I_E_11e_Ch_01

CHAPTER 1—THE INTERNATIONAL ECONOMY AND GLOBALIZATIONMULTIPLE CHOICE1. A primary reason why nations conduct international trade is because:a. Some nations prefer to produce one thing while others produce other thingsb. Resources are not equally distributed among all trading nationsc. Trade enhances opportunities to accumulate profitsd. Interest rates are not identical in all trading nationsANS: B PTS: 12. A main advantage of specialization results from:a. Economies of large-scale productionb. The specializing country behaving as a monopolyc. Smaller production runs resulting in lower unit costsd. High wages paid to foreign workersANS: A PTS: 13. International trade in goods and services is sometimes used as a substitute for all of the followingexcept:a. International movements of capitalb. International movements of laborc. Domestic production of the same goods and servicesd. Domestic production of different goods and servicesANS: D PTS: 14. If a nation has an open economy, it means that the nation:a. Allows private ownership of capitalb. Has flexible exchange ratesc. Has fixed exchange ratesd. Conducts trade with other countriesANS: D PTS: 15. International trade forces domestic firms to become more competitive in terms of:a. The introduction of new productsb. Product design and qualityc. Product priced. All of the aboveANS: D PTS: 16. The movement to free international trade is most likely to generate short-termunemployment in which industries?a. Industries in which there are neither imports nor exportsb. Import-competing industriesc. Industries that sell to domestic and foreign buyersd. Industries that sell to only foreign buyersANS: B PTS: 17. International trade is based on the idea that:a. Exports should exceed importsb. Imports should exceed exportsc. Resources are more mobile internationally than are goodsd. Resources are less mobile internationally than are goodsANS: D PTS: 18. Arguments for free trade are sometimes disregarded by politicians because:a. Maximizing domestic efficiency is not considered importantb. Maximizing consumer welfare may not be a chief priorityc. There exist sound economic reasons for keeping one's economy isolated from othereconomiesd. Economists tend to favor highly protected domestic marketsANS: B PTS: 19. How much physical output a worker producers in an hour's work depends on:a. The worker's motivation and skillb. The technology, plant, and equipment in usec. How easy the product is to manufactured. All of the aboveANS: D PTS: 110. The largest amount of trade with the United States in recent years has been conducted by:a. Canadab. Germanyc. Chiled. United KingdomANS: A PTS: 111. Increased foreign competition tends to:a. Intensify inflationary pressures at homeb. Induce falling output per worker-hour for domestic workersc. Place constraints on the wages of domestic workersd. Increase profits of domestic import-competing industriesANS: C PTS: 112. ____ is the ability of a firm/industry, under free and fair market conditions, to design,produce, and market goods and services that are better and/or cheaper than those of other firms/industries.a. Competitivenessb. Protectionismc. Comparative advantaged. Absolute advantageANS: A PTS: 113. A firm's ____, relative to that of other firms, is generally regarded as the most importantdeterminant of competitiveness.a. Income levelb. Tastes and preferencesc. Governmental regulationd. ProductivityANS: D PTS: 114. Free traders maintain that an open economy is advantageous in that it provides all of thefollowing except:a. Increased competition for world producersb. A wider selection of products for consumersc. The utilization of the most efficient production methodsd. Relatively high wage levels for all domestic workersANS: D PTS: 115. Recent pressures for protectionism in the United States have been motivated by all of thefollowing except:a. U.S. firms shipping component production overseasb. High profit levels for American corporationsc. Sluggish rates of productivity growth in the United Statesd. High unemployment rates among American workersANS: B PTS: 116. International trade tends to cause welfare losses to at least some groups in a country:a. The less mobile the country's resourcesb. The more mobile the country's resourcesc. The lower the country's initial living standardd. The higher the country's initial living standardANS: A PTS: 117. For a nation to maximize its productivity in a global economy:a. Only imports are necessaryb. Only exports are necessaryc. Both imports and exports are necessaryd. Neither imports nor exports are necessaryANS: C PTS: 118. A feasible effect of international trade is that:a. A monopoly in the home market becomes an oligopoly in the world marketb. An oligopoly in the home market becomes a monopoly in the world marketc. A purely competitive firm becomes an oligopolistd. A purely competitive firm becomes a monopolistANS: A PTS: 119. International trade in goods and services tends to:a. Increase all domestic costs and pricesb. Keep all domestic costs and prices at the same levelc. Lessen the amount of competition facing home manufacturersd. Increase the amount of competition facing home manufacturersANS: D PTS: 120. The real income of domestic producers and consumers can be increased by:a. Technological progress, but not international tradeb. International trade, but not technological progressc. Technological progress and international traded. Neither technological progress nor international tradeANS: C PTS: 121. In the United States, automobiles area. Imported, but not exportedb. Exported, but not importedc. Imported and exportedd. Neither exported nor importedANS: C PTS: 122. Technological improvements are similar to international trade since they both:a. Provide benefits for all producers and consumersb. Increase the nation's aggregate incomec. Reduce unemployment for all domestic workersd. Ensure that industries can operate at less than full capacityANS: B PTS: 123. A sudden shift from import tariffs to free trade may induce short-term unemployment in:a. Import-competing industriesb. Industries that are only exportersc. Industries that sell domestically as well as exportd. Industries that neither import nor exportANS: A PTS:24.Recent empirical studies indicate that productivity performance in industries is:a. Directly related to globalization of industriesb. Inversely related to globalization of industriesc. Not related to globalization of industriesd. Any of the aboveANS: A PTS: 125. Empirical research indicates that ____ best enhances productivity gains for firms and industries.a. Local competitionb. Regional competitionc. Global competitiond. No competitionANS: C PTS: 126. Increased globalization is fostered by:a. Increased tariffs and quotasb. Restrictions on the migration of laborc. Reduced transportation costsd. Restrictions on investment flowsANS: C PTS: 127. A reduced share of the world export market for the United States would be attributed to:a. Decreased productivity in U.S. manufacturingb. High incomes of American householdsc. Relatively low interest rates in the United Statesd. High levels of investment by American corporationsANS: A PTS: 128. The dominant trading nation in the world market following World War II was:a. United Kingdomb. Germanyc. South Koread. United StatesANS: D PTS: 129. A closed economy is one in which:a. Imports exactly equal exports, so that trade is balancedb. Domestic firms invest in industries overseasc. The home economy is isolated from foreign traded. Saving exactly equals investment at full employmentANS: C PTS: 130. Relative to countries with low ratios of exports to gross domestic product, countrieshaving high export to gross domestic product ratios are ____ vulnerable to changes in the world market.a. Lessb. Morec. Equallyd. Any of the aboveANS: B PTS: 131. Which of the following is a fallacy of international trade?a. Trade is a zero-sum activityb. Exports increase employment in exporting industriesc. Import restrictions increase employment in import-competing industriesd. Tariffs and quotas reduce trade volumeANS: A PTS: 132. Foreign ownership of U.S. financial assetsa. Has decreased since the 1960'sb. Has increased since the 1960'sc. Has made the U.S. a net borrower since the late 1980'sd. Both a and cANS: D PTS: 133. The first wave of globalization was brought to an end bya. The Great Depressionb. The Second World Warc. The First World Ward. The Smoot-Hawley ActANS: C PTS: 134. Multilateral trade negotiations have led toa. Continued trade liberalizationb. Financial liberalizationc. Increased investmentd. All of the aboveANS: D PTS: 1TRUE/FALSE1. Important trading partners of the United States include Canada, Mexico, Japan, and China.ANS: T PTS: 12. The United States exports a larger percentage of its gross domestic product than Japan, Germany,and Canada.ANS: F PTS: 13. Opening the economy to international trade tends to lessen inflationary pressures at home.ANS: T PTS: 14. The benefits of international trade accrue in the forms of lower domestic prices, development ofmore efficient methods and new products, and a greater range of consumption choices.ANS: T PTS: 15. In an open trading system, a country will import those commodities that it produces at relativelylow cost while exporting commodities that can be produced at relatively high cost.ANS: F PTS: 16. Although free trade provides benefits for consumers, it is often argued that import protectionshould be provided to domestic producers of strategic goods and materials vital to the nation's security.ANS: T PTS: 17. In the long run, competitiveness depends on an industry's natural resources, its stock ofmachinery and equipment, and the skill of its workers in creating goods that people want to buy.ANS: T PTS: 18. If a nation has an open economy, it means that the nation allows private ownership of capital.ANS: F PTS: 19. Increased foreign competition tends to increase profits of domestic import-competingcompanies.ANS: F PTS: 110. Restrictive trade policies have resulted in U.S. producers of minerals and metals supplying all ofthe U.S. consumers' needs.ANS: F PTS: 1SHORT ANSWER1.What is the most important factor which contributes to competitiveness?ANS:Key to the concept of competitiveness is productivity, or output per worker hour.PTS: 12. What are the challenges of the international trading system?ANS:Among the challenges that the international trading system faces are dealing with fair labor standards and concerns about the environment.PTS: 1ESSAY1.Does exposure to competition with the world leader in a particular industry improve afirm's productivity?ANS:The McKinsey institute found that higher productivity rested on the ability of mangers to invent new and ever more efficient ways of making products and on the ability of engineers to design products that are easy to make. The institute researchers observed that in the auto industry in Japan or the food industry in the United States, managers and engineers do not achieveinnovations because they are smarter work harder or are better educated than their peers. They do so because they are subjected to intense global competition, where improving labor productivity is the key to success.PTS: 12. What are the essential arguments in favor of free trade?ANS:Proponents of an open trading system contend that international trade results in higher levels of consumption and investment, lower prices of commodities, and a wider range of product choices for consumers. Trade also enables workers to become more productive, and wages of workers whose skills are more scarce internationally tend to rise.PTS: 1。