1. In Zagora, a worker can produce either 5 books or 10 gadgets in an hour. In Plovdiv, a worker can produce either 3 books or 5 gadgets in an hour. Which statement about this situation is true?
A. Zagora has the comparative advantage in the production of books.
B. Zagora has the comparative advantage in the production of gadgets.
C. Zagora has the absolute advantage in both types of production, and workers in Plovdiv can’t possibly compete against the super-productive workers in Zagora.
D. Plovdiv workers are clearly earning lower wages, and workers in Zagora can’t be expected to compete against the low-wage workers in Plovdiv.
E. None of the above
2. Free trade has the effect of:
A. making every individual in an economy better off.
B. decreasing an economy’s production possibilities.
C. making all producers in an economy better off.
D. increasing the purchasing options of consumers in an economy.
E. making all workers in an economy worse off.
3. Protectionist measures are enacted because they:
A. allow countries to preserve culturally important ways of life at very low cost.
B. typically benefit a large number of people at a cost to only a very small number.
C. typically benefit a small number of people greatly and impose small costs on a large number of people.
D. make everyone in an economy better off.
E. preserve a nation’s critical natural resources.
4. Restrictions on imports of foreign steel into the U.S. will:
A. help both U.S. steel producers and U.S. automobile producers.
B. help U.S. steel producers and hurt U.S. automobile producers.
C. hurt U.S. automobile producers, but help U.S. automobile consumers.
D. hurt foreign steel producers and help U.S. steel consumers.
E. help both U.S. steel producers and foreign steel producers.
5. Suppose Bulgaria is accused of "dumping" milk on the Ukrainian market. As a result, the Ukrainian government is considering an embargo against milk from Bulgaria. As a result of this proposed embargo:
A. Ukrainian consumers of milk, such as small children, would be made better off, as would Ukrainian milk producers.
B. Ukrainian consumers of milk, such as small children, would be helped, but Ukrainian milk producers would be hurt.
C. Ukrainian consumers of milk, such as small children, would be hurt, as would milk producers in both Bulgaria and Ukraine.
D. milk producers in Bulgaria would be helped due to the resulting increase in milk prices.
E. Ukrainian consumers of milk, such as small children, would be made worse off, but Ukrainian milk producers would be made better off.
6. The term "balance of payments" refers to a nation's:
A. merchandise exports minus imports.
B. record of all international transactions.
C. capital inflows minus outflows.
D. official reserves inflows minus outflows.
E. capital outflows minus inflows.
7. If a bottle of French wine priced at 100 francs can be purchased for $50, the exchange rate is:
A. 0.50 francs per dollar.
B. 4.00 francs per dollar.
C. 0.50 dollars per franc.
D. 2.00 dollars per franc.
E. None of the above