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. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Economists view free trade as a way to raise living standards both at home and abroad.

Trade decisions are based on the principle of absolute advantage.

The greater the elasticities of supply and demand, the smaller are the gains from trade.

Figure 9-7 The following diagram shows the domestic demand and domestic supply curves in a market. ​ -Refer to Figure 9-7. Suppose the world price in this market is $7. If the country allows free trade, will the country import or export this good, and how many units will be imported/exported?

The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased.

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 producer surplus?

A tax on an imported good is called a ______ .

​If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.

Figure 9-2 ​ -Refer to Figure 9-2. The increase in total surplus resulting from trade is

Figure 9-1 ​ Uganda -Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Uganda is

Scenario 9-2 Suppose domestic demand and domestic supply in a market are given by the following equations: =20-P =P ​ -Refer to Scenario 9-2. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

Economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition.

Figure 9-1 ​ Uganda -Refer to Figure 9-1. In the absence of trade, total surplus in Uganda is represented by the area

Scenario 9-2 Suppose domestic demand and domestic supply in a market are given by the following equations: =20-P =P ​ -Refer to Scenario 9-2. Suppose the world price in this market is $8 per unit, and suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much are consumer surplus, producer surplus, tariff revenue, and total surplus?

Without free trade, the domestic price of a good must be equal to the world price of a good.

Suppose India exports cars to France and imports wine from Argentina. This situation suggests

Figure 9-5 -When a country that imports a particular good imposes an import quota on that good,

If a country allows free trade and imports cars, then it is the case that the gains to domestic producers outweigh the losses to domestic consumers.

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