Question 1

Figure 9-5  
-Refer to Figure 9-5. The horizontal line at the world price of wagons represents the

Accepted Answer

A) demand for wagons from the rest of the world. 
B) supply of wagons from the rest of the world. 
C) level of inefficiency in the domestic market caused by trade. 
D) surplus in the domestic wagon market. 
A) demand for wagons from the rest of the world. 
B) supply of wagons from the rest of the world. 
C) level of inefficiency in the domestic market caused by trade. 
D) surplus in the domestic wagon market.

Question 2

If a country allows free trade and its domestic price for a given good is lower than the world price, then it will import that good.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following assertions is not correct about the multilateral approach to free trade?

Accepted Answer

A) The multilateral approach has the potential to result in freer trade than does the unilateral approach. 
B) The multilateral approach may have a political advantage over the unilateral approach. 
C) The multilateral approach is simpler than the unilateral approach. 
D) NAFTA and GATT both represent multilateral approaches to free trade. 
A) The multilateral approach has the potential to result in freer trade than does the unilateral approach. 
B) The multilateral approach may have a political advantage over the unilateral approach. 
C) The multilateral approach is simpler than the unilateral approach. 
D) NAFTA and GATT both represent multilateral approaches to free trade.

Question 4

Figure 9-3. The domestic country is China.  
-Refer to Figure 9-3. With trade, China will

Accepted Answer

A) import 100 pencil sharpeners. 
B) import 250 pencil sharpeners. 
C) export 150 pencil sharpeners. 
D) export 250 pencil sharpeners. 
A) import 100 pencil sharpeners. 
B) import 250 pencil sharpeners. 
C) export 150 pencil sharpeners. 
D) export 250 pencil sharpeners.

Question 5

Figure 9-10. The figure applies to Mexico and the good is rifles.  
-Refer to Figure 9-10. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents

Accepted Answer

A) Mexico's gains from trade. 
B) the amount by which Mexico's gain in producer surplus exceeds its loss in consumer surplus due to trade. 
C) Mexico's loss in total surplus due to trade. 
D) All of the above are correct. 
A) Mexico's gains from trade. 
B) the amount by which Mexico's gain in producer surplus exceeds its loss in consumer surplus due to trade. 
C) Mexico's loss in total surplus due to trade. 
D) All of the above are correct.

Question 6

When, in our analysis of the gains and losses from international trade, we assume that a particular country is small, we are

Accepted Answer

A) assuming the domestic price before trade will continue to prevail once that country is opened up to trade with other countries. 
B) assuming there is no demand for that country's domestically-produced goods by other countries. 
C) assuming international trade can benefit producers, but not consumers, in that country. 
D) making an assumption that is not necessary to analyze the gains and losses from international trade. 
A) assuming the domestic price before trade will continue to prevail once that country is opened up to trade with other countries. 
B) assuming there is no demand for that country's domestically-produced goods by other countries. 
C) assuming international trade can benefit producers, but not consumers, in that country. 
D) making an assumption that is not necessary to analyze the gains and losses from international trade.

Question 7

When a nation first begins to trade with other countries and the nation becomes an importer of corn,

Accepted Answer

A) this is an indication that the world price of corn exceeds the nation's domestic price of corn in the absence of trade. 
B) this is an indication that the nation has a comparative advantage in producing corn. 
C) the nation's consumers of corn become better off and the nation's producers of corn become worse off. 
D) All of the above are correct. 
A) this is an indication that the world price of corn exceeds the nation's domestic price of corn in the absence of trade. 
B) this is an indication that the nation has a comparative advantage in producing corn. 
C) the nation's consumers of corn become better off and the nation's producers of corn become worse off. 
D) All of the above are correct.

Question 8

Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for cardboard is
S1U1B1 S1U1B0
S1U1B1 S1U1B0
 $Q ^ { D } = 200 - 2 P$ ,
where $Q ^ { D }$ represents the domestic quantity of cardboard demanded, in tons, and $P$ represents the price of a ton of cardboard.For Boxland, the equation of the domestic supply curve for cardboard is
S1U1B1 S1U1B0
S1U1B1 S1U1B0
 $Q ^ { S } = - 60 + 3 P$ ,
where $Q ^ { s }$ represents the domestic quantity of cardboard supplied, in tons, and $P$ again represents the price of a ton of cardboard.
-Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, if Boxland goes from prohibiting international trade in cardboard to allowing international trade in cardboard,

Accepted Answer

A) domestic producers of cardboard become better off and domestic consumers of cardboard become better off. 
B) domestic producers of cardboard become better off and domestic consumers of cardboard become worse off. 
C) domestic producers of cardboard become worse off and domestic consumers of cardboard become better off. 
D) domestic producers of cardboard become worse off and domestic consumers of cardboard become worse off. 
A) domestic producers of cardboard become better off and domestic consumers of cardboard become better off. 
B) domestic producers of cardboard become better off and domestic consumers of cardboard become worse off. 
C) domestic producers of cardboard become worse off and domestic consumers of cardboard become better off. 
D) domestic producers of cardboard become worse off and domestic consumers of cardboard become worse off.

Question 9

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

Accepted Answer

A) True 
 B)False

Question 10

Figure 9-2  
-Refer to Figure 9-2. With free trade, consumer surplus is

Accepted Answer

A) $45. 
B) $80. 
C) $210. 
D) $245. 
A) $45. 
B) $80. 
C) $210. 
D) $245.

Question 11

For Country A, the world price of textiles exceeds the domestic equilibrium price of textiles. As a result, international trade allows sellers of textiles in Country A to experience greater producer surplus than they otherwise would experience.

Accepted Answer

A) True 
 B)False

Question 12

Trade enhances the economic well-being of a nation in the sense that

Accepted Answer

A) both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question. 
B) the gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question. 
C) trade results in an increase in total surplus. 
D) trade puts downward pressure on the prices of all goods. 
A) both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question. 
B) the gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question. 
C) trade results in an increase in total surplus. 
D) trade puts downward pressure on the prices of all goods.

Question 13

Most economists support the infant-industry argument because it is so easy to implement in practice.

Accepted Answer

A) True 
 B)False

Question 14

Figure 9-17  
-Refer to Figure 9-17. The deadweight loss caused by the tariff is

Accepted Answer

A) $24. 
B) $72. 
C) $96. 
D) $144. 
A) $24. 
B) $72. 
C) $96. 
D) $144.

Question 15

Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is possible?

Accepted Answer

A) More Danish-produced chips are sold in Denmark. 
B) More foreign-produced chips are sold in Denmark. 
C) Danish consumers of chips become better off. 
D) Total surplus in the Danish chip market increases. 
A) More Danish-produced chips are sold in Denmark. 
B) More foreign-produced chips are sold in Denmark. 
C) Danish consumers of chips become better off. 
D) Total surplus in the Danish chip market increases.

Question 16

Figure 9-15  
-Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to

Accepted Answer

A) B. 
B) E. 
C) D + F. 
D) B + D + E + F. 
A) B. 
B) E. 
C) D + F. 
D) B + D + E + F.

Question 17

A tariff is a

Accepted Answer

A) limit on how much of a good can be exported. 
B) limit on how much of a good can be imported. 
C) tax on an exported good. 
D) tax on an imported good. 
A) limit on how much of a good can be exported. 
B) limit on how much of a good can be imported. 
C) tax on an exported good. 
D) tax on an imported good.

Question 18

Which of the following is the most accurate statement?

Accepted Answer

A) The one argument for restricting trade that almost all economists accept as valid is the infant-industry argument. 
B) Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. 
C) The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade. 
D) The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-industry argument. 
A) The one argument for restricting trade that almost all economists accept as valid is the infant-industry argument. 
B) Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. 
C) The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade. 
D) The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-industry argument.

Question 19

The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese.

Accepted Answer

A) True 
 B)False

Question 20

When a country allows international trade and becomes an exporter of a good,

Accepted Answer

A) domestic producers of the good become better off. 
B) domestic consumers of the good become worse off. 
C) the gains of the winners exceed the losses of the losers. 
D) All of the above are correct. 
A) domestic producers of the good become better off. 
B) domestic consumers of the good become worse off. 
C) the gains of the winners exceed the losses of the losers. 
D) All of the above are correct.

Exam 9: Application: International Trade

Figure 9-5 -Refer to Figure 9-5. The horizontal line at the world price of wagons represents the

If a country allows free trade and its domestic price for a given good is lower than the world price, then it will import that good.

Which of the following assertions is not correct about the multilateral approach to free trade?

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. With trade, China will

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents

When, in our analysis of the gains and losses from international trade, we assume that a particular country is small, we are

When a nation first begins to trade with other countries and the nation becomes an importer of corn,

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

Figure 9-2 -Refer to Figure 9-2. With free trade, consumer surplus is

For Country A, the world price of textiles exceeds the domestic equilibrium price of textiles. As a result, international trade allows sellers of textiles in Country A to experience greater producer surplus than they otherwise would experience.

Trade enhances the economic well-being of a nation in the sense that

Most economists support the infant-industry argument because it is so easy to implement in practice.

Figure 9-17 -Refer to Figure 9-17. The deadweight loss caused by the tariff is

Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is possible?

Figure 9-15 -Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to

A tariff is a

Which of the following is the most accurate statement?

The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese.

When a country allows international trade and becomes an exporter of a good,

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

Filters

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. The area bounded by the points (Q₀, P₀), (Q₂, P₁), and (Q₁, P₁) represents