INO1 Economics Exam – Answer Key

1. Which action does Country A take when it limits beer imports?

• ✔ Imposing a quota
• Imposing a tariff
• Providing an export subsidy
• Dumping

2. What is a benefit of specialization?

• Decrease in demand for goods
• Decline in short-run average cost
• Decline in political disagreements
• ✔ Decrease in prices for consumer goods

3. Comparative advantage in coffee means:

• Country B has absolute advantage
• Country A has absolute advantage
• Country B cannot produce coffee
• ✔ Country A produces at lower opportunity cost

4. What is a protective tariff?

• ✔ Protective
• Compound
• Tariff quota
• Ad valorem

5. Annual import limit on bananas is:

• Tariff quota
• Compound tariff
• ✔ Absolute quota
• Ad valorem tariff

6. Effect of increasing tariffs on coffee:

• ✔ Imports ↓ Production ↑
• Both ↓
• Both ↑
• Imports ↑ Production ↓

7. Result of rent control:

• ✔ Shortage of rental units
• Surplus
• Increase allocative efficiency
• Decrease allocative price

8. Components of M1 money supply:

• Government bonds
• ✔ Cash, demand deposits, traveler’s checks
• Savings deposits
• Credit cards

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