SAMPLE TEST - CHAPTER 21 

1. From which of the following countries did the United States import the largest
    dollar value of merchandise goods during 1994?
 a. Canada
 b. Mexico
 c. Saudi Arabia
 d. Great Britain
 
2. A U.S. trade policy that restricts the sale of foreign goods in the U.S. market will
 a. reduce the demand for U.S. export goods, since foreigners will be less able to
    buy our goods if they cannot sell to us.
 b. benefit producers in industries that export goods.
 c. increase the nation's income since it protects domestic jobs.
 d. enhance economic efficiency by allocating more resources to the areas of their
    greatest comparative advantage.
 
3. Suppose the United States imposed a tariff on television sets, preventing foreign-
    produced TVs from freely entering the U.S. market. Which of the following would  most likely occur?
 a. The price of televisions to U.S. consumers would increase, and the demand for
    U.S. export products would rise.
 b. The price of televisions to U.S. consumers would fall, and the demand for U.S.
    export products would fall.
 c. The price of televisions to U.S. consumers would increase, and the demand for
    U.S. export products would fall.
 d. The price of televisions to U.S. consumers would fall, and the demand for U.S.
    export products would rise.
 
4. Which of the following is correct?
 a. An increase in the tariff on foreign-produced automobiles will benefit U.S.
    consumers of domestic cars.
 b. An ongoing result of the North American Free Trade Agreement is that producers
    in both countries will benefit at the expense of consumers.
 c. The wages of U.S. workers would sharply decline if we traded freely with low-
    wage countries such as Mexico.
 d. Exports provide a nation with its primary source of purchasing power used to
    import goods.

5. The following chart indicates the production possibilities of food and clothing
    per worker day in the United States and South Korea.
 
                  Units of Output Per Worker Day
                  United States     South Korea
       Food             2                1
       Clothing         4                3
 
 Which of the following is true?
 a. Mutual gains from trade could be realized if the United States specialized in
    clothing production and South Korea in production of food.
 b. South Korean workers are the low-cost producers of food.
 c. Mutual gains could be realized if the United States specialized in producing
    food and South Korea in producing clothing.
 d. U.S. workers are the high-cost producers of food.
 
6. (I) Relative to a no-trade situation, if the United States exported wheat, the U.S.
    domestic wheat price would rise and domestic production of wheat would expand.
    (II) Relative to a no-trade situation, international exchange causes prices of all
    goods to rise.
 a. I is true, II is false.
 b. I is false, II is true.
 c. Both are true.
 d. Both are false.
 
7. Imposing a restrictive quota on the import of spiked track shoes will likely
 a. increase the price of the shoes but decrease the quantity consumed.
 b. increase both the price of the shoes and the quantity consumed.
 c. leave the price of the shoes unchanged but decrease the quantity consumed.
 d. leave the price of the shoes unchanged and also leave the quantity consumed
    unchanged since domestic producers will expand output to make up for a
    reduction in the supply of the imported shoes.
 
8. The political popularity of a tariff on imported goods that compete with products
    of a well-established domestic industry is
 a. surprising since one would expect the political power of consumers to override
    the interests of even a well-established domestic industry.
 b. surprising since one would expect the economic harm resulting from tariffs to
    be well understood by voters.
 c. not surprising since such a tariff would generally benefit an easily recognized
    interest group at the expense of uninformed, uninterested consumers.
 d. not surprising since the tariff enables domestic producers and consumers to
    gain at the expense of foreigners.

9. Hong Kong, Taiwan, and Singapore all have relatively
 a. high trade barriers and high rates of economic growth.
 b. high trade barriers and low rates of economic growth.
 c. low trade barriers and high rates of economic growth.
 d. low trade barriers and low rates of economic growth.

10. Which of the following will results from the North American Free Trade Agreement
(NAFTA)?
a. Domestic producers in the United States, Canada and Mexico will have free access to
larger markets.
b. The low wages of Mexican workers will make it virtually impossible for United States
and Canadian producers to export goods to Mexico.
c. An expanded variety of goods will be available to consumers in all three countries.
d. Both a and c are true; b is false.