1) Which concept provides the economic reason for nations to specialize in what they produce? a) resource equality b) self-sufficiency c) physical capital d) scarcity 2) Absolute advantage is based on the ability to produce a good with a) the greatest efficiency. b) the highest opportunity cost. c) the highest price. d) the most resources. 3) How do producers identify a good in which they have a comparative advantage? a) It is a good that uses the most resources to produce. b) It is a good that most promotes interdependence. c) It is a good most suited to the skills and knowledge of the labor force. d) It is a good in which a producer has the lowest opportunity cost compared to other producers. 4) Which of the following goods should a country import? a) a product in which it has a comparative advantage b) a good produced at a lower opportunity cost at home c) a raw material that costs less to import than to extract d) a raw material that is basic to production of other imported goods 5) What effect would expansion of Japanese auto production probably have on U.S. auto production? a) an increase in jobs due to increased competition b) a loss of jobs due to increased supply c) no change because the production is in a foreign country d) a need to retrain workers in an entire industry 6) Which is an example of how trade barriers can affect you as an American consumer? a) A trade barrier increases the price of foreign goods Americans buy. b) A trade barrier makes it impossible for Americans to buy foreign goods. c) A trade barrier gives American consumers greater access to foreign goods. d) A trade barrier keeps the prices of foreign goods the same as the prices of American goods. 7) If you lived across from Mexico, in El Paso, TX, what objection might you have to NAFTA? a) The agreement would lead to a common currency. b) Trade between the U.S. and Canada would decrease. c) Too many companies would move to the United States. d) Pollution from less-regulated factories in Mexico could cross the border. 8) Which is an advantage of international trade agreements? a) Trade agreements place limits on imports. b) Trade agreements place limits on exports. c) Trade agreements increase consumer choice. d) Trade agreements create fixed prices for goods. 9) Which is a cost of participating in free trade agreements? a) Trade wars may result. b) Multinationals may lose business. c) Health and safety laws may increase. d) Domestic products may not be able to compete with imported goods. 10) Who owns multinational corporations? a) entrepreneurs b) shareholders c) American companies d) foreign companies 11) What is an exchange rate? a) The amount that a country's currency has appreciated. b) The value of one nation's currency in relation to another nation's currency. c) The relationship between the value of a nation's exports and the value of its imports. d) The present value of a country's currency in relation to its past value. 12) Why is a single currency beneficial for trade purposes? a) It helps nations maintain a positive balance of trade. b) It allows nations to trade on the foreign exchange market. c) It allows nations to trade without using an exchange rate. d) It gives nations the option to use a flexible exchange-rate system. 13) How might the owner of a store selling imported food react to a rise in the value of the U.S. dollar? a) The owner would be upset because prices on what she sells would fall, increasing sales. b) The owner would be pleased because prices on what she sells would fall, increasing sales. c) The owner would be upset because prices on what she sells would rise, decreasing sales. d) The owner would be pleased because prices on what she sells would rise, increasing sales. 14) How do you think a nation's balance of trade might be affected if its government instituted policies to support science education and give tax breaks to high-tech industries? a) These policies would make the nation's high-tech products more competitive and decrease trade deficits or increase trade surpluses. b) These policies would make the nation's high-tech products more competitive and increase trade deficits or decrease trade surpluses. c) These policies would make the nation's high-tech products more competitive and equalize the balance of trade. d) These policies would make the nation's high-tech products less competitive and increase trade deficits or decrease trade surpluses. 15) What is the effect of the decrease in demand for U.S. exports on the trade deficit? a) It has had no impact on the trade deficit. b) It has eliminated the trade imbalance c) It has contributed to a positive balance of trade. d) It has contributed to a negative balance of trade. 16) Which of the following BEST describes economic development? a) a process through which a nation improves its people's well-being b) a process through which a nation achieves full employment c) a process through which a nation reduces energy consumption d) a process through which a nation achieves a per capita GDP that meets basic needs 17) Which of the following distinguishes newly industrialized countries (NICs) from other LDCs? a) NICs are less developed than other LDCs. b) NICs have lower per capita GDP than most LDCs. c) NICs rely more on subsistence agriculture than most LDCs. d) NICs consume a greater amount of energy than most LDCs. 18) Why is per capita GDP a good tool for measuring different countries' relative levels of development? a) It provides a direct measure of a country's level of specialization b) It provides a direct measure of a country's level of consumption. c) It provides an average of the GDP across a whole population d) It provides the total value of all goods and services produced in a year. 19) A nation with high energy consumption MOST LIKELY has a) a low literacy rate. b) a high level of specialization. c) a lack of solid infrastructure. d) a poor quality of life. 20) Why does the consumption of a large amount of nonessential goods indicate a high level of development? a) It suggests that the people rely on subsistence agriculture for most of their goods b) It suggests that the people have more than enough income to meet their basic needs. c) It suggests that the country has lowered its infant mortality rate to near zero. d) It suggests that the country has raised its literacy rate above that of its neighbors. 21) Which of the following is TRUE of most LDCs, in comparison to developed countries? a) They have higher literacy rates. b) They have lower infant mortality rates. c) Women have much higher literacy rates than men. d) Children are much less likely to receive a full primary education. 22) If a farmer in a LDC cannot afford to purchase a tractor or a mechanized harvester, he or she lacks a) the natural resources to make the land fertile. b) the nutrition to make workers more productive. c) the physical capital to increase farm output. d) the human capital that can take advantage of technology. 23) Why did colonialism slow the development of many LDCs? a) Their dependency on European powers prevented the development of industry. b) Their low graduation rates prevented development of skilled laborers. c) Their lack of natural resources prevented proper farming and irrigation. d) Their lack of employment opportunities prevented the transition to free enterprise 24) Why does the infant mortality rate relate to a country's level of development? a) It is a predictor of the adult literacy rate. b) It is a indicator of the percentage of students in primary school. c) It is an indicator of employment opportunities. d) It is an indicator of nutrition and healthcare. 25) Capital that originates in other countries is called a) internal financing. b) foreign investment. c) debt rescheduling. d) foreign aid. 26) What problems are likely to be caused by privatization of business? a) loss of work incentives b) displacement of workers c) loss of foreign investment and trade d) loss of economic innovation 27) What change did Mikhail Gorbachev make to the Soviet Union's economy? a) He incorporated elements of a free market economy within a communist structure. b) He brought back old-style communism with a centrally planned government. c) He lifted price controls in 1992, which caused prices to triple. d) He allowed drilling of Russia's oil reserves, which led to increased trade. 28) What change led China to huge economic growth? a) establishing political liberty b) adopting free market policies c) establishing itself as a major oil exporter d) closing free market centers 29) Describe one effect that diversifying their economies has had on Brazil and Mexico. a) Subsistence agriculture is now dominant in both countries. b) They have a huge variation in the crops they grow. c) The majority of their labor force no longer farms. d) They have become major oil exporters. 30) Which of the following is the BEST example of an effect of globalization? a) A high speed train carries passengers from New York City to Washington, D.C. in just three hours. b) The owner of an auto shop in California orders parts from a supplier in Florida on a mobile phone. c) A gardener in Iowa discovers that the manual for her new tiller has directions written in five languages. d) An Asian American takes over the position of chief executive officer at a firm headquartered in Oklahoma 31) Why did a crisis caused by risky loans in the United States lead to a worldwide recession? a) the interconnectedness of the world's financial markets b) the speed with which the news traveled to Europe and Asia c) the openness of new free market economies to foreign investment d) the rapid expansion of remittances withdrawn from U.S. banks 32) Why, according to critics, do multinational corporations fail to bring many jobs to the less developed countries in which they operate? a) The goal of multinationals is to make high-quality products. b) The cost of paying wages would cut too deeply into profits c) The best jobs go to managers in the home office. d) The majority of tasks are done by machines, not workers. 33) To succeed, sustainable development requires the participation of a) the governments of LDCs. b) the World Trade Organization. c) NGOs. d) the World Bank. 34) What must American workers do to ensure that the United States remains "the world's most successful economy"? a) find jobs that do not require a college education b) change occupations in order to earn higher wages c) remain productive by keeping their skills up-to-date d) demand wages that meet the standard for their industry

econ 10

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