Question 1

Indonesia and Australia engage in international trade because:

Accepted Answer

A) Indonesia has absolute advantage over Australia in producing goods 
B) both Indonesia and Australia have absolute advantage in producing some goods 
C) both Indonesia and Australia have comparative advantage in producing some goods 
D) Australia has comparative advantage over Indonesia in producing all goods 
A) Indonesia has absolute advantage over Australia in producing goods 
B) both Indonesia and Australia have absolute advantage in producing some goods 
C) both Indonesia and Australia have comparative advantage in producing some goods 
D) Australia has comparative advantage over Indonesia in producing all goods

Question 2

If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue and domestic consumers will gain consumer surplus.

Accepted Answer

A) True 
 B)False

Question 3

Graph 9-8  
-According to Graph 9-8, producer surplus before trade would be:

Accepted Answer

A) $3600 
B) $4400 
C) $5200 
D) $6600 
A) $3600 
B) $4400 
C) $5200 
D) $6600

Question 4

A tariff:

Accepted Answer

A) lowers the price of the exported good below the world price 
B) keeps the price of the exported good the same as the world price 
C) raises the price of the imported good above the world price 
D) lowers the price of the imported good below the world price 
A) lowers the price of the exported good below the world price 
B) keeps the price of the exported good the same as the world price 
C) raises the price of the imported good above the world price 
D) lowers the price of the imported good below the world price

Question 5

Graph 9-2
This graph refers to the market for saddles in Argentina.  
-According to Graph 9-2, the price and quantity demanded of saddles in Argentina after trade would be:

Accepted Answer

A) P₁, Q₂ 
B) P₁, Q₁ 
C) P₀, q₀ 
D) P₀, Q₁ 
A) P₁, Q₂ 
B) P₁, Q₁ 
C) P₀, q₀ 
D) P₀, Q₁

Question 6

In general, if a country allows trade and becomes an importer of a good, domestic producers of the good are worse off, domestic consumers of the good are better off, but the economic wellbeing of the country increases.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT a consequence of international trade for an exporting country?

Accepted Answer

A) both domestic consumers and domestic producers will be better off 
B) the domestic price will rise to equal the world price 
C) domestic consumers will be worse off and domestic producers will be better off 
D) total combined consumer and producer surplus will rise 
A) both domestic consumers and domestic producers will be better off 
B) the domestic price will rise to equal the world price 
C) domestic consumers will be worse off and domestic producers will be better off 
D) total combined consumer and producer surplus will rise

Question 8

Suppose Australia has a free-trade treaty with the United States.As a result, Australia increases its exports of kangaroo to the USA.Which of the following statements is NOT true?

Accepted Answer

A) the price paid by Australian consumers of kangaroo increases 
B) the price received by Australian producers of kangaroo increases 
C) the losses of Australian consumers exceed the gains of Australian producers 
D) the gains of Australian producers exceed the losses of Australian consumers 
A) the price paid by Australian consumers of kangaroo increases 
B) the price received by Australian producers of kangaroo increases 
C) the losses of Australian consumers exceed the gains of Australian producers 
D) the gains of Australian producers exceed the losses of Australian consumers

Question 9

When a country allows free trade:

Accepted Answer

A) the domestic price will be greater than the world price 
B) the domestic price will be lower than the world price 
C) the domestic price will equal the world price 
D) it does not matter what the world price is, the domestic price is the prevailing price 
A) the domestic price will be greater than the world price 
B) the domestic price will be lower than the world price 
C) the domestic price will equal the world price 
D) it does not matter what the world price is, the domestic price is the prevailing price

Question 10

Graph 9-4
This graph refers to the market for kiwifruit in New Zealand.  
-According to Graph 9-4, consumer surplus in New Zealand after the trade in kiwifruit is:

Accepted Answer

A) a 
B) a + b 
C) a + b + c 
D) c 
A) a 
B) a + b 
C) a + b + c 
D) c

Question 11

If an import tariff is imposed on a good produced exclusively for export, the tariff will reduce the quantity of the good produced.

Accepted Answer

A) True 
 B)False

Question 12

If Japan subsidised the production of rice and then exported the rice to Australia at artificially low prices, then the Australian economy would be worse off.

Accepted Answer

A) True 
 B)False

Question 13

Graph 9-4
This graph refers to the market for kiwifruit in New Zealand.  
-According to Graph 9-4, consumer surplus in New Zealand before trade the trade in kiwifruit is:

Accepted Answer

A) a 
B) a + b 
C) a + b + d 
D) c 
A) a 
B) a + b 
C) a + b + d 
D) c

Question 14

A quota can potentially cause an even larger deadweight loss than a tariff.

Accepted Answer

A) True 
 B)False

Question 15

What is the effect on the economic wellbeing of a nation if a tariff on imports is imposed? Why?

Accepted Answer

A tariff reduces the economic wellbeing

Question 16

When a country allows trade and becomes an importer of a good, which of the following is NOT true?

Accepted Answer

A) the gains of domestic consumers exceed the losses of domestic producers 
B) the losses of domestic producers exceed the gains of domestic consumers 
C) the price paid by domestic consumers of the good decreases 
D) the price received by domestic producers of the good decreases 
A) the gains of domestic consumers exceed the losses of domestic producers 
B) the losses of domestic producers exceed the gains of domestic consumers 
C) the price paid by domestic consumers of the good decreases 
D) the price received by domestic producers of the good decreases

Question 17

According to this statement, if trade in corn is allowed, the price of corn in Australia:

Accepted Answer

A) will increase 
B) will decrease 
C) will be unaffected 
D) could increase or decrease 
A) will increase 
B) will decrease 
C) will be unaffected 
D) could increase or decrease

Question 18

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive in a market.

Accepted Answer

A) True 
 B)False

Question 19

If a country allows trade and the price of a good falls as a result:

Accepted Answer

A) the domestic price is higher than the world price and the country will import the good 
B) the domestic price is lower than the world price and the country will import the good 
C) the domestic price is higher than the world price and the country will export the good 
D) the domestic price is lower than the world price and the country will export the good 
A) the domestic price is higher than the world price and the country will import the good 
B) the domestic price is lower than the world price and the country will import the good 
C) the domestic price is higher than the world price and the country will export the good 
D) the domestic price is lower than the world price and the country will export the good

Question 20

Since losers from international trade are always compensated for their losses, international trade increases the size of the economic pie and the size of the pieces such that everyone is better off.

Accepted Answer

A) True 
 B)False

Exam 9: Application: International Trade

Indonesia and Australia engage in international trade because:

If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue and domestic consumers will gain consumer surplus.

Graph 9-8 -According to Graph 9-8, producer surplus before trade would be:

A tariff:

Graph 9-2 This graph refers to the market for saddles in Argentina. -According to Graph 9-2, the price and quantity demanded of saddles in Argentina after trade would be:

In general, if a country allows trade and becomes an importer of a good, domestic producers of the good are worse off, domestic consumers of the good are better off, but the economic wellbeing of the country increases.

Which of the following is NOT a consequence of international trade for an exporting country?

Suppose Australia has a free-trade treaty with the United States.As a result, Australia increases its exports of kangaroo to the USA.Which of the following statements is NOT true?

When a country allows free trade:

Graph 9-4 This graph refers to the market for kiwifruit in New Zealand. -According to Graph 9-4, consumer surplus in New Zealand after the trade in kiwifruit is:

If an import tariff is imposed on a good produced exclusively for export, the tariff will reduce the quantity of the good produced.

If Japan subsidised the production of rice and then exported the rice to Australia at artificially low prices, then the Australian economy would be worse off.

Graph 9-4 This graph refers to the market for kiwifruit in New Zealand. -According to Graph 9-4, consumer surplus in New Zealand before trade the trade in kiwifruit is:

A quota can potentially cause an even larger deadweight loss than a tariff.

What is the effect on the economic wellbeing of a nation if a tariff on imports is imposed? Why?

When a country allows trade and becomes an importer of a good, which of the following is NOT true?

According to this statement, if trade in corn is allowed, the price of corn in Australia:

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive in a market.

If a country allows trade and the price of a good falls as a result:

Since losers from international trade are always compensated for their losses, international trade increases the size of the economic pie and the size of the pieces such that everyone is better off.

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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