Question 1

Figure 9-11  
-Refer to Figure 9-11. Producer surplus in this market before trade is

Accepted Answer

A) C. 
B) B + C. 
C) A + B + D. 
D) B + C + D. 
A) C. 
B) B + C. 
C) A + B + D. 
D) B + C + D.

Question 2

The greater the elasticities of supply and demand, the smaller are the gains from trade.

Accepted Answer

A) True 
 B)False

Question 3

If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff.

Accepted Answer

A) True 
 B)False

Question 4

Most economists view the United States' experience with trade as

Accepted Answer

A) one from which no firm conclusions about the virtues of free trade can be reached, due to the relatively short history of international trade in the U.S. 
B) one from which no firm conclusions about the virtues of free trade can be reached, due to the lack of trade within the U.S. throughout most of the early history of the U.S. 
C) an ongoing experiment that confirms the virtues of free trade. 
D) an ongoing experiment that calls into serious question the notion that free trade enhances the economic well-being of a nation. 
A) one from which no firm conclusions about the virtues of free trade can be reached, due to the relatively short history of international trade in the U.S. 
B) one from which no firm conclusions about the virtues of free trade can be reached, due to the lack of trade within the U.S. throughout most of the early history of the U.S. 
C) an ongoing experiment that confirms the virtues of free trade. 
D) an ongoing experiment that calls into serious question the notion that free trade enhances the economic well-being of a nation.

Question 5

Suppose the United States exports cars to Canada and imports bananas from Mexico. This situation suggests

Accepted Answer

A) the United States has a comparative advantage relative to Canada in producing cars, and Mexico has a comparative advantage relative to the United States in producing bananas. 
B) the United States has a comparative advantage relative to Canada in producing bananas, and Mexico has a comparative advantage relative to the United States in producing cars. 
C) the United States has an absolute advantage relative to Canada in producing cars, and Mexico has an absolute advantage relative to the United States in producing bananas. 
D) the United States has an absolute advantage relative to Mexico in producing bananas, and Canada has an absolute advantage relative to the United States in producing cars. 
A) the United States has a comparative advantage relative to Canada in producing cars, and Mexico has a comparative advantage relative to the United States in producing bananas. 
B) the United States has a comparative advantage relative to Canada in producing bananas, and Mexico has a comparative advantage relative to the United States in producing cars. 
C) the United States has an absolute advantage relative to Canada in producing cars, and Mexico has an absolute advantage relative to the United States in producing bananas. 
D) the United States has an absolute advantage relative to Mexico in producing bananas, and Canada has an absolute advantage relative to the United States in producing cars.

Question 6

Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called

Accepted Answer

A) marginal cost of production. 
B) marginal benefit of size. 
C) economies of scale. 
D) economies of production. 
A) marginal cost of production. 
B) marginal benefit of size. 
C) economies of scale. 
D) economies of production.

Question 7

Figure 9-6  
-Refer to Figure 9-6. The imposition of a tariff on carnations

Accepted Answer

A) increases the number of carnations imported by 100. 
B) increases the number of carnations imported by 200. 
C) decreases the number of carnations imported by 200. 
D) decreases the number of carnations imported by 400. 
A) increases the number of carnations imported by 100. 
B) increases the number of carnations imported by 200. 
C) decreases the number of carnations imported by 200. 
D) decreases the number of carnations imported by 400.

Question 8

A tariff on a product makes

Accepted Answer

A) domestic sellers better off and domestic buyers worse off. 
B) domestic sellers worse off and domestic buyers worse off. 
C) domestic sellers better off and domestic buyers better off. 
D) domestic sellers worse off and domestic buyers better off. 
A) domestic sellers better off and domestic buyers worse off. 
B) domestic sellers worse off and domestic buyers worse off. 
C) domestic sellers better off and domestic buyers better off. 
D) domestic sellers worse off and domestic buyers better off.

Question 9

Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil.  
-Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,

Accepted Answer

A) consumer surplus changes from the area A + B + D to the area A. 
B) producer surplus changes from the area C to the area B + C + D. 
C) total surplus decreases by the area D. 
D) All of the above are correct. 
A) consumer surplus changes from the area A + B + D to the area A. 
B) producer surplus changes from the area C to the area B + C + D. 
C) total surplus decreases by the area D. 
D) All of the above are correct.

Question 10

Figure 9-15  
-Refer to Figure 9-15. For the saddle market, area E represents

Accepted Answer

A) government's revenue from the tariff. 
B) producer surplus after the tariff becomes effective. 
C) the decrease in consumer surplus, relative to the free-trade situation, as a result of the tariff. 
D) the decrease in total surplus, relative to the free-trade situation, as a result of the tariff. 
A) government's revenue from the tariff. 
B) producer surplus after the tariff becomes effective. 
C) the decrease in consumer surplus, relative to the free-trade situation, as a result of the tariff. 
D) the decrease in total surplus, relative to the free-trade situation, as a result of the tariff.

Question 11

Figure 9-5  
-Refer to Figure 9-5. With trade, this country

Accepted Answer

A) exports 20 wagons. 
B) exports 50 wagons. 
C) imports 30 wagons. 
D) imports 50 wagons. 
A) exports 20 wagons. 
B) exports 50 wagons. 
C) imports 30 wagons. 
D) imports 50 wagons.

Question 12

Trade decisions are based on the principle of absolute advantage.

Accepted Answer

A) True 
 B)False

Question 13

About what percent of total world trade is accounted for by countries that belong to the World Trade Organization?

Accepted Answer

A) 54 percent 
B) 72 percent 
C) 89 percent 
D) 97 percent 
A) 54 percent 
B) 72 percent 
C) 89 percent 
D) 97 percent

Question 14

An import quota

Accepted Answer

A) is preferable to a tariff since an import quota does not create a deadweight loss. 
B) is a tax on imported goods. 
C) reduces the welfare of domestic consumers. 
D) reduces the welfare of domestic producers. 
A) is preferable to a tariff since an import quota does not create a deadweight loss. 
B) is a tax on imported goods. 
C) reduces the welfare of domestic consumers. 
D) reduces the welfare of domestic producers.

Question 15

Since World War II, GATT has been responsible for reducing the average tariff among member countries from about

Accepted Answer

A) 40 percent to about 5 percent. 
B) 40 percent to about 20 percent. 
C) 80 percent to about 20 percent. 
D) 20 percent to about 10 percent. 
A) 40 percent to about 5 percent. 
B) 40 percent to about 20 percent. 
C) 80 percent to about 20 percent. 
D) 20 percent to about 10 percent.

Question 16

Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil.  
-Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,

Accepted Answer

A) consumer surplus for domestic crude-oil consumers decreases. 
B) the demand for crude oil by domestic crude-oil consumers decreases. 
C) the losses of the domestic losers outweigh the gains of the domestic winners. 
D) domestic crude-oil producers sell less crude oil. 
A) consumer surplus for domestic crude-oil consumers decreases. 
B) the demand for crude oil by domestic crude-oil consumers decreases. 
C) the losses of the domestic losers outweigh the gains of the domestic winners. 
D) domestic crude-oil producers sell less crude oil.

Question 17

Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers. As a result of the French subsidy, sales of French wheat to Germany

Accepted Answer

A) may prompt German farmers to invoke the unfair-competition argument. 
B) increase the consumer surplus of German buyers of wheat. 
C) increase the total surplus of the German people. 
D) All of the above are correct. 
A) may prompt German farmers to invoke the unfair-competition argument. 
B) increase the consumer surplus of German buyers of wheat. 
C) increase the total surplus of the German people. 
D) All of the above are correct.

Question 18

Figure 9-5  
-Refer to Figure 9-5. Without trade, consumer surplus amounts to

Accepted Answer

A) $210.50. 
B) $245.50. 
C) $367.50. 
D) $607.50. 
A) $210.50. 
B) $245.50. 
C) $367.50. 
D) $607.50.

Question 19

Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.

Accepted Answer

A) True 
 B)False

Question 20

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

Accepted Answer

A) confirmation of the virtues of free trade. 
B) confirmation of the infant-industry argument. 
C) confirmation that free trade agreements are not necessary. 
D) confirmation that specialization in absolute advantage works. 
A) confirmation of the virtues of free trade. 
B) confirmation of the infant-industry argument. 
C) confirmation that free trade agreements are not necessary. 
D) confirmation that specialization in absolute advantage works.

Exam 9: Application: International Trade

Figure 9-11 -Refer to Figure 9-11. Producer surplus in this market before trade is

The greater the elasticities of supply and demand, the smaller are the gains from trade.

If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff.

Most economists view the United States' experience with trade as

Suppose the United States exports cars to Canada and imports bananas from Mexico. This situation suggests

Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called

Figure 9-6 -Refer to Figure 9-6. The imposition of a tariff on carnations

A tariff on a product makes

Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. -Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,

Figure 9-15 -Refer to Figure 9-15. For the saddle market, area E represents

Figure 9-5 -Refer to Figure 9-5. With trade, this country

Trade decisions are based on the principle of absolute advantage.

About what percent of total world trade is accounted for by countries that belong to the World Trade Organization?

An import quota

Since World War II, GATT has been responsible for reducing the average tariff among member countries from about

Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. -Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,

Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers. As a result of the French subsidy, sales of French wheat to Germany

Figure 9-5 -Refer to Figure 9-5. Without trade, consumer surplus amounts to

Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

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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