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2. Beta can produce either ten apples or three oranges. Cama can produce either twelve apples or three oranges. Which of the following is true?

2. Beta can produce either ten apples or three oranges. Cama can produce either twelve apples or three oranges. Which of the following is true?
1. Beta has an absolute advantage in the production of apples.
2. Cama has an absolute advantage in the production of oranges.
3. Cama has an absolute advantage in the production of apples.
4. Cama has a comparative advantage in the production of oranges.

3. According to modern theory, it is beneficial for a country to trade a good with another country if one country has a(n) in the production of that good.
1. comparative advantage
2. absolute advantage
3. financial advantage
4. opportunity cost

4. A country has an absolute advantage when it can
1. produce more of a product than another country
2. produce a lot of different economic products
3. produce a good at a higher dollar cost than another country
4. produce a good at a lower opportunity cost than another country

5. Specialization promotes efficiency of the world economy by
1. allowing nations to only produce the goods they produce efficiently
2. bringing absolute advantage to all nations
3. increasing the availability of natural resources
4. making sure the exports and imports of all countries are the same

6. An import is
1. a good or service that is sent to a foreign country
2. an example of profitable trade
3. a good or service that is brought from a foreign country
4. an example of a production deficiency

7. A tax placed on an import is a
1. quota
2. opportunity cost
3. ration
4. tariff

8. The Hawley-Smoot Tariff is an example of
1. free trade
2. protectionism
3. dumping
4. infant industry

9. Many economists argue that global free trade will
1. promote economic efficiency
2. cause economic problems
3. result in the United States becoming poor
4. create protectionism

10. The argument is based on the belief that new industries are fragile and need to be protected from foreign competition.
1. dumping
2. national security
3. quota
4. infant industry

11. During his administration, President George W. Bush believed that
1. participating in the world economy makes the U.S. economy stronger
2. foreign trade is not very important in the U.S. economy
3. free trade agreements are not necessary
4. increasing trade restrictions is important to all U.S. industries

12. NAFTA instituted a free trade policy between
1. all world nations
2. Europe and Asia
3. Canada, Mexico, and the United States
4. Europe and Africa

13. The is the price of a nation’s currency relative to another nation’s currency.
1. foreign exchange rate
2. floating exchange rate
3. fixed exchange rate
4. interest rate

14. A country experiences a when the value of imports exceeds the value of exports.
1. balance of trade
2. balance of payments
3. trade surplus
4. trade deficit

15. A(n) is determined by the supply and demand of that currency.
1. fixed exchange rate
2. floating exchange rate
3. balance of trade
4. interest rate

16. The International Monetary Fund was created in 1944 in order to
1. manage the international monetary system of fixed exchange rates
2. determine the floating exchange rates
3. fix all interest rates
4. create comparative advantage

17. A dollar is able to purchase less foreign currency than a dollar.
1. weak, strong
2. global, non-global
3. strong, weak
4. balanced, imbalanced

18. Globalization is the term used to describe the emergence of a fragmented and divisive isolationist world view.
1. true
2. false

Desiree’s pet care company, Doggone Gorgeous, is an exclusive salon that has shops in Paris, Milan, New York, and San Francisco. Desiree’s business concept is unique because she does not accept currency; she accepts autographed photos of her famous clients with their dogs as payment. She has convinced several upscale shopkeepers to barter with the photos and assigns value to each photo based on the net worth of the person in the photo. She turns a tidy profit in all four locations by collecting and exchanging these famous client photos.

Answer the following questions about Desiree’s business:

19. Doggone Gorgeous is a multinational company.
1. true
2. false

20. The signed photographs of clients and their dogs constitute money.
1. true
2. false

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