Question 1

A common argument in favor of restricting trade

Accepted Answer

A) concerns the strategy of bargaining. 
B) is that efforts should be made to get new industries started. 
C) emphasizes the belief that all countries should play by the same rules. 
D) All of the above are correct. 
A) concerns the strategy of bargaining. 
B) is that efforts should be made to get new industries started. 
C) emphasizes the belief that all countries should play by the same rules. 
D) All of the above are correct.

Question 2

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

Accepted Answer

A) the country will be an exporter of the good. 
B) the country will be an importer of the good. 
C) the country will be neither an exporter nor an importer of the good. 
D) Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither. 
A) the country will be an exporter of the good. 
B) the country will be an importer of the good. 
C) the country will be neither an exporter nor an importer of the good. 
D) Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

Question 3

The before-trade price of fish in Germany is $8.00 per pound. The world price of fish is $6.00 per pound. Germany is a price-taker in the fish market. If Germany allows trade in fish, then Germany will become an

Accepted Answer

A) importer of fish and the price of fish in Germany will be $6.00. 
B) importer of fish and the price of fish in Germany will be $8.00. 
C) exporter of fish and the price of fish in Germany will be $6.00. 
D) exporter of fish and the price of fish in Germany will be $8.00. 
A) importer of fish and the price of fish in Germany will be $6.00. 
B) importer of fish and the price of fish in Germany will be $8.00. 
C) exporter of fish and the price of fish in Germany will be $6.00. 
D) exporter of fish and the price of fish in Germany will be $8.00.

Question 4

The history of the textile industry raises important questions for economic policy.

Accepted Answer

A) True 
 B)False

Question 5

Figure 9-17  
-Refer to Figure 9-17. With free trade, the country imports

Accepted Answer

A) 16 units of the good. 
B) 24 units of the good. 
C) 60 units of the good. 
D) 64 units of the good. 
A) 16 units of the good. 
B) 24 units of the good. 
C) 60 units of the good. 
D) 64 units of the good.

Question 6

Chile allows trade with the rest of the world. We know that Chile has a comparative advantage in producing lemons if we know that

Accepted Answer

A) Chile imports lemons. 
B) the world price of lemons is higher than the price of lemons that would prevail in Chile if trade with other countries were not allowed. 
C) consumer surplus in Chile would exceed producer surplus in Chile if trade with other countries were not allowed. 
D) All of the above are correct. 
A) Chile imports lemons. 
B) the world price of lemons is higher than the price of lemons that would prevail in Chile if trade with other countries were not allowed. 
C) consumer surplus in Chile would exceed producer surplus in Chile if trade with other countries were not allowed. 
D) All of the above are correct.

Question 7

Figure 9-1
The figure illustrates the market for wool in Scotland.  
-Refer to Figure 9-1. When trade is allowed,

Accepted Answer

A) Scotland producers of wool become better off and Scotland consumers of wool become worse off. 
B) Scotland consumers of wool become better off and Scotland producers of wool become worse off. 
C) both Scotland producers and consumers of wool become better off. 
D) both Scotland producers and consumers of wool become worse off. 
A) Scotland producers of wool become better off and Scotland consumers of wool become worse off. 
B) Scotland consumers of wool become better off and Scotland producers of wool become worse off. 
C) both Scotland producers and consumers of wool become better off. 
D) both Scotland producers and consumers of wool become worse off.

Question 8

When a country allows international trade and becomes an importer 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.

Question 9

Suppose Guatemala has an absolute advantage over other countries in producing sugar, but other countries have a comparative advantage over Guatemala in producing sugar. If trade in sugar is allowed, Guatemala

Accepted Answer

A) will import sugar. 
B) will export sugar. 
C) will either export sugar or export sugar, but it is not clear from the given information. 
D) would have nothing to gain either from exporting or importing sugar. 
A) will import sugar. 
B) will export sugar. 
C) will either export sugar or export sugar, but it is not clear from the given information. 
D) would have nothing to gain either from exporting or importing sugar.

Question 10

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

Accepted Answer

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

Question 11

Economists view free trade as a way to raise living standards both at home and abroad.

Accepted Answer

A) True 
 B)False

Question 12

If a country allows free trade and imports cars, then it is the case that the gains to domestic producers outweigh the losses to domestic consumers.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the most accurate statement?

Accepted Answer

A) Protection is necessary in order for young industries to grow up and be successful. 
B) Protection is not necessary for an industry to grow. 
C) Protection is necessary because if young industries are not protected, they may suffer losses. 
D) Protection may not always be necessary for infant industries, but it has proven to be useful in most cases. 
A) Protection is necessary in order for young industries to grow up and be successful. 
B) Protection is not necessary for an industry to grow. 
C) Protection is necessary because if young industries are not protected, they may suffer losses. 
D) Protection may not always be necessary for infant industries, but it has proven to be useful in most cases.

Question 14

In a December 2007 New York Times column, Paul Krugman noted that

Accepted Answer

A) it is difficult to find instances of trade between high-wage countries in the modern era. 
B) it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C) the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D) the United States now imports more manufactured goods from the third world than from other advanced countries. 
A) it is difficult to find instances of trade between high-wage countries in the modern era. 
B) it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C) the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D) the United States now imports more manufactured goods from the third world than from other advanced countries.

Question 15

If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results from a tariff is represented on the supply-and-demand graph by

Accepted Answer

A) the area of one triangle. 
B) the area of one rectangle. 
C) the combined areas of two different triangles. 
D) the combined areas of two different rectangles. 
A) the area of one triangle. 
B) the area of one rectangle. 
C) the combined areas of two different triangles. 
D) the combined areas of two different rectangles.

Question 16

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

Accepted Answer

A) True 
 B)False

Question 17

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

Accepted Answer

A) national-security argument. 
B) infant-industry argument. 
C) unfair competition argument. 
D) protection-as-a-bargaining chip-argument. 
A) national-security argument. 
B) infant-industry argument. 
C) unfair competition argument. 
D) protection-as-a-bargaining chip-argument.

Question 18

A logical starting point from which the study of international trade begins is

Accepted Answer

A) the recognition that not all markets are competitive. 
B) the recognition that government intervention in markets sometimes enhances the economic welfare of the society. 
C) the principle of absolute advantage. 
D) the principle of comparative advantage. 
A) the recognition that not all markets are competitive. 
B) the recognition that government intervention in markets sometimes enhances the economic welfare of the society. 
C) the principle of absolute advantage. 
D) the principle of comparative advantage.

Question 19

Figure 9-6  
-Refer to Figure 9-6. When the tariff is imposed, domestic consumers

Accepted Answer

A) lose by $500. 
B) lose by $900. 
C) gain by $500. 
D) gain by $900. 
A) lose by $500. 
B) lose by $900. 
C) gain by $500. 
D) gain by $900.

Question 20

Figure 9-1
The figure illustrates the market for wool in Scotland.  
-Refer to Figure 9-1. When trade in wool is allowed, producer surplus in Scotland

Accepted Answer

A) increases by the area B + D. 
B) increases by the area B + D + G. 
C) decreases by the area C + F. 
D) decreases by the area G. 
A) increases by the area B + D. 
B) increases by the area B + D + G. 
C) decreases by the area C + F. 
D) decreases by the area G.

Exam 9: Application: International Trade

A common argument in favor of restricting trade

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

The before-trade price of fish in Germany is $8.00 per pound. The world price of fish is $6.00 per pound. Germany is a price-taker in the fish market. If Germany allows trade in fish, then Germany will become an

The history of the textile industry raises important questions for economic policy.

Figure 9-17 -Refer to Figure 9-17. With free trade, the country imports

Chile allows trade with the rest of the world. We know that Chile has a comparative advantage in producing lemons if we know that

Figure 9-1 The figure illustrates the market for wool in Scotland. -Refer to Figure 9-1. When trade is allowed,

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

Suppose Guatemala has an absolute advantage over other countries in producing sugar, but other countries have a comparative advantage over Guatemala in producing sugar. If trade in sugar is allowed, Guatemala

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

Economists view free trade as a way to raise living standards both at home and abroad.

If a country allows free trade and imports cars, then it is the case that the gains to domestic producers outweigh the losses to domestic consumers.

Which of the following is the most accurate statement?

In a December 2007 New York Times column, Paul Krugman noted that

If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results from a tariff is represented on the supply-and-demand graph by

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

A logical starting point from which the study of international trade begins is

Figure 9-6 -Refer to Figure 9-6. When the tariff is imposed, domestic consumers

Figure 9-1 The figure illustrates the market for wool in Scotland. -Refer to Figure 9-1. When trade in wool is allowed, producer surplus in Scotland

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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