Exam 9: Application: International Trade

Using the graph below, answer the following questions about hammers. a. What is the equilibrium price of hammers before trade? b. What is the equilibrium quantity of hammers before trade? c. What is the price of hammers after trade is allowed? d. What is the quantity of hammers imported after trade is allowed? e. What is the amount of consumer surplus before trade? f. What is the amount of consumer surplus after trade? g. What is the amount of producer surplus before trade? h. What is the amount of producer surplus after trade? i. What is the amount of total surplus before trade? j. What is the amount of total surplus after trade? k. What is the change in total surplus because of trade?

Tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade, thus reducing the gains from trade.

"Trade raises the economic well-being of a nation in the sense that the gains of the winners exceed the losses of the losers." This statement is correct for a nation that exports manufactured goods, but it is not correct for a nation that imports manufactured goods.

Figure 9-9 -Refer to Figure 9-9. Producer surplus in this market before trade is

Figure 9-15 -Refer to Figure 9-15. Consumer surplus with trade and without a tariff is

Figure 9-9 -Refer to Figure 9-9. The change in total surplus in this market because of trade is

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. -Refer to Figure 9-8. When the country for which the figure is drawn allows international trade in cars,

Figure 9-20 The figure illustrates the market for rice in Vietnam. -Refer to Figure 9-20. In the absence of trade, total surplus in the Vietnamese rice market amounts to

Figure 9-5 -Refer to Figure 9-5. With trade, producer surplus is

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. -Refer to Figure 9-8. The country for which the figure is drawn

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

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case that

Figure 9-5 -Refer to Figure 9-5. Bearing in mind that this country is "small," which of the following events conceivably could cause the country to switch from being an importer of wagons to an exporter of wagons?

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then

The nation of Falconia forbids international trade. In Falconia, you can obtain a computer by trading 3 bicycles. In other countries, you can obtain a computer by trading 5 bicycles. These facts indicate that

Figure 9-15 -Refer to Figure 9-15. Producer surplus with the tariff is

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. When trade takes place, the quantity Q₂ - Q₁ is

Economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition.

Trade among nations is ultimately based on