Question 1

In practice, it has proven to be extraordinarily difficult for governments to pick the right infant industries to protect.

Accepted Answer

A) True 
 B)False

Question 2

If Australia imports toys from other countries, this means the world price of toys is lower than the Australian price of toys.

Accepted Answer

A) True 
 B)False

Question 3

Graph 9-3  
-In Graph 9-3, the equilibrium price and quantity after the quota 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 4

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

Accepted Answer

A) equal to $8 per kg 
B) equal to $15 per kg 
C) less than $15 per kg 
D) greater than $8 per kg 
A) equal to $8 per kg 
B) equal to $15 per kg 
C) less than $15 per kg 
D) greater than $8 per kg

Question 5

Import quotas increase the domestic price of the product to at least the world price.

Accepted Answer

A) True 
 B)False

Question 6

Graph 9-6
This graph refers to the market for oil in Spain.  
-According to Graph 9-6, consumer surplus in Spain after trade would be:

Accepted Answer

A) A 
B) C + B 
C) A + B + D 
D) B + C + D 
A) A 
B) C + B 
C) A + B + D 
D) B + C + D

Question 7

Graph 9-3  
-In Graph 9-3, after the quota, imports would be equal to:

Accepted Answer

A) Q₄ minus Q₁ 
B) Q₃ minus Q₂ 
C) Q₃ minus Q₁ 
D) Q₂ minus Q₁ 
A) Q₄ minus Q₁ 
B) Q₃ minus Q₂ 
C) Q₃ minus Q₁ 
D) Q₂ minus Q₁

Question 8

When a country allows trade and becomes an exporter of a good:

Accepted Answer

A) both domestic producers and domestic consumers are better off 
B) domestic producers are better off and domestic consumers are worse off 
C) domestic producers are worse off and domestic consumers are better off 
D) both domestic producers and domestic consumers are worse off 
A) both domestic producers and domestic consumers are better off 
B) domestic producers are better off and domestic consumers are worse off 
C) domestic producers are worse off and domestic consumers are better off 
D) both domestic producers and domestic consumers are worse off

Question 9

Graph 9-6
This graph refers to the market for oil in Spain.  
-According to Graph 9-6, producer surplus plus consumer surplus in Spain before trade would be:

Accepted Answer

A) A + B 
B) A + B + C 
C) A + B + C + D 
D) B + C + D 
A) A + B 
B) A + B + C 
C) A + B + C + D 
D) B + C + D

Question 10

Suppose that Australia has a comparative advantage over the New Zealand in providing financial services and New Zealand has a comparative advantage over Australia in producing milk products.By reducing trade barriers, CER allowed both Australia and New Zealand to export more of the products in which it enjoys a comparative advantage.Do all people in both countries benefit from this free trade agreement? Explain.

Accepted Answer

While overall economic wellbeing in both

Question 11

Suppose that Tonga, a small country, imports apples at the world price of $4 per kilogram.If Tonga imposes a tariff of $1 per kilogram on imported apples, the price of apples in Tonga will increase, but by less than $1, ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 12

Jess usually buys a muffin before work every day.If the government decides to impose a tariff on muffins, how will Jess' behaviour change?

Accepted Answer

A) she will buy more muffins because the price of the muffins will fall 
B) she will buy fewer muffins because she doesn't like imported muffins 
C) she will buy more muffins because Australia now has a comparative disadvantage in producing muffins 
D) she will buy fewer muffins because the domestic price of muffins will rise 
A) she will buy more muffins because the price of the muffins will fall 
B) she will buy fewer muffins because she doesn't like imported muffins 
C) she will buy more muffins because Australia now has a comparative disadvantage in producing muffins 
D) she will buy fewer muffins because the domestic price of muffins will rise

Question 13

What are the arguments in favour of trade restrictions and what are the counter-arguments?

Accepted Answer

Arguments mentioned in the text include

Question 14

Graph 9-5
This graph refers to the market for oil in Spain.  
-According to Graph 9-5, the price and quantity of oil in Spain before trade would be:

Accepted Answer

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

Question 15

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

Accepted Answer

A) $20 000 
B) $24 000 
C) $40 000 
D) $48 000 
A) $20 000 
B) $24 000 
C) $40 000 
D) $48 000

Question 16

If country A produces all goods at a cheaper price than country B, country B will specialise in producing the goods for which it has comparative advantage.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that Australia and China do not trade with each other.If they then allow trade and Australia becomes an exporter of mineral products to China, which group or groups in each country are better off, and which are worse off?

Accepted Answer

Mineral producers in Australia are bette

Question 18

Trade among nations is ultimately based on absolute advantage.

Accepted Answer

A) True 
 B)False

Question 19

The main justification for imposing restrictions on free international trade is:

Accepted Answer

A) to protect foreign producers 
B) to support foreign consumers 
C) to protect domestic producers 
D) to support domestic consumers 
A) to protect foreign producers 
B) to support foreign consumers 
C) to protect domestic producers 
D) to support domestic consumers

Question 20

The infant industry argument:

Accepted Answer

A) is based on the belief that protecting industries when they are young will pay off later 
B) is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children 
C) has the support of most economists 
D) has proven to be correct in nearly all cases 
A) is based on the belief that protecting industries when they are young will pay off later 
B) is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children 
C) has the support of most economists 
D) has proven to be correct in nearly all cases

Exam 9: Application: International Trade

In practice, it has proven to be extraordinarily difficult for governments to pick the right infant industries to protect.

If Australia imports toys from other countries, this means the world price of toys is lower than the Australian price of toys.

Graph 9-3 -In Graph 9-3, the equilibrium price and quantity after the quota would be:

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

Import quotas increase the domestic price of the product to at least the world price.

Graph 9-6 This graph refers to the market for oil in Spain. -According to Graph 9-6, consumer surplus in Spain after trade would be:

Graph 9-3 -In Graph 9-3, after the quota, imports would be equal to:

When a country allows trade and becomes an exporter of a good:

Graph 9-6 This graph refers to the market for oil in Spain. -According to Graph 9-6, producer surplus plus consumer surplus in Spain before trade would be:

Suppose that Tonga, a small country, imports apples at the world price of $4 per kilogram.If Tonga imposes a tariff of $1 per kilogram on imported apples, the price of apples in Tonga will increase, but by less than $1, ceteris paribus.

Jess usually buys a muffin before work every day.If the government decides to impose a tariff on muffins, how will Jess' behaviour change?

What are the arguments in favour of trade restrictions and what are the counter-arguments?

Graph 9-5 This graph refers to the market for oil in Spain. -According to Graph 9-5, the price and quantity of oil in Spain before trade would be:

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

If country A produces all goods at a cheaper price than country B, country B will specialise in producing the goods for which it has comparative advantage.

Suppose that Australia and China do not trade with each other.If they then allow trade and Australia becomes an exporter of mineral products to China, which group or groups in each country are better off, and which are worse off?

Trade among nations is ultimately based on absolute advantage.

The main justification for imposing restrictions on free international trade is:

The infant industry argument:

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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