Question 1

Benefits from free trade include increased variety of goods and increased competition.

Accepted Answer

A) True 
 B)False  True

Question 2

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.

Accepted Answer

A) True 
 B)False  True

Question 3

Graph 9-7  
-According to Graph 9-7, producer surplus after trade would be:

Accepted Answer

A) $21 600 
B) $25 200 
C) $43 200 
D) $50 400 
A) $21 600 
B) $25 200 
C) $43 200 
D) $50 400 B

Question 4

If a country allows trade and the domestic price of a good is lower than the world price:

Accepted Answer

A) the country will become an exporter of the good. 
B) the country will become an importer of the good 
C) the country will neither export nor import the good 
D) additional information about demand is needed to determine whether the country will export or import the good 
A) the country will become an exporter of the good. 
B) the country will become an importer of the good 
C) the country will neither export nor import the good 
D) additional information about demand is needed to determine whether the country will export or import the good

Question 5

Graph 9-7  
-According to Graph 9-7, how many units of this product would be exported after trade is allowed?

Accepted Answer

A) 400 
B) 800 
C) 2400 
D) 2800 
A) 400 
B) 800 
C) 2400 
D) 2800

Question 6

An import quota increases domestic producer surplus and the surplus of import licence holders, reduces domestic consumer surplus, and creates deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

If a tariff is placed on clocks, the price of both domestic and imported clocks will rise by the amount of the tariff.

Accepted Answer

A) True 
 B)False

Question 8

Policymakers in Australia are increasingly considering trade restrictions in order to protect domestic producers from foreign competitors.

Accepted Answer

A) True 
 B)False

Question 9

Graph 9-9  
-In Graph 9-9, the domestic price and quantity demanded after the tariff would be:

Accepted Answer

A) P₁, Q₁ 
B) P₁, Q₄ 
C) P₂, Q₂ 
D) P₂, Q₃ 
A) P₁, Q₁ 
B) P₁, Q₄ 
C) P₂, Q₂ 
D) P₂, Q₃

Question 10

A tariff and an import quota will both:

Accepted Answer

A) increase the quantity of imports and raise domestic price 
B) increase the quantity of imports and lower domestic price 
C) reduce the quantity of imports and raise domestic price 
D) reduce the quantity of imports and lower domestic price 
A) increase the quantity of imports and raise domestic price 
B) increase the quantity of imports and lower domestic price 
C) reduce the quantity of imports and raise domestic price 
D) reduce the quantity of imports and lower domestic price

Question 11

A tariff is a:

Accepted Answer

A) tax imposed on imported goods 
B) tax imposed on exported goods 
C) a quantitative limit on imported goods 
D) policy to encourage more trade 
A) tax imposed on imported goods 
B) tax imposed on exported goods 
C) a quantitative limit on imported goods 
D) policy to encourage more trade

Question 12

Graph 9-8  
-According to Graph 9-8, consumer surplus after trade would be:

Accepted Answer

A) $3600 
B) $5400 
C) $7200 
D) $8100 
A) $3600 
B) $5400 
C) $7200 
D) $8100

Question 13

Import quotas and tariffs both cause the quantity of imports to fall.

Accepted Answer

A) True 
 B)False

Question 14

When Ford and General Motors import automobile parts from Mexico at prices below those they must pay in the US:

Accepted Answer

A) workers who assemble Ford and General Motors vehicles become worse off 
B) US consumers, taken as a group, become worse off 
C) Mexican consumers, taken as a group, become worse off 
D) American companies that manufacture automobile parts become worse off 
A) workers who assemble Ford and General Motors vehicles become worse off 
B) US consumers, taken as a group, become worse off 
C) Mexican consumers, taken as a group, become worse off 
D) American companies that manufacture automobile parts become worse off

Question 15

Graph 9-7  
-According to Graph 9-7, producer surplus before trade would be:

Accepted Answer

A) $8000 
B) $9600 
C) $16 000 
D) $19 200 
A) $8000 
B) $9600 
C) $16 000 
D) $19 200

Question 16

When resources devoted to lobbying are included in the analysis of restrictions to international trade:

Accepted Answer

A) deadweight losses may increase. 
B) deadweight losses from fall 
C) the welfare of domestic consumers will increase 
D) domestic prices will equal world prices 
A) deadweight losses may increase. 
B) deadweight losses from fall 
C) the welfare of domestic consumers will increase 
D) domestic prices will equal world prices

Question 17

Suppose a country becomes more open to trade and imports increase.This means that:

Accepted Answer

A) everyone in the country benefits from trade 
B) the losses of the losers is less than the gains of the winners 
C) the losses of the losers exceed the gains of the winners 
D) everyone in the country loses from the trade 
A) everyone in the country benefits from trade 
B) the losses of the losers is less than the gains of the winners 
C) the losses of the losers exceed the gains of the winners 
D) everyone in the country loses from the trade

Question 18

If the cost of producing wool in New Zealand is higher than in China but New Zealand exports wool to China, it is likely that:

Accepted Answer

A) New Zealand has a comparative advantage in producing cameras and China has a comparative advantage in producing wool. 
B) New Zealand has an absolute advantage in producing wool and China has a comparative advantage in producing cameras. 
C) New Zealand and China would both be better off if they each produced wool and cameras. 
D) New Zealand subsidises the production of wool. 
A) New Zealand has a comparative advantage in producing cameras and China has a comparative advantage in producing wool. 
B) New Zealand has an absolute advantage in producing wool and China has a comparative advantage in producing cameras. 
C) New Zealand and China would both be better off if they each produced wool and cameras. 
D) New Zealand subsidises the production of wool.

Question 19

The Closer Economic Relations agreement between New Zealand and Australia is designed to ensure both Australia and New Zealand can exercise their own comparative advantage.

Accepted Answer

A) True 
 B)False

Question 20

Comparative advantage refers to:

Accepted Answer

A) a situation where the relative price of a domestic good is the same in two countries 
B) one country's ability to control domestic and world prices 
C) the situation where one country can produce a good relatively more cheaply than another country 
D) a situation where there is increased competition due to trade 
A) a situation where the relative price of a domestic good is the same in two countries 
B) one country's ability to control domestic and world prices 
C) the situation where one country can produce a good relatively more cheaply than another country 
D) a situation where there is increased competition due to trade

Exam 9: Application: International Trade

Benefits from free trade include increased variety of goods and increased competition.

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.

Graph 9-7 -According to Graph 9-7, producer surplus after trade would be:

If a country allows trade and the domestic price of a good is lower than the world price:

Graph 9-7 -According to Graph 9-7, how many units of this product would be exported after trade is allowed?

An import quota increases domestic producer surplus and the surplus of import licence holders, reduces domestic consumer surplus, and creates deadweight loss.

If a tariff is placed on clocks, the price of both domestic and imported clocks will rise by the amount of the tariff.

Policymakers in Australia are increasingly considering trade restrictions in order to protect domestic producers from foreign competitors.

Graph 9-9 -In Graph 9-9, the domestic price and quantity demanded after the tariff would be:

A tariff and an import quota will both:

A tariff is a:

Graph 9-8 -According to Graph 9-8, consumer surplus after trade would be:

Import quotas and tariffs both cause the quantity of imports to fall.

When Ford and General Motors import automobile parts from Mexico at prices below those they must pay in the US:

Graph 9-7 -According to Graph 9-7, producer surplus before trade would be:

When resources devoted to lobbying are included in the analysis of restrictions to international trade:

Suppose a country becomes more open to trade and imports increase.This means that:

If the cost of producing wool in New Zealand is higher than in China but New Zealand exports wool to China, it is likely that:

The Closer Economic Relations agreement between New Zealand and Australia is designed to ensure both Australia and New Zealand can exercise their own comparative advantage.

Comparative advantage refers to:

Ten Lessons From 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

Application: 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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