Question 1

Which of the following best describes the concept of comparative advantage?

Accepted Answer

The ability to produce a good or service at a lower opportunity cost than competitors.

Question 2

Suppose the U.S. eliminates all tariffs on imported steel, but other countries keep their tariffs on U.S. exports. According to most economists, what is the likely outcome for the U.S. economy?

Accepted Answer

The U.S. economy would gain overall, even if other countries do not reduce their tariffs.

Question 3

A country that does not trade with other countries is said to be in:

Accepted Answer

Autarky

Question 4

If 6 workers can produce 15 tables a day and 7 workers can produce 17 tables a day, what is the marginal product of the 7th worker?

Accepted Answer

$$2$$

Question 5

Which of the following is NOT a reason why countries do not completely specialize in the production of one good, even if they have a comparative advantage?

Accepted Answer

Absolute advantage prevents complete specialization.

Question 6

A tariff imposed on imported goods will generally:

Accepted Answer

Make domestic consumers worse off.

Question 7

Which of the following best explains why the marginal cost curve is U-shaped?

Accepted Answer

Initially, the marginal product of labor rises, then falls.

Question 8

If a firm produces 30 units of output and incurs a total cost of $$900 and an average fixed cost of 20$$, what is the firm's average variable cost at this output?

Accepted Answer

$$10$$

Question 9

Which of the following is a form of protectionism?

Accepted Answer

Quotas

Question 10

In the long run, which of the following is true?

Accepted Answer

There are no fixed costs.

Question 11

Which of the following is an example of positive technological change?

Accepted Answer

A manager rearranges the factory floor and increases output with the same inputs.

Question 12

The law of diminishing returns states that:

Accepted Answer

Adding more of a variable input to the same amount of a fixed input will cause the marginal product of the variable input to decline.

Question 13

Which of the following best describes economies of scale?

Accepted Answer

Long-run average costs fall as output increases.

Question 14

A quota on imports will generally:

Accepted Answer

Make domestic producers better off.

Question 15

Which of the following is the correct formula for average total cost (ATC)?

Accepted Answer

$$ATC = AFC + AVC$$

Question 16

Suppose the 'Buy American' provision in a stimulus package acts as a quota of zero imports for steel. In the U.S. steel market, this would:

Accepted Answer

Increase the price of steel and decrease the quantity demanded.

Question 17

Which of the following is a reason why some people support protectionism, despite economists' criticisms?

Accepted Answer

Supporters believe that wages will fall and jobs will be lost due to competition with firms from developing countries.

Question 18

Which of the following best describes the main purpose of most tariffs and quotas?

Accepted Answer

To reduce the foreign competition that domestic firms face.

Question 19

If the marginal product of labor is negative, what does this imply about hiring additional workers?

Accepted Answer

Hiring additional workers decreases total output.

Question 20

Which of the following is true about the relationship between the marginal cost (MC) curve and the average total cost (ATC) curve?

Accepted Answer

The MC curve cuts through the minimum point of the ATC curve.

International Trade and Production Costs: Microeconomics Exam Review

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