Question 1

The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if

Accepted Answer

A) consumer surplus equals producer surplus in the Wheatland corn market. 
B) total surplus exceeds consumer surplus in the Wheatland corn market. 
C) Wheatland permits international trade in corn. 
D) Wheatland forbids international trade in corn. 
A) consumer surplus equals producer surplus in the Wheatland corn market. 
B) total surplus exceeds consumer surplus in the Wheatland corn market. 
C) Wheatland permits international trade in corn. 
D) Wheatland forbids international trade in corn.

Question 2

Figure 9-4. The domestic country is Nicaragua.  
-Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is

Accepted Answer

A) $625, and this is an increase in total surplus. 
B) $750, and this is an increase in total surplus. 
C) $625, and this is a decrease in total surplus. 
D) $750, and this is a decrease in total surplus. 
A) $625, and this is an increase in total surplus. 
B) $750, and this is an increase in total surplus. 
C) $625, and this is a decrease in total surplus. 
D) $750, and this is a decrease in total surplus.

Question 3

Figure 9-4. The domestic country is Nicaragua.  
-Refer to Figure 9-4. Which of the following statements is accurate?

Accepted Answer

A) Consumer surplus with trade is $3,200. 
B) Producer surplus with trade is $375. 
C) The gains from trade amount to $800. 
D) The gains from trade are represented on the graph by the area bounded by the points (0, $12), (300, $12), (300, $7) and (0, $7). 
A) Consumer surplus with trade is $3,200. 
B) Producer surplus with trade is $375. 
C) The gains from trade amount to $800. 
D) The gains from trade are represented on the graph by the area bounded by the points (0, $12), (300, $12), (300, $7) and (0, $7).

Question 4

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price.  
-Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area

Accepted Answer

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

Question 5

Congresswoman Gaga represents a state in which several firms manufacture furniture. She wants to impose tariffs on all imported furniture. Which of the following is the least likely consequence of such tariffs?

Accepted Answer

A) Domestic furniture buyers will lose consumer surplus, have less variety, and will pay higher prices. 
B) Domestic furniture producers will gain producer surplus. 
C) Domestic furniture producers will have a higher rate of technological advance. 
D) Domestic furniture producers will have more market power. 
A) Domestic furniture buyers will lose consumer surplus, have less variety, and will pay higher prices. 
B) Domestic furniture producers will gain producer surplus. 
C) Domestic furniture producers will have a higher rate of technological advance. 
D) Domestic furniture producers will have more market power.

Question 6

Figure 9-17  
-Refer to Figure 9-17. With trade and a tariff, total surplus is

Accepted Answer

A) $1,224. 
B) $1,416. 
C) $1,512. 
D) $1,704. 
A) $1,224. 
B) $1,416. 
C) $1,512. 
D) $1,704.

Question 7

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 $60. Then, relative to the no-trade situation, international trade in cardboard produces which of the following results for Boxland?

Accepted Answer

A) It decreases consumer surplus, increases producer surplus, and decreases total surplus. 
B) It decreases consumer surplus, increases producer surplus, and increases total surplus. 
C) It decreases consumer surplus, decreases producer surplus, and decreases total surplus. 
D) It increases consumer surplus, increases producer surplus, and increases total surplus. 
A) It decreases consumer surplus, increases producer surplus, and decreases total surplus. 
B) It decreases consumer surplus, increases producer surplus, and increases total surplus. 
C) It decreases consumer surplus, decreases producer surplus, and decreases total surplus. 
D) It increases consumer surplus, increases producer surplus, and increases total surplus.

Question 8

Figure 9-2  
-Refer to Figure 9-2. At the world price and with free trade,

Accepted Answer

A) the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied. 
B) the basket market is in equilibrium. 
C) the domestic demand for baskets is perfectly inelastic. 
D) both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade. 
A) the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied. 
B) the basket market is in equilibrium. 
C) the domestic demand for baskets is perfectly inelastic. 
D) both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade.

Question 9

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

Accepted Answer

A) Moldova can only import goods; it cannot export goods. 
B) Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage. 
C) only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant. 
D) Moldova is a price taker. 
A) Moldova can only import goods; it cannot export goods. 
B) Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage. 
C) only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant. 
D) Moldova is a price taker.

Question 10

Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade

Accepted Answer

A) can realize economies of scale more fully. 
B) have greater market power. 
C) experience larger producer surplus. 
D) All of the above are correct. 
A) can realize economies of scale more fully. 
B) have greater market power. 
C) experience larger producer surplus. 
D) All of the above are correct.

Question 11

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

Accepted Answer

A) consumer surplus increases and total surplus increases in the market for that good. 
B) consumer surplus increases and total surplus decreases in the market for that good. 
C) consumer surplus decreases and total surplus increases in the market for that good. 
D) consumer surplus decreases and total surplus decreases in the market for that good. 
A) consumer surplus increases and total surplus increases in the market for that good. 
B) consumer surplus increases and total surplus decreases in the market for that good. 
C) consumer surplus decreases and total surplus increases in the market for that good. 
D) consumer surplus decreases and total surplus decreases in the market for that good.

Question 12

NAFTA is an example of a multilateral approach to achieving free trade.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches.
-Refer to Scenario 9-1. If trade in peaches is allowed, the United States

Accepted Answer

A) will become an importer of peaches. 
B) will become an exporter of peaches. 
C) may become either an importer or an exporter of peaches, but this cannot be determined. 
D) will experience increases in both consumer surplus and producer surplus. 
A) will become an importer of peaches. 
B) will become an exporter of peaches. 
C) may become either an importer or an exporter of peaches, but this cannot be determined. 
D) will experience increases in both consumer surplus and producer surplus.

Question 14

In a 2007 New York Times article Paul Krugman wrote that

Accepted Answer

A) the infant-industry argument works well as an argument in favor of protection for the U.S. steel industry. 
B) the negative effects of third world exports on U.S. wages may be increasing. 
C) there are social gains to the U.S. from free trade. 
D) high wage countries account for a growing share of U.S. imports of manufactured goods. 
A) the infant-industry argument works well as an argument in favor of protection for the U.S. steel industry. 
B) the negative effects of third world exports on U.S. wages may be increasing. 
C) there are social gains to the U.S. from free trade. 
D) high wage countries account for a growing share of U.S. imports of manufactured goods.

Question 15

Assume, for the U.S., that the domestic price of wheat without international trade is higher than the world price of wheat. This suggests that, in the production of wheat,

Accepted Answer

A) the U.S. has a comparative advantage over other countries and the U.S. will export wheat. 
B) the U.S. has a comparative advantage over other countries and the U.S. will import wheat. 
C) other countries have a comparative advantage over the U.S. and the U.S. will export wheat. 
D) other countries have a comparative advantage over the U.S. and the U.S. will import wheat. 
A) the U.S. has a comparative advantage over other countries and the U.S. will export wheat. 
B) the U.S. has a comparative advantage over other countries and the U.S. will import wheat. 
C) other countries have a comparative advantage over the U.S. and the U.S. will export wheat. 
D) other countries have a comparative advantage over the U.S. and the U.S. will import wheat.

Question 16

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Accepted Answer

A) in increase in exports of low-priced goods from developing countries to developed countries. 
B) the replacement of manufacturing jobs with service jobs in developed countries. 
C) economic dislocations caused by the North American Free Trade Agreement (NAFT
A)  in the 1990s. 
D) high tariffs imposed during the Great Depression of the 1930s. 
A) in increase in exports of low-priced goods from developing countries to developed countries. 
B) the replacement of manufacturing jobs with service jobs in developed countries. 
C) economic dislocations caused by the North American Free Trade Agreement (NAFT
A)  in the 1990s. 
D) high tariffs imposed during the Great Depression of the 1930s.

Question 17

Several arguments for restricting trade have been advanced. Those arguments do not include

Accepted Answer

A) the jobs argument. 
B) the protection-as-a-bargaining-chip argument. 
C) the no-deadweight-loss argument. 
D) the infant-industry argument. 
A) the jobs argument. 
B) the protection-as-a-bargaining-chip argument. 
C) the no-deadweight-loss argument. 
D) the infant-industry argument.

Question 18

Assume, for Taiwan, that the domestic price of soybeans without international trade is lower than the world price of soybeans. This suggests that, in the production of soybeans,

Accepted Answer

A) Taiwan has a comparative advantage over other countries and Taiwan will import soybeans. 
B) Taiwan has a comparative advantage over other countries and Taiwan will export soybeans. 
C) other countries have a comparative advantage over Taiwan and Taiwan will import soybeans. 
D) other countries have a comparative advantage over Taiwan and Taiwan will export soybeans. 
A) Taiwan has a comparative advantage over other countries and Taiwan will import soybeans. 
B) Taiwan has a comparative advantage over other countries and Taiwan will export soybeans. 
C) other countries have a comparative advantage over Taiwan and Taiwan will import soybeans. 
D) other countries have a comparative advantage over Taiwan and Taiwan will export soybeans.

Question 19

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland.  
-Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Accepted Answer

A) producer surplus will be smaller than it would be if Isoland banned trade. 
B) consumer surplus will be smaller than it would be if Isoland banned trade. 
C) the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied. 
D) Isoland will be an importer of peaches. 
A) producer surplus will be smaller than it would be if Isoland banned trade. 
B) consumer surplus will be smaller than it would be if Isoland banned trade. 
C) the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied. 
D) Isoland will be an importer of peaches.

Question 20

Assume, for Canada, that the domestic price of wheat without international trade is lower than the world price of wheat. This suggests that, in the production of wheat,

Accepted Answer

A) Canada has a comparative advantage over other countries and Canada will export wheat. 
B) Canada has a comparative advantage over other countries and Canada will import wheat. 
C) other countries have a comparative advantage over Canada and Canada will export wheat. 
D) other countries have a comparative advantage over Canada and Canada will import wheat. 
A) Canada has a comparative advantage over other countries and Canada will export wheat. 
B) Canada has a comparative advantage over other countries and Canada will import wheat. 
C) other countries have a comparative advantage over Canada and Canada will export wheat. 
D) other countries have a comparative advantage over Canada and Canada will import wheat.

Exam 9: Application: International Trade

The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if

Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is

Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. Which of the following statements is accurate?

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. -Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area

Congresswoman Gaga represents a state in which several firms manufacture furniture. She wants to impose tariffs on all imported furniture. Which of the following is the least likely consequence of such tariffs?

Figure 9-17 -Refer to Figure 9-17. With trade and a tariff, total surplus is

Figure 9-2 -Refer to Figure 9-2. At the world price and with free trade,

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

NAFTA is an example of a multilateral approach to achieving free trade.

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. -Refer to Scenario 9-1. If trade in peaches is allowed, the United States

In a 2007 New York Times article Paul Krugman wrote that

Assume, for the U.S., that the domestic price of wheat without international trade is higher than the world price of wheat. This suggests that, in the production of wheat,

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Several arguments for restricting trade have been advanced. Those arguments do not include

Assume, for Taiwan, that the domestic price of soybeans without international trade is lower than the world price of soybeans. This suggests that, in the production of soybeans,

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland. -Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Assume, for Canada, that the domestic price of wheat without international trade is lower than the world price of wheat. This suggests that, in the production of wheat,

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

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