Question 1

International trade arises from

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  importation duties. 
D)  the advantage of execution. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  importation duties. 
D)  the advantage of execution.

Question 2

Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports?

Accepted Answer

A)  domestic consumers 
B)  domestic producers 
C)  workers in the industry 
D)  foreign consumers 
A)  domestic consumers 
B)  domestic producers 
C)  workers in the industry 
D)  foreign consumers

Question 3

It is possible for the United States to compete against cheap foreign labor because expensive domestic workers

Accepted Answer

A)  pay U.S. taxes. 
B)  receive subsidies. 
C)  are more productive. 
D)  belong to unions. 
A)  pay U.S. taxes. 
B)  receive subsidies. 
C)  are more productive. 
D)  belong to unions.

Question 4

Define comparative advantage and discuss its role in international trade.

Accepted Answer

Comparative advantage is the factor that

Question 5

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Accepted Answer

A)  Belize coffee producers would gain from trade. 
B)  Belize coffee consumers would gain from trade. 
C)  Belize would gain tariff revenue from trade. 
D)  All of these answers are gains from trade. 
A)  Belize coffee producers would gain from trade. 
B)  Belize coffee consumers would gain from trade. 
C)  Belize would gain tariff revenue from trade. 
D)  All of these answers are gains from trade.

Question 6

Suppose the world price of a good is $4. Based on the table below, the country would

Accepted Answer

A)  import 20 units. 
B)  export 20 units. 
C)  import 10 units. 
D)  export 10 units. 
A)  import 20 units. 
B)  export 20 units. 
C)  import 10 units. 
D)  export 10 units.

Question 7

A reason tariffs and quotas are imposed is that

Accepted Answer

A)  their costs are spread among many people and their benefits are concentrated. 
B)  their costs are concentrated and their benefits are spread among many people. 
C)  they create net benefits in the long run. 
D)  they reduce import dependence. 
A)  their costs are spread among many people and their benefits are concentrated. 
B)  their costs are concentrated and their benefits are spread among many people. 
C)  they create net benefits in the long run. 
D)  they reduce import dependence.

Question 8

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

Accepted Answer

A)  imports will increase, the price will fall, and the quantity supplied will fall. 
B)  exports will increase, the price will be unchanged, and the quantity supplied will increase. 
C)  imports will increase, the price will decrease, and the supply curve will shift to the left. 
D)  the quantity demanded will decrease, the quantity supplied will decrease, and the price will decrease. 
A)  imports will increase, the price will fall, and the quantity supplied will fall. 
B)  exports will increase, the price will be unchanged, and the quantity supplied will increase. 
C)  imports will increase, the price will decrease, and the supply curve will shift to the left. 
D)  the quantity demanded will decrease, the quantity supplied will decrease, and the price will decrease.

Question 9

When considering rent seeking, which of the following is TRUE?

Accepted Answer

A)  The anti-free trade group generally will lobby more than the pro-free trade group. 
B)  The pro-free trade group generally will lobby more than the anti-free trade group. 
C)  Usually only the anti-free trade group is concerned about what is best for society at large. 
D)  Only the pro-free trade group is concerned about the government's revenue from tariffs. 
A)  The anti-free trade group generally will lobby more than the pro-free trade group. 
B)  The pro-free trade group generally will lobby more than the anti-free trade group. 
C)  Usually only the anti-free trade group is concerned about what is best for society at large. 
D)  Only the pro-free trade group is concerned about the government's revenue from tariffs.

Question 10

An assumption behind the infant-industry argument for tariff protection is that

Accepted Answer

A)  foreign competitors are selling output below average cost. 
B)  the domestic industry will be facing an upward adjustment in its average cost. 
C)  the domestic industry will eventually gain a comparative advantage in producing the good. 
D)  the market needs additional competition to satisfy consumer demand. 
A)  foreign competitors are selling output below average cost. 
B)  the domestic industry will be facing an upward adjustment in its average cost. 
C)  the domestic industry will eventually gain a comparative advantage in producing the good. 
D)  the market needs additional competition to satisfy consumer demand.

Question 11

The gains from free trade are enjoyed by a ________ number of people and the costs of free trade are imposed by ________ number of people.

Accepted Answer

A)  small; large 
B)  large; small 
C)  small; small 
D)  large; large 
A)  small; large 
B)  large; small 
C)  small; small 
D)  large; large

Question 12

The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection.

Accepted Answer

A)  cheap foreign labor 
B)  infant industry 
C)  dumping 
D)  comparative advantage 
A)  cheap foreign labor 
B)  infant industry 
C)  dumping 
D)  comparative advantage

Question 13

During the first 6 months of 2008, the United States imported from Africa, Asia, and Latin America more than 1.6 billion pounds of coffee and did not export any coffee. How is the gain from imports distributed between consumers and domestic producers?

Accepted Answer

A)  U.S. producer surplus shrinks. 
B)  U.S. consumer surplus increases. 
C)  Total U.S. surplus increases. 
D)  All the above answers are correct. 
A)  U.S. producer surplus shrinks. 
B)  U.S. consumer surplus increases. 
C)  Total U.S. surplus increases. 
D)  All the above answers are correct.

Question 14

Between August 2007 and July 2008, Brazil exported more than 3.5 billion pounds of coffee to the rest of the world. These exports mean that

Accepted Answer

A)  Brazil has comparative advantage in coffee production. 
B)  the rest of the world has comparative advantage in coffee production. 
C)  the rest of the world has absolute advantage in coffee production. 
D)  Brazil has absolute advantage in coffee production. 
A)  Brazil has comparative advantage in coffee production. 
B)  the rest of the world has comparative advantage in coffee production. 
C)  the rest of the world has absolute advantage in coffee production. 
D)  Brazil has absolute advantage in coffee production.

Question 15

Tariffs ________ a deadweight loss and import quotas ________ a deadweight loss.

Accepted Answer

A)  create; create 
B)  do not create; create 
C)  create; do not create 
D)  do not create; do not create 
A)  create; create 
B)  do not create; create 
C)  create; do not create 
D)  do not create; do not create

Question 16

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
-In the figure above, international trade ________ consumer surplus in the United States by ________.

Accepted Answer

A)  increases; $320 million 
B)  decreases; $192 million 
C)  increases; $192 million 
D)  decreases; $320 million 
A)  increases; $320 million 
B)  decreases; $192 million 
C)  increases; $192 million 
D)  decreases; $320 million

Question 17

How does a tariff affect the government's revenue? How does an import quota affect the government's revenue?

Accepted Answer

A tariff is a tax on an imported good. L

Question 18

Which of the statements about the gains from international trade is CORRECT?

Accepted Answer

A)  Everyone gains from international trade. 
B)  Some people gain from international trade and some lose, though overall the gains exceed the losses. 
C)  Some people gain from international trade and some lose; overall the gains exceed the losses. 
D)  Everyone loses from international trade. 
A)  Everyone gains from international trade. 
B)  Some people gain from international trade and some lose, though overall the gains exceed the losses. 
C)  Some people gain from international trade and some lose; overall the gains exceed the losses. 
D)  Everyone loses from international trade.

Question 19

When the United States exports a good, U.S. consumer surplus ________ and U.S. total surplus ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 20

The winners from a Japanese tariff on imported cars are I. Japanese car producers.
II) Japanese car consumers.
III) the Japanese government.

Accepted Answer

A)  only I and III 
B)  only I 
C)  only II 
D)  I, II, and III 
A)  only I and III 
B)  only I 
C)  only II 
D)  I, II, and III

International trade arises from

Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports?

It is possible for the United States to compete against cheap foreign labor because expensive domestic workers

Define comparative advantage and discuss its role in international trade.

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Suppose the world price of a good is $4. Based on the table below, the country would

A reason tariffs and quotas are imposed is that

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

When considering rent seeking, which of the following is TRUE?

An assumption behind the infant-industry argument for tariff protection is that

The gains from free trade are enjoyed by a number of people and the costs of free trade are imposed by number of people.

The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection.

During the first 6 months of 2008, the United States imported from Africa, Asia, and Latin America more than 1.6 billion pounds of coffee and did not export any coffee. How is the gain from imports distributed between consumers and domestic producers?

Between August 2007 and July 2008, Brazil exported more than 3.5 billion pounds of coffee to the rest of the world. These exports mean that

Tariffs a deadweight loss and import quotas a deadweight loss.

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, international trade consumer surplus in the United States by .

How does a tariff affect the government's revenue? How does an import quota affect the government's revenue?

Which of the statements about the gains from international trade is CORRECT?

When the United States exports a good, U.S. consumer surplus and U.S. total surplus .

The winners from a Japanese tariff on imported cars are I. Japanese car producers. II) Japanese car consumers. III) the Japanese government.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 7: Global Markets in Action

International trade arises from

Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports?

It is possible for the United States to compete against cheap foreign labor because expensive domestic workers

Define comparative advantage and discuss its role in international trade.

Belize, a country in Central America, has a small coffee industry. Suppose Belize does not have free trade but it has comparative advantage in coffee production. If Belize allowed international trade, what would be the gains from trade?

Suppose the world price of a good is $4. Based on the table below, the country would

A reason tariffs and quotas are imposed is that

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

When considering rent seeking, which of the following is TRUE?

An assumption behind the infant-industry argument for tariff protection is that

The gains from free trade are enjoyed by a ________ number of people and the costs of free trade are imposed by ________ number of people.

The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection.

During the first 6 months of 2008, the United States imported from Africa, Asia, and Latin America more than 1.6 billion pounds of coffee and did not export any coffee. How is the gain from imports distributed between consumers and domestic producers?

Between August 2007 and July 2008, Brazil exported more than 3.5 billion pounds of coffee to the rest of the world. These exports mean that

Tariffs ________ a deadweight loss and import quotas ________ a deadweight loss.

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, international trade ________ consumer surplus in the United States by ________.

How does a tariff affect the government's revenue? How does an import quota affect the government's revenue?

Which of the statements about the gains from international trade is CORRECT?

When the United States exports a good, U.S. consumer surplus ________ and U.S. total surplus ________.

The winners from a Japanese tariff on imported cars are I. Japanese car producers. II) Japanese car consumers. III) the Japanese government.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

The gains from free trade are enjoyed by a number of people and the costs of free trade are imposed by number of people.

Tariffs a deadweight loss and import quotas a deadweight loss.

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, international trade consumer surplus in the United States by .

When the United States exports a good, U.S. consumer surplus and U.S. total surplus .