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Econ13 homework 2




Econ13 homework 2;Spring 2014 Homework 2 (100 points);Due: Check Syllabus for due date;Multiple Choice (3 pts each);1. ____B_____ is output per hour in the business sector.;B;A. Net exports;B. Productivity;C. Investment;D. Per Capita GDP;2. A country will roughly double its GDP in twenty years if its annual growth rate is:c;A. 12 percent.;B. 7.5 percent.;C. 3.5 percent.;D. 2.5 percent.;3. When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) ____________b______ in producing that product.;A. relative advantage;B. absolute advantage;C. economy of scale;D. production efficiency;4. The idea behind comparative advantage reflects the possibility that one party: B;A. may be able to produce everything relatively more efficiently than another party.;B. may be able to produce something at a lower dollar cost than another party.;C. with an absolute advantage in producing two different may export goods both of those goods to the other party.;D. may be able to produce something at a lower opportunity cost than another party.;5. In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true? C;A. India has a comparative advantage in the production of rice.;B. China has a comparative advantage in the production of rice.;C. China has both an absolute and comparative advantage in the production of rice.;D. India has an absolute advantage in the production of rice.;6. Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:D;A. 0.25 apples, 0.5 apples.;B. 9 apples, 4 apples.;C. 0.5 apples, 0.25 apples.;D. 2 apples, 4 apples;7. Which of the following is true? D;A. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage.;B. A nation can have a comparative advantage in the production of every good, but not an absolute advantage.;C. A nation cannot have an absolute advantage in the production of every good.;D. A nation cannot have a comparative advantage in the production of every good.;8. The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower _______a_________.;A. opportunity cost;B. absolute cost;C. relative cost;D. comparative cost;9. A tariff differs from a quota in that a tariff is: D;A. levied on imports, whereas a quota is imposed on exports.;B. levied on exports, whereas a quota is imposed on imports.;C. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported.;D. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.;10. The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that: A;A. firms will be protected from subsidized foreign competition.;B. domestic producers can attain the economies of scale to allow them to compete in world markets.;C. there will be adequate supplies of crucial resources in case they are needed for national defence.;D. it will not be subjected to a takeover from a foreign competitor.;11. ______B____ means selling goods below their cost of production.;A. Protectionism;B. Dumping;C. Import quotas;D. Non-tariff barriers;12. Low-wage U.S. workers suffer from protectionism in all the industries that they don?t work in, because: D;A. protectionism provides a barrier to entry to the job markets that the low-wage earners want entry to.;B. protectionism forces them to pay higher prices for basic necessities like clothing and food.;C. protectionism will envourage foreign workers to apply for American jobs.;D. protectionism will prevent them from applying for those jobs in other industries.;13. The race to the bottom scenario of global environmental degradation is explained roughly like this: A;A. Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution.;B. Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution.;C. Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.;D. Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits.;14. People or firms use one currency to purchase another currency at the ____________C___.;A. international currency exchange;B. foreign exchange market;C. foreign currency exchange;D. international parity market;15. If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to C;A. a hard peg policy.;B. purchasing power parity.;C. depreciation.;D. a floating exchange rate.;16. For firms engaged in international lending and borrowing, _______________A_____ can have an enormous effect on profits.;A. swings in exchange rates;B. trade-offs and risks;C. foreign portfolio investment;D. foreign direct investment;17. If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then A;A. the dollar depreciated against the yen;B. the dollar appreciated against the yen;C. the yen depreciated against the dollar;D. the yen weakened against the dollar;18. If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then C;A. the U.S. dollar appreciated against the Canadian dollar;B. the Canadian dollar weakened against the Canadian dollar;C. the U.S. dollar strengthened against the Canadian dollar;D. the Canadian dollar appreciated against the U.S. dollar;19. In 2008, 1 Swiss franc cost.56 British pounds and in 2010 it cost.51 British pounds in 2010. How much would 1 British pound purchase in Swiss francs in 2008 and 2010? B;A. 2008: 1.79 francs, 2010: 1.96 francs;B. 2008: 1.78 francs, 2010: 1.98 francs;C. 2008: 1.71 francs, 2010: 2.00 francs;D. 2008: 1.73 francs, 2010: 1.97 francs;20. Which of the following is an example of a pegged currency? A;A. U.S. dollar;B. British pound;C. Euro;D. Chinese yuan;21. A stronger euro is less favorable for B;A. German tourists traveling abroad.;B. American tourists traveling in France.;C. Canadian firms selling in Germany.;D. Canadian investors with money investments in Germany.;22. If the U.S. dollar weakens, which of the following parties will benefit? C;A. countries exporting to the U.S.;B. Australian firms selling in the U.S.;C. U.S firms selling in Europe;D. Japanese investors who have money in the U.S.;23. Using the term "spillover" is a less formal means of describing A;A. an externality.;B. social costs.;C. private costs.;D. market failure.;24. Market failure describes a situation in which the market itself _______________c_______ in a way that balances social costs and benefits.;A. remains outside the transaction;B. incurs the costs outside the production process;C. fails to allocate resources efficiently;D. avoids externalities;25. Market-oriented environmental tools _______c________ for firms to take the social costs of pollution into account and _______________c_____ in reacting to these incentives.;A. draw distinctions, lower the social costs incurred;B. lack incentives, prohibit firms from having flexibility;C. create incentives, allow firms some flexibility;D. specify particular technology, lower the social costs incurred;26. The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below.;Price;Quantity Demanded;Quantity Supplied without Paying Social Costs;Quantity Supplied after Paying Social Costs;100;0;120;75;80;10;100;50;55;30;90;30;40;55;85;25;30;80;80;20;20;100;65;15;The equilibrium price and quantity when social costs are taken into account are A;A. Price = $55, Quantity = 30;B. Price = $40, Quantity = 55;C. Price = $30, Quantity = 20;D. Price = $30, Quantity = 80;27. ___________D____ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.;A. Social costs;B. Private costs;C. Market costs;D. External costs;Short Answers (19 points);3. What is comparative advantage, and why is it important in international trade? (4 points);4. Steve and Craig have been shipwrecked on a deserted island in the South Pacific. Their economic activity consists of either gathering pineapples or fishing. We know Steve can catch four fish in one hour or harvest two baskets of pineapples. In the same time Craig can reel in two fish or harvest two baskets of pineapples.;Assume Craig and Steve both operate on straight-line production possibilities curves. What is Steve's opportunity cost of producing a basket of pineapples? 0.5 fish;Of a producing a fish? 2 Pineapples;What is Craig's opportunity cost of producing a basket of pineapples? 1 fish;Of a producing a fish? (5 points) 1 pineapple;7. Identify the exchange rate that equalizes the prices of internationally traded goods across countries and briefly discuss the main functions this exchange rate serves. (3 points);10. Briefly discuss the shortcomings of environmental command-and-control regulations. (3 points);12. Briefly explain what is meant by the term "externality" and how it occurs (4 points);Externality is an effect of a purchase or use decision by one set of parties on others who did not have a choice and whose interests were not taken into account


Paper#29264 | Written in 18-Jul-2015

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