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1) LDCs often have a comparative advantage in the production of ? a. primary products b. intermediate products c. manufactured products d. financial services
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2) Output fell sharply in the transition economies because ? a. banks were unable to function b. there was little corporate control c. vital infrastructure was missing d. All of the above
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3) If goods are exported for less than society’s marginal production cost and the marginal benefit to domestic consumers, it is likely that they benefit from? a. an import subsidy b. a quota c. comparative advantage d. an export subsidy
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4) A tariff causes domestic firms to ________ and consumers to? a. overproduce, under consume b. Overproduce, overconsume c. underproduce, under consume d. underproduce, overconsume
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5) The level of the equilibrium exchange rate offsets international differences in ? a. comparative advantage b. absolute advantage c. opportunity cost d. relative costs
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6) International difference is opportunity costs lead to countries acquiring ? a. Comparative advantage b. High exchange rates c. trade barriers d. trade quotas
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7) To prevent the external value of the currency from falling the government might ? a. Reduce interest rates b. Sell its own currency c. Buy its own currency with foreign reserves d. Increase its own spending
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8) The marginal propensity of consume is equal to ? a. Total spending / total consumption b. Total consumption / total income c. Change in consumption / change in income d. Change in consumption / change in savings
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9) The terms of trade measure ? a. The income of one country compared to another b. The GDP of one country compared to another c. The quantity of exports of one country compared to another d. Export prices compared to import prices
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10) If a country can produce 10 of product A or 4 of product B the opportunity cost of 1B is ? a. 0.4A b. 2.5A c. 10A d. 1B
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