2 Under the assumption of increasing opportunity cost, if country A increases the production of commodity with comparative advantage to conduct international trade with other countries, then at what level of specialization will the production of commodity with comparative advantage in country A tend to be?
(A) Complete.
(B) Partial.
(C) Little.
(D) Zero.

1 The numbers in the table below indicate hours of labor per unit of output X and output Y of countries A and B. According to the table, if they trade based on the principle of comparative advantage, which of the followings is correct?(A) A would import X from B. (B) B would export Y to A. (C) They would not want to trade with each other. (D) More information is needed to determine the trade pattern.

3 Assuming that the production technology and domestic demand of China and the U.S. are similar, the capital/labor factor endowment ratio of the United States is 0.5, and that of China is 0.02. Compared with that in China, which of the followings about the U.S. cost of capital relative to the cost of labor is correct? (A) It is higher than that in China. (B) It is lower than that in China. (C) There is no difference between two countries. (D) These two countries cannot be compared with each other.

4 The restriction on the number of imported cars in a small country can be accomplished through tariffs or import quota. Country A currently restricts the same number of imported cars either with import tariffs or with import quota. When the country’s domestic automobile demand increases, how would the domestic automobile equilibrium price alter under the implementation of tariff and import quota, respectively? (A) Unchanged, Unchanged. (B) Increase, Decrease. (C) Unchanged, Increase. (D) Uncertain, Uncertain.

5 In to the figure below, PW stands for world price of goods and the number Q on the horizontal axis is in thousands. When the tariff is imposed, the government collects __①__ and the deadweight cost caused by the tariff equals __②__ . (A)①$50,000 ②$25,000 (B)①$60,000 ②$10,000 (C)①$10,000 ②$50,000 (D)①$220,000 ②$30,000

6 Which of the following measures is used as nontariff barriers? (A) Monetary policy conducted by the Central Bank. (B) Government procurement policies. (C) Exchange rate policy. (D) Fiscal policy.

7 According to the product life cycle model, which of the following statements regarding comparative advantage is correct? (A) Comparative advantage may move from one country where a product is invented to another as the product matures. (B) For agricultural or homogeneous industrial goods, comparative advantage is determined by the stage of the life cycle these products are in. (C) Comparative advantage always stays in the country where a product is invented no matter what stage of the life cycle it is in. (D) Comparative advantage depends upon a country’s relative endowment of skilled workers and its ability to invent.

8_______ refers to the situation in which a country’s joining in a regional trading organization leads to the reduction of its trade with nonmember countries in favor of member countries. (A) Trade diversion (B) Trade distortion (C) Trade exclusion (D) Trade creation

9 The argument that developing countries should nurture their domestic industries in their early stage by protecting them from the unfair and adverse effects of foreign competition on the domestic industry is known as_______ . (A) the escape clause hypothesis (B) institutional fair trade policy (C) preservation of the home market (D) the infant industry argument

10 If the central bank of a country does not want to see its currency rise in value compared to other currencies, it may pursue __①__ monetary policy to __②__ its domestic interest rate, thereby weakening its currency. (A)①contractionary ②lower (B)①expansionary ②raise (C)①contractionary ②raise (D)①expansionary ②lower

11 Which of the following investment strategies will help an investor to make a profit if he or she anticipates that the value of the Euro, a currency that he or she does not own, is going to fall over the next 90 days and his or her prediction turns out to be correct? (A) Buy the Euros short. (B) Sell the Euros short. (C) Sell the U.S. Dollars short. (D) Buy the Euros long. Pworld + Tariff Pworld

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