Question 1

If a country allows trade and the domestic price of a good is higher than the world price,what will occur

Accepted Answer

A) The country will become an exporter of the good and trade at the domestic price. 
B) The country will become an importer of the good and trade at the world price. 
C) The country will become an exporter of the good and trade at the world price. 
D) The country will become an importer of the good and trade at the market equilibrium price. 
A) The country will become an exporter of the good and trade at the domestic price. 
B) The country will become an importer of the good and trade at the world price. 
C) The country will become an exporter of the good and trade at the world price. 
D) The country will become an importer of the good and trade at the market equilibrium price.

Question 2

Figure 9-2
  
-Refer to Figure 9-2.What happens to the demand and supply of the Canadian market of pencil sharpeners at the world price

Accepted Answer

A) The domestic quantity demanded is greater than the domestic quantity supplied. 
B) The pencil sharpener market is in equilibrium. 
C) The demand curve is perfectly inelastic. 
D) Both domestic producers and domestic consumers will be better off. 
A) The domestic quantity demanded is greater than the domestic quantity supplied. 
B) The pencil sharpener market is in equilibrium. 
C) The demand curve is perfectly inelastic. 
D) Both domestic producers and domestic consumers will be better off.

Question 3

Which of the following best describes the argument many infant industries propose in order to gain support for trade restrictions

Accepted Answer

A) Protecting new industries through trade restrictions will pay off later. 
B) Protecting industries that produce goods and services for infants is necessary if a country is to have healthy children. 
C) Any trade restrictions put in place will be temporary and easily removed. 
D) Government can easily decide whether the benefits to consumers of protecting new industries exceeds the cost imposed by the restrictions. 
A) Protecting new industries through trade restrictions will pay off later. 
B) Protecting industries that produce goods and services for infants is necessary if a country is to have healthy children. 
C) Any trade restrictions put in place will be temporary and easily removed. 
D) Government can easily decide whether the benefits to consumers of protecting new industries exceeds the cost imposed by the restrictions.

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

Figure 9-11
  
-Refer to Figure 9-11.Without trade,what would be the equilibrium price and quantity of carnations

Accepted Answer

A) $4 and 300 
B) $6 and 200 
C) $6 and 400 
D) $8 and 300 
A) $4 and 300 
B) $6 and 200 
C) $6 and 400 
D) $8 and 300

Question 7

Which of the following statements explains the difference between tariffs and quotas

Accepted Answer

A) Tariffs reduce the quantity of the imports and raise the domestic price of the good but quotas do not. 
B) "Voluntary" limits on Canadian exports of hogs are better for the United States than U.S.tariffs placed on Canadian hog exports. 
C) Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses, whereas quotas do not impose deadweight losses. 
D) A tariff raises revenue for the government, whereas an import quota creates surplus for those who get the licences to import. 
A) Tariffs reduce the quantity of the imports and raise the domestic price of the good but quotas do not. 
B) "Voluntary" limits on Canadian exports of hogs are better for the United States than U.S.tariffs placed on Canadian hog exports. 
C) Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses, whereas quotas do not impose deadweight losses. 
D) A tariff raises revenue for the government, whereas an import quota creates surplus for those who get the licences to import.

Question 8

When a country moves from a free trade position and imposes a tariff on imports,what does this cause

Accepted Answer

A) a decrease in total surplus in the market 
B) a decrease in producer surplus in the market 
C) an increase in consumer surplus in the market 
D) a decrease in revenue to the government 
A) a decrease in total surplus in the market 
B) a decrease in producer surplus in the market 
C) an increase in consumer surplus in the market 
D) a decrease in revenue to the government

Question 9

Aquilonia has decided to end its policy of not trading with the rest of the world.When it ends its trade restrictions,it discovers that it is importing cinnamon,exporting steel,and neither importing nor exporting rugs.What are the effects

Accepted Answer

A) Domestic producers of cinnamon are now better off, and consumers of cinnamon are worse off; producers of steel are worse off, and consumers of steel are better off; both producers and consumers of rugs are unaffected. 
B) Domestic producers of cinnamon are now worse off, and consumers of cinnamon are better off; producers of steel are better off, and consumers of steel are worse off; both producers and consumers of rugs are unaffected. 
C) Domestic producers of cinnamon are now worse off, and consumers of cinnamon are better off; producers of steel are worse off, and consumers of steel are better off; both producers and consumers of rugs are unaffected. 
D) Domestic producers of cinnamon, steel, and rugs are worse off and consumers of cinnamon, steel and rugs are better off.This is because trade always harms producers and helps consumers. 
A) Domestic producers of cinnamon are now better off, and consumers of cinnamon are worse off; producers of steel are worse off, and consumers of steel are better off; both producers and consumers of rugs are unaffected. 
B) Domestic producers of cinnamon are now worse off, and consumers of cinnamon are better off; producers of steel are better off, and consumers of steel are worse off; both producers and consumers of rugs are unaffected. 
C) Domestic producers of cinnamon are now worse off, and consumers of cinnamon are better off; producers of steel are worse off, and consumers of steel are better off; both producers and consumers of rugs are unaffected. 
D) Domestic producers of cinnamon, steel, and rugs are worse off and consumers of cinnamon, steel and rugs are better off.This is because trade always harms producers and helps consumers.

Question 10

Figure 9-4
  
-Refer to Figure 9-4.What is total surplus in this market before trade

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 11

Figure 9-11
  
-Refer to Figure 9-11.What effect does imposing a tariff on carnations have on imports

Accepted Answer

A) increases imports by 100 
B) increases imports by 200 
C) reduces imports by 200 
D) reduces imports by 400 
A) increases imports by 100 
B) increases imports by 200 
C) reduces imports by 200 
D) reduces imports by 400

Question 12

What is a tariff

Accepted Answer

A) a tax placed on exported goods that lowers the domestic price below the world price 
B) a tax placed on exported goods that keeps the domestic price the same as the world price 
C) a tax placed on imported goods that lowers the domestic price below the world price 
D) a tax placed on imported goods that raises the domestic price above the world price 
A) a tax placed on exported goods that lowers the domestic price below the world price 
B) a tax placed on exported goods that keeps the domestic price the same as the world price 
C) a tax placed on imported goods that lowers the domestic price below the world price 
D) a tax placed on imported goods that raises the domestic price above the world price

Question 13

Define the two approaches a nation can take to achieve free trade.Does one approach have an advantage over the other

Accepted Answer

A unilateral approach is when a country

Question 14

Figure 9-2
  
-Figure 9-2 shows the domestic demand and supply for pencil sharpeners in China.Supposing China engages in trade with us,what will China do

Accepted Answer

A) import 100 pencil sharpeners 
B) import 250 pencil sharpeners 
C) export 250 pencil sharpeners 
D) export 300 pencil sharpeners 
A) import 100 pencil sharpeners 
B) import 250 pencil sharpeners 
C) export 250 pencil sharpeners 
D) export 300 pencil sharpeners

Question 15

The difference in the prices of a good in two countries creates opportunities for arbitrage: traders buy the good at a low price in one country and sell it at a higher price in the other. When the difference in the prices vanishes and the world price is established in both countries, there is no scope for trade anymore because no trader will be willing to buy the good in one country and sell it in another. Discuss the validity of this statement.

Accepted Answer

This is not a valid statement.Consider t

Question 16

When a country takes a multilateral approach to free trade,what happens

Accepted Answer

A) It removes trade restrictions on its own. 
B) It reduces its trade restrictions while other countries do the same. 
C) It does not remove trade restrictions. 
D) It removes all trade restrictions. 
A) It removes trade restrictions on its own. 
B) It reduces its trade restrictions while other countries do the same. 
C) It does not remove trade restrictions. 
D) It removes all trade restrictions.

Question 17

Figure 9-7
  
-Refer to Figure 9-7.If trade in shoes is allowed,what will be the price of shoes in Korea

Accepted Answer

A) $5 per pair 
B) between $5 and $12 per pair 
C) $12 per pair 
D) higher than $12 per pair 
A) $5 per pair 
B) between $5 and $12 per pair 
C) $12 per pair 
D) higher than $12 per pair

Question 18

Figure 9-5
  
-Figure 9-5 shows the domestic market for calculators in Haiti.What is consumer surplus in Haiti before trade

Accepted Answer

A) $375 
B) $1125 
C) $2250 
D) $4500 
A) $375 
B) $1125 
C) $2250 
D) $4500

Question 19

Figure 9-2
  
-Refer to Figure 9-2.With free trade,what would consumer surplus in China be

Accepted Answer

A) $400 
B) $800 
C) $900 
D) $1600 
A) $400 
B) $800 
C) $900 
D) $1600

Question 20

Figure 9-11
  
-Refer to Figure 9-11.What is the amount of revenue collected by the government from the tariff

Accepted Answer

A) $200 
B) $400 
C) $600 
D) $800 
A) $200 
B) $400 
C) $600 
D) $800

Exam 9: Application: International Trade

If a country allows trade and the domestic price of a good is higher than the world price,what will occur

Figure 9-2 -Refer to Figure 9-2.What happens to the demand and supply of the Canadian market of pencil sharpeners at the world price

Which of the following best describes the argument many infant industries propose in order to gain support for trade restrictions

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.

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

Figure 9-11 -Refer to Figure 9-11.Without trade,what would be the equilibrium price and quantity of carnations

Which of the following statements explains the difference between tariffs and quotas

When a country moves from a free trade position and imposes a tariff on imports,what does this cause

Aquilonia has decided to end its policy of not trading with the rest of the world.When it ends its trade restrictions,it discovers that it is importing cinnamon,exporting steel,and neither importing nor exporting rugs.What are the effects

Figure 9-4 -Refer to Figure 9-4.What is total surplus in this market before trade

Figure 9-11 -Refer to Figure 9-11.What effect does imposing a tariff on carnations have on imports

What is a tariff

Define the two approaches a nation can take to achieve free trade.Does one approach have an advantage over the other

Figure 9-2 -Figure 9-2 shows the domestic demand and supply for pencil sharpeners in China.Supposing China engages in trade with us,what will China do

When a country takes a multilateral approach to free trade,what happens

Figure 9-7 -Refer to Figure 9-7.If trade in shoes is allowed,what will be the price of shoes in Korea

Figure 9-5 -Figure 9-5 shows the domestic market for calculators in Haiti.What is consumer surplus in Haiti before trade

Figure 9-2 -Refer to Figure 9-2.With free trade,what would consumer surplus in China be

Figure 9-11 -Refer to Figure 9-11.What is the amount of revenue collected by the government from the tariff

Ten Principles of 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

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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