Question 1

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

Accepted Answer

A) the country will be an exporter of the good. 
B) the country will be an importer of the good. 
C) the country will be neither an exporter nor an importer of the good. 
D) Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither. 
A) the country will be an exporter of the good. 
B) the country will be an importer of the good. 
C) the country will be neither an exporter nor an importer of the good. 
D) Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

Question 2

A common argument in favor of restricting international trade in good x is based on the premise that

Accepted Answer

A) international trade reduces total surplus in countries that export good x. 
B) international trade reduces total surplus in countries that import good x. 
C) international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another. 
D) trade restrictions can be useful when one country bargains with its trading partners. 
A) international trade reduces total surplus in countries that export good x. 
B) international trade reduces total surplus in countries that import good x. 
C) international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another. 
D) trade restrictions can be useful when one country bargains with its trading partners.

Question 3

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

Accepted Answer

A) True 
 B)False

Question 4

The North American Free Trade Agreement

Accepted Answer

A) is an example of the unilateral approach to free trade. 
B) eliminated tariffs on imports to North America from the rest of the world. 
C) reduced trade restrictions among Canada, Mexico and the United States. 
D) All of the above are correct. 
A) is an example of the unilateral approach to free trade. 
B) eliminated tariffs on imports to North America from the rest of the world. 
C) reduced trade restrictions among Canada, Mexico and the United States. 
D) All of the above are correct.

Question 5

Scenario 9-2
• For a small country called Boxland, the equation of the domestic demand curve for
cardboard is   ,
where   represents the domestic quantity of cardboard demanded, in tons, and   represents the price of a ton of cardboard.
• For Boxland, the equation of the domestic supply curve for cardboard is   ,
where   represents the domestic quantity of cardboard supplied, in tons, and   again
represents the price of a ton of cardboard.
-Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard

Accepted Answer

A) benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00. 
B) benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50. 
C) benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50. 
D) harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00. 
A) benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00. 
B) benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50. 
C) benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50. 
D) harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.

Question 6

Figure 9-22
The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit.  
-Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. Relative to the free-trade outcome, the imposition of the tariff

Accepted Answer

A) decreases imports of the good by 300 units and increases domestic production of the good by 300 units. 
B) decreases imports of the good by 300 units and increases domestic production of the good by 600 units. 
C) decreases imports of the good by 600 units and increases domestic production of the good by 300 units. 
D) decreases imports of the good by 600 units and increases domestic production of the good by 600 units. 
A) decreases imports of the good by 300 units and increases domestic production of the good by 300 units. 
B) decreases imports of the good by 300 units and increases domestic production of the good by 600 units. 
C) decreases imports of the good by 600 units and increases domestic production of the good by 300 units. 
D) decreases imports of the good by 600 units and increases domestic production of the good by 600 units.

Question 7

Figure 9-12  
-Refer to Figure 9-12. With trade allowed, this country

Accepted Answer

A) exports 400 units of the good. 
B) exports 800 units of the good. 
C) imports 400 units of the good. 
D) exports 1,600 units of the good. 
A) exports 400 units of the good. 
B) exports 800 units of the good. 
C) imports 400 units of the good. 
D) exports 1,600 units of the good.

Question 8

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Accepted Answer

A) in increase in exports of low-priced goods from developing countries to developed countries. 
B) the replacement of manufacturing jobs with service jobs in developed countries. 
C) economic dislocations caused by the North American Free Trade Agreement (NAFT
A)  in the 1990s. 
D) high tariffs imposed during the Great Depression of the 1930s. 
A) in increase in exports of low-priced goods from developing countries to developed countries. 
B) the replacement of manufacturing jobs with service jobs in developed countries. 
C) economic dislocations caused by the North American Free Trade Agreement (NAFT
A)  in the 1990s. 
D) high tariffs imposed during the Great Depression of the 1930s.

Question 9

Figure 9-5
The figure illustrates the market for tricycles in a country.  
-Refer to Figure 9-5. With trade, consumer surplus is

Accepted Answer

A) $3,240. 
B) $6,480. 
C) $6,760. 
D) $13,520. 
A) $3,240. 
B) $6,480. 
C) $6,760. 
D) $13,520.

Question 10

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,

Accepted Answer

A) consumer surplus increases and total surplus increases in the market for that good. 
B) consumer surplus increases and total surplus decreases in the market for that good. 
C) consumer surplus decreases and total surplus increases in the market for that good. 
D) consumer surplus decreases and total surplus decreases in the market for that good. 
A) consumer surplus increases and total surplus increases in the market for that good. 
B) consumer surplus increases and total surplus decreases in the market for that good. 
C) consumer surplus decreases and total surplus increases in the market for that good. 
D) consumer surplus decreases and total surplus decreases in the market for that good.

Question 11

Figure 9-10. The figure applies to Mexico and the good is rifles.  
-Refer to Figure 9-10. With trade, the equilibrium price of rifles and the equilibrium quantity of rifles demanded in Mexico are

Accepted Answer

A) P1 and Q1. 
B) P1 and Q2. 
C) P2 and Q2. 
D) P0 and Q0. 
A) P1 and Q1. 
B) P1 and Q2. 
C) P2 and Q2. 
D) P0 and Q0.

Question 12

The two basic approaches that a country can take as a means to achieve free trade are the

Accepted Answer

A) unilateral approach and the multilateral approach. 
B) short-run approach and the long-run approach. 
C) continental approach and the global approach. 
D) industry approach and the security approach. 
A) unilateral approach and the multilateral approach. 
B) short-run approach and the long-run approach. 
C) continental approach and the global approach. 
D) industry approach and the security approach.

Question 13

Figure 9-25
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit.  
-Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a tariff, total surplus is

Accepted Answer

A) $1,700. 
B) $1,800. 
C) $1,900. 
D) $2,000. 
A) $1,700. 
B) $1,800. 
C) $1,900. 
D) $2,000.

Question 14

Refer to Figure 9-15. Consumer surplus with trade and without a tariff is

Accepted Answer

A) A. 
B) A + B. 
C) A + C + G. 
D) A + B + C + D + E + F. 
A) A. 
B) A + B. 
C) A + C + G. 
D) A + B + C + D + E + F.

Question 15

Refer to Figure 9-15. A result of the tariff is that, relative to the free-trade situation, the quantity of saddles imported decreases by

Accepted Answer

A) Q2 - Q1. 
B) Q3 - Q2. 
C) Q4 - Q3. 
D) Q4 - Q3 + Q2 - Q1. 
A) Q2 - Q1. 
B) Q3 - Q2. 
C) Q4 - Q3. 
D) Q4 - Q3 + Q2 - Q1.

Question 16

Honduras is an importer of goose-down pillows. The world price of these pillows is $50. Honduras imposes a $7 tariff on pillows. Honduras is a price-taker in the pillow market. As a result of the tariff, the price of goose-down pillows in Honduras

Accepted Answer

A) remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases. 
B) increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
C) increases to a new price between $50 and $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
D) increases to a new price above $57 and the quantity of goose-down pillows purchased in Honduras remains the same. 
A) remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases. 
B) increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
C) increases to a new price between $50 and $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
D) increases to a new price above $57 and the quantity of goose-down pillows purchased in Honduras remains the same.

Question 17

When the nation of Duxembourg allows trade and becomes an importer of software,

Accepted Answer

A) residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises. 
B) residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg falls. 
C) residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg rises. 
D) residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg falls. 
A) residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises. 
B) residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg falls. 
C) residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg rises. 
D) residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg falls.

Question 18

Figure 9-1
The figure illustrates the market for coffee in Guatemala.  
-Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala

Accepted Answer

A) increases by the area B + D. 
B) increases by the area C + F. 
C) decreases by the area B + D. 
D) decreases by the area D + G. 
A) increases by the area B + D. 
B) increases by the area C + F. 
C) decreases by the area B + D. 
D) decreases by the area D + G.

Question 19

Suppose in the country of Nash that the price of corn is $4 per bushel with no trade allowed. If the world price of corn is $3 per bushel and if Nash allows free trade, will Nash be an importer or an exporter of corn?

Accepted Answer

Nash will

Question 20

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

Accepted Answer

A) True 
 B)False

Exam 9: Application: International Trade

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

A common argument in favor of restricting international trade in good x is based on the premise that

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

The North American Free Trade Agreement

Figure 9-12 -Refer to Figure 9-12. With trade allowed, this country

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, consumer surplus is

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. With trade, the equilibrium price of rifles and the equilibrium quantity of rifles demanded in Mexico are

The two basic approaches that a country can take as a means to achieve free trade are the

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. -Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a tariff, total surplus is

Refer to Figure 9-15. Consumer surplus with trade and without a tariff is

Refer to Figure 9-15. A result of the tariff is that, relative to the free-trade situation, the quantity of saddles imported decreases by

Honduras is an importer of goose-down pillows. The world price of these pillows is $50. Honduras imposes a $7 tariff on pillows. Honduras is a price-taker in the pillow market. As a result of the tariff, the price of goose-down pillows in Honduras

When the nation of Duxembourg allows trade and becomes an importer of software,

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala

Suppose in the country of Nash that the price of corn is $4 per bushel with no trade allowed. If the world price of corn is $3 per bushel and if Nash allows free trade, will Nash be an importer or an exporter of corn?

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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