Question 1

Choose the statement that is incorrect.

Accepted Answer

A) Wage differences drive international trade. 
B) High-wage workers have high productivity. 
C) International trade can improve the opportunities of people in developing countries and increase their incomes. 
D) By trading with poor countries, we increase the demand for the goods that these countries produce and increase the demand for their labour. 
E) Free trade creates some jobs and destroys other jobs. 
A) Wage differences drive international trade. 
B) High-wage workers have high productivity. 
C) International trade can improve the opportunities of people in developing countries and increase their incomes. 
D) By trading with poor countries, we increase the demand for the goods that these countries produce and increase the demand for their labour. 
E) Free trade creates some jobs and destroys other jobs.

Question 2

A market is open to international trade. At the world price, the quantity demanded is 150 units and the quantity supplied is 200 units. This country will

Accepted Answer

A) import 50 units. 
B) export 200 units. 
C) import 150 units. 
D) import 200 units. 
E) export 50 units. 
A) import 50 units. 
B) export 200 units. 
C) import 150 units. 
D) import 200 units. 
E) export 50 units.

Question 3

Canada has a comparative advantage in producing airplanes if

Accepted Answer

A) it can produce them at a lower dollar cost than another country. 
B) it can produce a larger quantity than another country. 
C) it has a larger quantity of skilled workers than another country. 
D) it can produce them at a higher opportunity cost than another country. 
E) it can produce them at a lower opportunity cost than another country. 
A) it can produce them at a lower dollar cost than another country. 
B) it can produce a larger quantity than another country. 
C) it has a larger quantity of skilled workers than another country. 
D) it can produce them at a higher opportunity cost than another country. 
E) it can produce them at a lower opportunity cost than another country.

Question 4

A tariff ________ consumer surplus and an import quota ________ consumer surplus.

Accepted Answer

A) decreases; decreases 
B) increases; increases 
C) decreases; increases 
D) increases; decreases 
E) does not change; does not change 
A) decreases; decreases 
B) increases; increases 
C) decreases; increases 
D) increases; decreases 
E) does not change; does not change

Question 5

Canada produces both lumber and wine. Canada exports lumber and imports wine. The rest of the world imports Canadian lumber and exports wine to Canada. If Canada did not trade with the rest of the world, then the equilibrium price of lumber would be ________ in Canada than the rest of the world, and the equilibrium price of wine would be ________ in Canada than the rest of the world.

Accepted Answer

A) lower; higher 
B) higher; lower 
C) higher; higher 
D) lower; lower 
E) the same or lower; the same or higher 
A) lower; higher 
B) higher; lower 
C) higher; higher 
D) lower; lower 
E) the same or lower; the same or higher

Question 6

Table 7.3.1
Canada's Market for Widgets
  
-Table 7.3.1 shows the Canadian supply of and demand for widgets. Widgets are available on the world market for $7. If the Canadian government imposes a tariff of $1, the domestic selling price will be ________ and quantity bought will be ________.

Accepted Answer

A) $6; 48 million 
B) $7; 44 million 
C) $8; 16 million 
D) $8; 24 million 
E) $8; 40 million 
A) $6; 48 million 
B) $7; 44 million 
C) $8; 16 million 
D) $8; 24 million 
E) $8; 40 million

Question 7

When Canada exports a good, Canada's consumer surplus ________ and Canada's total surplus ________.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) decreases and Canada's producer surplus increases; does not change 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) decreases and Canada's producer surplus increases; does not change

Question 8

A country

Accepted Answer

A) imports those goods in which it has a comparative advantage. 
B) exports those goods in which it has a comparative advantage. 
C) imports goods produced in countries with lower wage rates. 
D) exports goods produced by domestic industries with low wages relative to its trading partners. 
E) exports those goods in which it has an absolute advantage. 
A) imports those goods in which it has a comparative advantage. 
B) exports those goods in which it has a comparative advantage. 
C) imports goods produced in countries with lower wage rates. 
D) exports goods produced by domestic industries with low wages relative to its trading partners. 
E) exports those goods in which it has an absolute advantage.

Question 9

Prior to international trade, if the price of good X is lower in country A than in country B,

Accepted Answer

A) country B has an absolute advantage in the production of good X. 
B) country B has a comparative advantage in the production of good X. 
C) country A has an absolute advantage in the production of good X. 
D) country A has a comparative advantage in the production of good X. 
E) country B should stop producing good X. 
A) country B has an absolute advantage in the production of good X. 
B) country B has a comparative advantage in the production of good X. 
C) country A has an absolute advantage in the production of good X. 
D) country A has a comparative advantage in the production of good X. 
E) country B should stop producing good X.

Question 10

Table 7.3.1
Canada's Market for Widgets
  
-Table 7.3.1 shows the Canadian supply of and demand for widgets. Widgets are available on the world market for $7. Canadian widget producers convince the government to protect the domestic industry from cheap imports. If the Canadian government sets an import quota of 8 million widgets, the resulting price of a widget in Canada will be ________, and domestic production will be ________.

Accepted Answer

A) $6; 40 million 
B) $7; 36 million 
C) $8; 32 million 
D) $9; 28 million 
E) $10; 32 million 
A) $6; 40 million 
B) $7; 36 million 
C) $8; 32 million 
D) $9; 28 million 
E) $10; 32 million

Question 11

Suppose that the world price of eggs is $1 a dozen, Canada does not trade internationally, and the equilibrium price of eggs in Canada is $3 a dozen. Then Canada begins to trade internationally. The price of eggs in Canada ________. Canadian consumers buy ________ eggs.

Accepted Answer

A) rises; more 
B) rises; less 
C) falls; more 
D) falls; less 
E) rises; the same quantity of 
A) rises; more 
B) rises; less 
C) falls; more 
D) falls; less 
E) rises; the same quantity of

Question 12

The proposition that protection is necessary to allow an infant industry to grow into a mature industry so that it can compete in world markets is the

Accepted Answer

A) infant-maturity argument. 
B) infant-industry argument. 
C) new industry proposition. 
D) growth proposition. 
E) dynamic comparative advantage argument. 
A) infant-maturity argument. 
B) infant-industry argument. 
C) new industry proposition. 
D) growth proposition. 
E) dynamic comparative advantage argument.

Question 13

If a quota is set at the same quantity of imports that results from a tariff,

Accepted Answer

A) the deadweight loss from the tariff is greater than the deadweight loss from the import quota. 
B) the deadweight loss from the tariff equals the deadweight loss from the import quota. 
C) the deadweight loss from the import quota is greater than the deadweight loss from the tariff. 
D) the government tariff revenue is greater than the importers' profit from the import quota. 
E) the government tariff revenue is less than the importers' profit from the import quota. 
A) the deadweight loss from the tariff is greater than the deadweight loss from the import quota. 
B) the deadweight loss from the tariff equals the deadweight loss from the import quota. 
C) the deadweight loss from the import quota is greater than the deadweight loss from the tariff. 
D) the government tariff revenue is greater than the importers' profit from the import quota. 
E) the government tariff revenue is less than the importers' profit from the import quota.

Question 14

Tariffs and import quotas differ in that

Accepted Answer

A) one is a form of trade restriction, while the other is not. 
B) one is a tax, while the other is a limit. 
C) one is imposed by the government, while the other is imposed by the private sector. 
D) one is legal, while the other is not. 
E) one increases imports, while the other decreases imports. 
A) one is a form of trade restriction, while the other is not. 
B) one is a tax, while the other is a limit. 
C) one is imposed by the government, while the other is imposed by the private sector. 
D) one is legal, while the other is not. 
E) one increases imports, while the other decreases imports.

Question 15

International trade benefits the

Accepted Answer

A) exporting country but not the importing country. 
B) importing country but not the exporting country. 
C) government of the importing country. 
D) government of the exporting country. 
E) exporting country and the importing country. 
A) exporting country but not the importing country. 
B) importing country but not the exporting country. 
C) government of the importing country. 
D) government of the exporting country. 
E) exporting country and the importing country.

Question 16

A tariff ________ the domestic price of the good and an import quota ________ the domestic price of the good.

Accepted Answer

A) lowers; lowers 
B) lowers; raises 
C) raises; lowers 
D) raises; raises 
E) does not change; does not change 
A) lowers; lowers 
B) lowers; raises 
C) raises; lowers 
D) raises; raises 
E) does not change; does not change

Question 17

Who benefits from imports?

Accepted Answer

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

Question 18

Canada has a comparative advantage in producing hardwood if the Canadian price of hardwood before international trade is ________ the world price.

Accepted Answer

A) equal to 
B) greater than 
C) not comparable to 
D) at least double 
E) less than 
A) equal to 
B) greater than 
C) not comparable to 
D) at least double 
E) less than

Question 19

If Canada imposes a tariff on imported cars,

Accepted Answer

A) Canada's demand curve for cars shifts rightward. 
B) Canada's demand curve for cars shifts leftward. 
C) Canada's supply curve of cars shifts rightward. 
D) Canada's supply curve of cars shifts leftward. 
E) the price of a car in Canada rises but neither Canada's demand curve nor Canada's supply curve shifts. 
A) Canada's demand curve for cars shifts rightward. 
B) Canada's demand curve for cars shifts leftward. 
C) Canada's supply curve of cars shifts rightward. 
D) Canada's supply curve of cars shifts leftward. 
E) the price of a car in Canada rises but neither Canada's demand curve nor Canada's supply curve shifts.

Question 20

Import quotas

Accepted Answer

A) are the same as tariffs. 
B) are not used by Canada. 
C) set the minimum percentage of the value of a product that must consist of imported components. 
D) benefit society. 
E) set the maximum number of units of a good that can be imported in a given time period. 
A) are the same as tariffs. 
B) are not used by Canada. 
C) set the minimum percentage of the value of a product that must consist of imported components. 
D) benefit society. 
E) set the maximum number of units of a good that can be imported in a given time period.

Exam 7: Global Markets in Action

Choose the statement that is incorrect.

A market is open to international trade. At the world price, the quantity demanded is 150 units and the quantity supplied is 200 units. This country will

Canada has a comparative advantage in producing airplanes if

A tariff ________ consumer surplus and an import quota ________ consumer surplus.

Table 7.3.1 Canada's Market for Widgets -Table 7.3.1 shows the Canadian supply of and demand for widgets. Widgets are available on the world market for $7. If the Canadian government imposes a tariff of $1, the domestic selling price will be ________ and quantity bought will be ________.

When Canada exports a good, Canada's consumer surplus ________ and Canada's total surplus ________.

A country

Prior to international trade, if the price of good X is lower in country A than in country B,

Suppose that the world price of eggs is $1 a dozen, Canada does not trade internationally, and the equilibrium price of eggs in Canada is $3 a dozen. Then Canada begins to trade internationally. The price of eggs in Canada ________. Canadian consumers buy ________ eggs.

The proposition that protection is necessary to allow an infant industry to grow into a mature industry so that it can compete in world markets is the

If a quota is set at the same quantity of imports that results from a tariff,

Tariffs and import quotas differ in that

International trade benefits the

A tariff ________ the domestic price of the good and an import quota ________ the domestic price of the good.

Who benefits from imports?

Canada has a comparative advantage in producing hardwood if the Canadian price of hardwood before international trade is ________ the world price.

If Canada imposes a tariff on imported cars,

Import quotas

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

A tariff consumer surplus and an import quota consumer surplus.

Table 7.3.1 Canada's Market for Widgets -Table 7.3.1 shows the Canadian supply of and demand for widgets. Widgets are available on the world market for $7. If the Canadian government imposes a tariff of $1, the domestic selling price will be and quantity bought will be .

When Canada exports a good, Canada's consumer surplus and Canada's total surplus .

Suppose that the world price of eggs is $1 a dozen, Canada does not trade internationally, and the equilibrium price of eggs in Canada is $3 a dozen. Then Canada begins to trade internationally. The price of eggs in Canada . Canadian consumers buy eggs.

A tariff the domestic price of the good and an import quota the domestic price of the good.