50 + Mcqs in Asymmetric Information & Trade Policies for the Developing Nations Page 1 McqOptions

1.	Which of the following strategies have developing countries not used to deal with the problem of unstable export markets ?
A.	multilateral contracts
B.	production and export controls
C.	buffer stock arrangements
D.	tariff-rates quotas
Answer» E.

Discussion

2.	Which of the following organizations primarily provides long-term loans to developing countries to help them develop their infrastructure such as schools hospitals and roads ?
A.	World Bank
B.	International Monetary Fund
C.	Council on Foreign Relations
D.	Organization of petroleum Exporting Countries
Answer» B. International Monetary Fund

Discussion

3.	Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?
A.	It must be “as seen on TV”
B.	It must be free to the signaling party
C.	It must be costly to the signaling party but less costly to the party with higher-quality product
D.	It must be applied to an inexpensive product
Answer» D. It must be applied to an inexpensive product

Discussion

4.	Which of the following is true under pairwise majority rule if people vote for the outcome closest to their most preferred outcome ?
A.	The average preferred outcome wins
B.	There is no clear winner due to Arrow’s Impossibility Theorem.
C.	The outcome preferred by the median voter wins
D.	The outcome preferred by the greatest number of voters wins.
Answer» D. The outcome preferred by the greatest number of voters wins.

Discussion

5.	Which of the following is not true about how people make decisions ?
A.	people give too much weight to a small number of vivid observations
B.	People are sometimes too sure of their own abilities
C.	All of these answers are actually true statements about how people make decisions.
D.	People are always rational maximizers
E.	People are reluctant to change their minds in the face of new information
Answer» E. People are reluctant to change their minds in the face of new information

Discussion

6.	Which of the following is not a method firms use to avoid the moral hazard problem in the employment relationship ?
A.	They pay employees with delayed compensation such as a year-end bonus
B.	They buy life insurance on their workers
C.	They pay above equilibrium wages
D.	They put hidden video cameras in the workplace
Answer» C. They pay above equilibrium wages

Discussion

7.	Which of the following is an example of a signal that is used to reveal private information ?
A.	Enzo carefully chooses a special gift for Josephine
B.	Josephine earns her MBA from the Harvard Business School
C.	Lexus advertises its cars during the football World Cup Final.
D.	All of these answers are correct
Answer» E.

Discussion

8.	Which of the following is a response to People’s inconsistent behavior over time ?
A.	all of these answers
B.	forced contributions to a retirement plan
C.	year-end bonuses
D.	efficiency wages
Answer» C. year-end bonuses

Discussion

9.	Which of the following help explain why firms pay bonuses to workers during particularly profitable years to prevent workers from becoming disgruntled ?
A.	people are rational maximizers
B.	People are reluctant to change their minds
C.	People are inconsistent over time
D.	People care about fairness
Answer» E.

Discussion

10.	Which of the following best demonstrates the problem of moral hazard ?
A.	Josephine doesn’t buy health insurance because it is too expensive, and she is healthy
B.	A life insurance company forces Enzo to have a medical examination prior to selling him insurance
C.	Enzo drives more recklessly after he buys car insurance
D.	Fatima chooses to attend a well-respected college
Answer» D. Fatima chooses to attend a well-respected college

Discussion

11.	Which industrialization policy have developing countries used which places emphasis on the comparative advantage principle as a guide to resource allocation ?
A.	export promotion
B.	import promotion
C.	international commodity agreements
D.	multilateral contracts
Answer» B. import promotion

Discussion

12.	To stabilize the prices of primary products international commodity agreements have utilized all of the following except ?
A.	tariff-rate quotas applied to imported goods
B.	production and export controls
C.	buffer stocks
D.	multilateral contracts
Answer» B. production and export controls

Discussion

13.	To help developing nations strengthen their international competitiveness many industrial nations have granted non-reciprocal tariff reductions to developing nations under the ?
A.	international commodity agreements program
B.	multilateral contract program
C.	generalized system of preferences program
D.	export-led growth program
Answer» D. export-led growth program

Discussion

14.	To be considered a good candidate for export cartel, a commodity should ?
A.	be a manufactured good
B.	be a primary product
C.	have a low price elasticity of supply
D.	have a high price elasticity of demand
Answer» D. have a high price elasticity of demand

Discussion

15.	To be considered a a good candidate for an export cartel, a commodity should ?
A.	be a manufactured goods
B.	be a primary product
C.	have high price elasticity of supply
D.	have a low price elasticity of demand
Answer» E.

Discussion

16.	The People’s Republic of China ?
A.	is the first of the East Asian countries to be recognized for a successful outward-oriented development strategy
B.	has retained to the present time its strategy of import substitution as a source of economic growth
C.	has always accounted for a significant share of international trade, given its very large population
D.	has significantly increased its openness to international trade and foreign investment in recent decades
Answer» E.

Discussion

17.	The pattern of economic growth describes the phenomenon of countries moving up in technological development by following the patterns of countries ahead of them in the development process ?
A.	flying geese
B.	import substitution
C.	export orientation
D.	commodity expansion
Answer» B. import substitution

Discussion

18.	The OPEC oil cartel ?
A.	has shown that is easy to achieve cooperation among cartel members
B.	was successful in raising oil prices in the 1970s but was disbanded in the 1980s
C.	has shown greater success in realizing profits during periods of global recession
D.	has had a level of success in raising oil prices that other developing countries are unlikely to achieve with other primary commodities
Answer» E.

Discussion

19.	The Generalized System of Preferences (GSP) program allows ?
A.	developing country export to advanced countries to receive preferential tariff treatment
B.	developing country imports from advanced countries to receive preferential tariff treatment
C.	any developing country to ignore the most-favored nation clause
D.	any advanced country to ignore the most favored-nation clause
Answer» B. developing country imports from advanced countries to receive preferential tariff treatment

Discussion

20.	The arrangement where goods imported from trading partners in the developing world are subject to lower tariff rates than goods from other countries is referred to as ?
A.	normal trade relation status
B.	most favored nation status
C.	offshore assembly provisions
D.	Generalized System of Preferences
Answer» E.

Discussion

21.	Refer to Figure 1 What percent of the population vote for A when the choice is between A and B ?
A.	75 percent
B.	35 percent
C.	60 percent
D.	40 percent
E.	25 percent
Answer» D. 40 percent

Discussion

22.	Poor developing countries typically impose __________ tariffs than rich advanced nations on imports?
A.	lower
B.	higher
C.	about the same height
D.	None of the above
Answer» C. about the same height

Discussion

23.	_________ policies attempt to foster industrialization by establishing high barriers to imports of foreign goods to promote local production ?
A.	absolute advantage
B.	comparative advantage
C.	export-led growth
D.	import substitution
Answer» E.

Discussion

24.	Nicole wants to avoid buying a car that is a lemon. She takes a car she would like to buy to her mechanic before she purchases it. This is known as ?
A.	screening
B.	signaling
C.	moral hazard
D.	adverse selection
Answer» B. signaling

Discussion

25.	Most of developing-country exports consist of ?
A.	primary products such as tin and bauxite
B.	intermediate products
C.	labor-intensive agricultural products
D.	labor-intensive manufacturing products
Answer» B. intermediate products

Discussion

26.	Membership in the World Trade Organization for china ?
A.	has been a matter of low priority for the Chinese government
B.	was achieved in the early 1950s
C.	has been opposed by a number of labor and human rights organizations in other countries
D.	has had negligible effect on trade between china and the United States
Answer» D. has had negligible effect on trade between china and the United States

Discussion

27.	Markus is a travelling salesman for an apparel company. In this employment relationship, Markus is the ?
A.	agent
B.	principle
C.	screener
D.	signaler
Answer» B. principle

Discussion

28.	Jamil’s friend dies of a sudden heart attack. Jamil rushes to his doctor for an expensive physical examination. This response demonstrates that ?
A.	People give too much weight to a small number of vivid observations
B.	People easily change their minds when confronted with new information
C.	People enjoy going to the doctor
D.	People tend to plan ahead and follow through on their plans
Answer» B. People easily change their minds when confronted with new information

Discussion

29.	Jamil’s car is in need of repair, so John decides to sell it avoid the repair bill. Unaware of the problem, Shahab buys the car. This is an example of ?
A.	hidden actions
B.	adverse selection
C.	moral hazard
D.	adverse selection
Answer» B. adverse selection

Discussion

30.	Instead, assume that global economic expansion causes the quantity of tin demanded to increase by 4 million pounds at each price To maintain price of tin at the target price you would ?
A.	sell 4 million pounds of tin
B.	sell 8 million pounds of tin
C.	buy 4 million pounds of tin
D.	buy 8 million pounds of tin
Answer» B. sell 8 million pounds of tin

Discussion

31.	In the ultimatum game, what split would be rational for both the person proposing the split and the person who must accept or reject the split ?
A.	There is no rational solution
B.	75/25
C.	99/1
D.	1/99
E.	50/50
Answer» D. 1/99

Discussion

32.	In the Px = export price index, Pm = import price index, Qx = export quantity index,and Qm = import quantity index. Developing countries tend to maintain that their commodity term of trade have declined over the long run suggesting that _________ has declined?
A.	Px/Pm
B.	Pm/Px
C.	(Pm/Px)Qm
D.	(Px/Pm)Qx
Answer» B. Pm/Px

Discussion

33.	Import substitution is an example of ?
A.	the principle of comparative advantage
B.	the principle of absolute advantage
C.	an outward-looking growth strategy
D.	an inward-looking growth strategy
Answer» E.

Discussion

34.	Hong Kong and South Korea are examples of developing nations that have recently pursued ________ industrialization policies?
A.	import substitution
B.	export promotion
C.	commercial dumping
D.	multilateral contract
Answer» C. commercial dumping

Discussion

35.	hich of the following is not a property required of a perfect voting system ?
A.	The median voter always wins
B.	no dictators
C.	independence of irrelevant
D.	transitivity
Answer» B. no dictators

Discussion

36.	For the oil-importing countries, the increase in oil prices in 1970s and early 2000s contributed to all of the following except ?
A.	balance of trade deficits
B.	price inflation
C.	constrained economic growth
D.	improving terms of trade
Answer» E.

Discussion

37.	Export-led growth strategies tend to emphasize ?
A.	resource allocation based on the principle of absolute advantage
B.	resource allocation based on the principle of comparative advantage
C.	trade protection for import-competing firms
D.	trade protection for exporting-competing firms
Answer» C. trade protection for import-competing firms

Discussion

38.	Economic growth occurs because ?
A.	labor forces increase
B.	capital stocks increase
C.	new inventions increase productivity
D.	All of the above
Answer» E.

Discussion

39.	Developing countries that concentrate production in agricultural products or raw materials may face a long-run decline in their international terms of trade because of ?
A.	inelastic demand for these products in advanced countries
B.	large increases in the supplies of these products on world markets because of export expansion policies
C.	sluggish demand for these products in advanced countries
D.	All of the above
Answer» E.

Discussion

40.	Developing countries that emphasize the production of raw materials or agricultural goods may realize a long-run deterioration in the international terms of trade because of ?
A.	relatively low import tariffs maintained by advanced countries
B.	highly elastic demand for these products in advanced countries
C.	declines in the supplies of these products on world markets
D.	sluggish demand for these products in advanced countries
Answer» E.

Discussion

41.	Concerning the hypothesis that there has occurred a long run deterioration in the developing countries terms of trade empirical studies provide ?
A.	mixed evidence that does not substantiate the deterioration hypothesis
B.	overwhelming support for the deterioration hypothesis
C.	overwhelming opposition to the deterioration hypothesis
D.	None of the above
Answer» B. overwhelming support for the deterioration hypothesis

Discussion

42.	Concerning tariff policy, the United States does not charge?
A.	lower tariff rates on goods from nations with normal trade relation status
B.	lower tariff rates on goods from nations with most favored nation status
C.	low or zero tariffs on goods from certain developing countries
D.	identical tariff rates in products from all countries of the world
Answer» E.

Discussion

43.	Because supply and demand conditions for primary products are very price inelastic their prices ?
A.	have been steadily rising in recent decades
B.	have been more stable than the prices of manufactured goods
C.	fluctuate about as much as the prices of manufactured goods
D.	tend to be very unstable from year to year
Answer» E.

Discussion

44.	Assume that global recession causes the quantity of tin demanded to decrease by 4 million pounds at each price To maintain the price of tin at the target price you would ?
A.	sell 4 million pounds of tin
B.	sell 8 million pounds of tin
C.	buy 4 million pounds of tin
D.	buy 8 million pounds of tin
Answer» D. buy 8 million pounds of tin

Discussion

45.	Assume That the firms operate as purely competitive sellers (a purely competitive industry) In the long run, equilibrium price equals _________ quantity equals _________ and profits total _________?
A.	$100, 2 million barrels per day $60 million
B.	$80, 4 million barrels per day $70 million
C.	$60, 6 million barrels per day, $20 million
D.	$40, 8 million barrels per day, $0 million
Answer» E.

Discussion

46.	An export quota agreement to stabilize the price of bauxite tends to be more successful when the member producer countries as a percentage of the world’s producer countries is __________ and the _________ it is for the member producer countries to store/stock pile bauxite?
A.	relatively small; more difficult
B.	relatively small; easier
C.	relatively large; more difficult
D.	relatively large; easier
Answer» E.

Discussion

47.	Among the institutions and policies that have been created to support developing countries are?
A.	the world Bank
B.	the international Monetary Fund
C.	The Generalized System of Preferences
D.	All of the above
Answer» E.

Discussion

48.	All of the following are trade problems of developing countries except?
A.	unstable export markets
B.	improving terms of trade
C.	limited access to the markets of industrial countries
D.	highly elastic demand curves for their products
Answer» C. limited access to the markets of industrial countries

Discussion

49.	A widely used indicator to differentiate developed countries from developing countries is ?
A.	international trade per capita
B.	real income per capital
C.	unemployment per capita
D.	calories per capita
Answer» C. unemployment per capita

Discussion

50.	A life insurance company forces Enzo to have a medical examination prior to selling him insurance ?
A.	transitivity
B.	impossibility
C.	independence
D.	unanimity
Answer» B. impossibility

Discussion

Explore topic-wise MCQs in Economics.

Which of the following strategies have developing countries not used to deal with the problem of unstable export markets ?

Which of the following organizations primarily provides long-term loans to developing countries to help them develop their infrastructure such as schools hospitals and roads ?

Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?

Which of the following is true under pairwise majority rule if people vote for the outcome closest to their most preferred outcome ?

Which of the following is not true about how people make decisions ?

Which of the following is not a method firms use to avoid the moral hazard problem in the employment relationship ?

Which of the following is an example of a signal that is used to reveal private information ?

Which of the following is a response to People’s inconsistent behavior over time ?

Which of the following help explain why firms pay bonuses to workers during particularly profitable years to prevent workers from becoming disgruntled ?

Which of the following best demonstrates the problem of moral hazard ?

Which industrialization policy have developing countries used which places emphasis on the comparative advantage principle as a guide to resource allocation ?

To stabilize the prices of primary products international commodity agreements have utilized all of the following except ?

To help developing nations strengthen their international competitiveness many industrial nations have granted non-reciprocal tariff reductions to developing nations under the ?

To be considered a good candidate for export cartel, a commodity should ?

To be considered a a good candidate for an export cartel, a commodity should ?

The People’s Republic of China ?

The pattern of economic growth describes the phenomenon of countries moving up in technological development by following the patterns of countries ahead of them in the development process ?

The OPEC oil cartel ?

The Generalized System of Preferences (GSP) program allows ?

The arrangement where goods imported from trading partners in the developing world are subject to lower tariff rates than goods from other countries is referred to as ?

Refer to Figure 1 What percent of the population vote for A when the choice is between A and B ?

Poor developing countries typically impose __________ tariffs than rich advanced nations on imports?

_________ policies attempt to foster industrialization by establishing high barriers to imports of foreign goods to promote local production ?

Nicole wants to avoid buying a car that is a lemon. She takes a car she would like to buy to her mechanic before she purchases it. This is known as ?

Most of developing-country exports consist of ?

Membership in the World Trade Organization for china ?

Markus is a travelling salesman for an apparel company. In this employment relationship, Markus is the ?

Jamil’s friend dies of a sudden heart attack. Jamil rushes to his doctor for an expensive physical examination. This response demonstrates that ?

Jamil’s car is in need of repair, so John decides to sell it avoid the repair bill. Unaware of the problem, Shahab buys the car. This is an example of ?

Instead, assume that global economic expansion causes the quantity of tin demanded to increase by 4 million pounds at each price To maintain price of tin at the target price you would ?

In the ultimatum game, what split would be rational for both the person proposing the split and the person who must accept or reject the split ?

In the Px = export price index, Pm = import price index, Qx = export quantity index,and Qm = import quantity index. Developing countries tend to maintain that their commodity term of trade have declined over the long run suggesting that _________ has declined?

Import substitution is an example of ?

Hong Kong and South Korea are examples of developing nations that have recently pursued ________ industrialization policies?

hich of the following is not a property required of a perfect voting system ?

For the oil-importing countries, the increase in oil prices in 1970s and early 2000s contributed to all of the following except ?

Export-led growth strategies tend to emphasize ?

Economic growth occurs because ?

Developing countries that concentrate production in agricultural products or raw materials may face a long-run decline in their international terms of trade because of ?

Developing countries that emphasize the production of raw materials or agricultural goods may realize a long-run deterioration in the international terms of trade because of ?

Concerning the hypothesis that there has occurred a long run deterioration in the developing countries terms of trade empirical studies provide ?

Concerning tariff policy, the United States does not charge?

Because supply and demand conditions for primary products are very price inelastic their prices ?

Assume that global recession causes the quantity of tin demanded to decrease by 4 million pounds at each price To maintain the price of tin at the target price you would ?

Assume That the firms operate as purely competitive sellers (a purely competitive industry) In the long run, equilibrium price equals _________ quantity equals _________ and profits total _________?

An export quota agreement to stabilize the price of bauxite tends to be more successful when the member producer countries as a percentage of the world’s producer countries is __________ and the _________ it is for the member producer countries to store/stock pile bauxite?

Among the institutions and policies that have been created to support developing countries are?

All of the following are trade problems of developing countries except?

A widely used indicator to differentiate developed countries from developing countries is ?

A life insurance company forces Enzo to have a medical examination prior to selling him insurance ?

Assume That the firms operate as purely competitive sellers (a purely competitive industry) In the long run, equilibrium price equals _____ quantity equals _ and profits total _____?

An export quota agreement to stabilize the price of bauxite tends to be more successful when the member producer countries as a percentage of the world’s producer countries is __ and the _ it is for the member producer countries to store/stock pile bauxite?