Question

63.

Which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

	A.	Working conditions, although often less pleasant than in developed nations, are generally improved with foreign investment.
	B.	Foreign companies tend to reduce the overall number of jobs available in developing countries.
	C.	Wages offered by foreign companies are generally higher than wages offered by local companies.
	D.	Foreign companies generally pay lower wages in developing countries than they do back home.

64.

Which of these typically occurs when a new tariff is imposed on the import of foreign-made steel as a result of a national defense argument?

	A.	Consumers will pay higher prices while deadweight loss is reduced.
	B.	Consumers will pay lower prices while deadweight loss is created.
	C.	Consumers will pay higher prices while deadweight loss is created.
	D.	Consumers will pay lower prices while deadweight loss is reduced.

65.

Which statement is not a common argument against free trade?

	A.	It causes prices of imported goods to rise.
	B.	It causes environmental damage due to fewer regulations abroad.
	C.	It causes jobs to be lost to foreign competition.
	D.	It prevents infant industries from becoming competitive in world markets.

66.

Assume the market for ball bearings is perfectly competitive. Currently, each of the firms in this market is making a positive level of economic profits. In the long run, we can expect the market

		supply to decrease
		demand to increase
		supply to increase
		demand to decrease

67.

Deadweight loss measures the inefficiency as the loss of

		consumer surplus minus producer surplus.
		consumer surplus plus producer surplus.
		producer surplus only.
		consumer surplus only.

Answer 1

63) Ans: (B) Foreign companies tend to reduce the overall number of jobs available in developing countries.

The motive of foreign company is not to reduce the jobs. Rather their motive is to make more profit. The wages that they provide to the workers in the developing nations is much lower than what they would have to pay in their own developed nation. As such the cost of the product on them reduces largely. Thus they are able to make more profit and also they win on the competition since they are able to sell products at a cheaper price due to the cost cutting they received on labor. This further increases their profit.

In order to retain the workers, they pay them on time. They are employing the people and paying them. So, jobs is not reduced, rather it is increased.

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