Exam 9: Application: International Trade

Figure 9-9 The following diagram shows the domestic demand and domestic supply curves in a market. ​ -Refer to Figure 9-9. Suppose the world price in this market is $6. If the country allows free trade, how much is total surplus?

Suppose the world price of coffee is $2 per pound and Brazil's domestic price of coffee without trade is $3 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

Scenario 9-1 ​ For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q^D = 210 − 2P, where Q^D represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is Q^S = -90 + 3P, where Q^S represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. -Refer to Scenario 9-1. Suppose the world price of cardboard is $82.5. Then Boxland's gains from international trade in cardboard amount to

Suppose in the country of Jumanji that the price of coffee with no trade allowed is below the world price of coffee. If Jumanji allows free trade, will Jumanji be an importer or an exporter of coffee?

Figure 9-5 -Refer to Figure 9-5. Producer surplus plus consumer surplus in this market after trade is

Figure 9-2 ​ -Refer to Figure 9-2. Total surplus with trade exceeds total surplus without trade by

For a given country, comparing the world price of aluminum and the domestic price of aluminum before trade indicates whether that country's demand for aluminum exceeds the demand for aluminum in other countries.

Figure 9-1 ​ Uganda -Refer to Figure 9-1. In the absence of trade, total surplus in the Ugandan coffee market amounts to

Suppose New Zealand has a comparative advantage over other countries in producing almonds, but other countries have an absolute advantage over New Zealand in producing almonds. If trade in almonds is allowed, New Zealand

List five arguments given to support trade restrictions.

Representative Vazquez cites the "jobs argument" when he argues before Congress in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Representative Vazquez's reasoning is that he ignores the fact that

Figure 9-9 The following diagram shows the domestic demand and domestic supply curves in a market. ​ -Refer to Figure 9-9. With no trade allowed, what are the equilibrium price and equilibrium quantity in this market?

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Figure 9-6 -Refer to Figure 9-6. The tariff

Free trade causes job losses in industries in which a country does not have a comparative advantage, but it also causes job gains in industries in which the country has a comparative advantage.

​Since a tariff can increase employment in an industry, the result is a net increase in total surplus.

Suppose Ecuador imposes a tariff on imported bananas. If the increase in producer surplus is $50 million, the reduction in consumer surplus is $150 million, and the deadweight loss of the tariff is $30 million, then the tariff generates $130 million in revenue for the government.

Figure 9-5 -Refer to Figure 9-5. Producer surplus in this market after trade is

Figure 9-2 ​ -Refer to Figure 9-2. If this country allows free trade in skateboards,

A multilateral approach to free trade has greater potential to increase the gains from trade than a unilateral approach, because the multilateral approach can reduce trade restrictions abroad as well as at home.