declining, w increasing and w falling.

p1 declining, w increasing and no change in w.

p1 increasing and no changes in wages.

p1 declining and no changes in wages.

p1 declining, w increasing and no change in w.


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47. Question : Consider if home produces goods 1 and 2 and the foreign countryproduces good 3. An improvement in the technology for producing good1 with a decline in the price of good 3 will lead to

Student Answer:unambiguous welfare gains for the foreign country.

wages falling both at home and in the foreign country.

unambiguous home welfare gains and foreign welfare losses.

unambiguous home welfare gains and falling foreign wages.

falling home wages and foreign welfare losses.


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48. Question : Tariffs reduce welfare by

Student Answer:reallocating resources into goods people don't want.


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equating marginal rates of substitution across countries.

shifting demand from imports to exported goods.

creating a difference between the domestic valuation of

commodities and the cost of obtaining them via trade.

increasing government revenue, which is then wasted.


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49. Question : An export tax

Student Answer: will increase domestic employment.

will increase domestic welfare.

will have ambiguous effects on domestic employment.

will have ambiguous effects on domestic welfare.

will have effects that differ from that of a tariff.


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50. Question : If a country can influence world prices by levying a tariff on its import,

Student Answer:it is a small country.

it is a large country.

any tariff will improve its welfare.

it can only decrease, but not increase the world price of its importgood.

b and d.


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Economics Midterm MBA

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