Chapter 18 International Trade and Finance

61) Consider two individuals, Celia and Sondra, who produce bracelets and pendants. Celia's and Sondra's hourly productivity are as follows:

	Bracelets /hour	Pendants /hour
Celia	4	1
Sondra	10	2

Who has the absolute advantage or comparative advantage in the production of bracelets or pendants?

62) In An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith listed three reasons for productivity to increase with specialization. What are these three reasons?

63) Define the term "import."

64) Define the term "export."

65) Imagine two countries, Zorba and Anduluvia. Zorba is producing everything at a lower resource cost than Anduluvia. If the two countries trade what is the reason?

18.2 Protectionist Policies

1) An import ban results in

A) a decrease in the supply of the product.

B) an increase in the product's price.

C) a decrease in the quantity of the product bought and sold.

D) all of the above.

2) An import quota

A) limits the amount of a good that can be imported, thus decreasing prices.

B) limits the amount of a good that can be imported, thus increasing prices.

C) increases the amount of a good imported, thus decreasing prices.

D) increases the amount of a good imported, thus increasing prices.

3) A(n) ________ is a trade policy by which a nation agrees to limit its exports of a good in order to avoid more restrictive trade policies.

A) tariff

B) voluntary export restraint

C) import quota

D) import ban

4) Exporting nations often agree to voluntary export restraints in an attempt to

A) employ more workers in the importing nation.

B) avoid more restrictive trade policies.

C) increase global welfare.

D) decrease inflation.

5) Voluntary export restraints

A) have the same effect as an import ban.

B) are illegal under the international trading rules.

C) violate the spirit of international trade agreements.

D) all of the above.