Question 1

The economic consequences of opening trade and permitting increased imports are:

Accepted Answer

A)  both domestic consumers and domestic producers are better off 
B)  domestic consumers are better off and domestic producers are worse off 
C)  domestic consumers are worse off and domestic producers are better off 
D)  both domestic consumers and domestic producers are worse off 
A)  both domestic consumers and domestic producers are better off 
B)  domestic consumers are better off and domestic producers are worse off 
C)  domestic consumers are worse off and domestic producers are better off 
D)  both domestic consumers and domestic producers are worse off

Question 2

New Zealand is a large exporter of dairy products. This means that NZ dairy exporters are better off as a result of this trade but domestic customers are worse off.

Accepted Answer

A) True 
 B)False

Question 3

Graph 9-10
  
-Using Graph 9-10, fill-in the answers for the following questions.
a. consumer surplus before trade would be area(s) _______________.
b. consumer surplus after trade would be area(s) _______________.
c. producer surplus before trade would be area(s) _______________.
d. producer surplus after trade would be area(s) _______________.
e. total surplus before trade would be area(s) ______________.
f. total surplus after trade would be area(s) ______________.

Accepted Answer

a. A + B
b. A
c. C
d

Question 4

In practice, it has proven to be extraordinarily difficult for governments to pick the right infant industries to protect.

Accepted Answer

A) True 
 B)False

Question 5

Suppose France imposes a tariff on imported US computers. The tariff will raise the price of computers and will make both French producers and consumers of computers worse off.

Accepted Answer

A) True 
 B)False

Question 6

Graph 9-3
  
-In Graph 9-3, area E represents:

Accepted Answer

A)  a part of consumer surplus 
B)  a part of producer surplus 
C)  a surplus for import licence holders 
D)  government revenue 
A)  a part of consumer surplus 
B)  a part of producer surplus 
C)  a surplus for import licence holders 
D)  government revenue

Question 7

In general, if a country allows trade and becomes an importer of a good, domestic producers of the good are worse off, domestic consumers of the good are better off, but the economic wellbeing of the country increases.

Accepted Answer

A) True 
 B)False

Question 8

Graph 9-2
This graph refers to the market for saddles in Argentina.
  
-According Graph 9-2, the quantity of saddles exported from Argentina is:

Accepted Answer

A)  Q0 minus Q1 
B)  Q2 minus Q1 
C)  Q2 minus Q0 
D)  Q0 
A)  Q0 minus Q1 
B)  Q2 minus Q1 
C)  Q2 minus Q0 
D)  Q0

Question 9

A tariff and an import quota will both:

Accepted Answer

A)  increase the quantity of imports and raise domestic price 
B)  increase the quantity of imports and lower domestic price 
C)  reduce the quantity of imports and raise domestic price 
D)  reduce the quantity of imports and lower domestic price 
A)  increase the quantity of imports and raise domestic price 
B)  increase the quantity of imports and lower domestic price 
C)  reduce the quantity of imports and raise domestic price 
D)  reduce the quantity of imports and lower domestic price

Question 10

Graph 9-9
  
-In Graph 9-9, as a result of the tariff, deadweight loss would be:

Accepted Answer

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A quota can potentially cause an even larger deadweight loss than a tariff.

Accepted Answer

A) True 
 B)False

Question 13

Graph 9-11
  
-Using Graph 9-11, fill-in the answers for the following questions.
a. consumer surplus before trade would be area(s) _______________.
b. consumer surplus after trade would be area(s) _______________.
c. producer surplus before trade would be area(s) _______________.
d. producer surplus after trade would be area(s) _______________.
e. total surplus before trade would be area(s) ______________.
f. total surplus after trade would be area(s) ______________.

Accepted Answer

a. A
b. A + B + D
c.

Question 14

Graph 9-1
This graph refers to the market for beef in Japan.
  
-According to Graph 9-1, if trade in beef is allowed, Japan:

Accepted Answer

A)  will become an importer of beef 
B)  will become an exporter of beef 
C)  could become either an importer of beef or an exporter of beef 
D)  will neither import nor export beef 
A)  will become an importer of beef 
B)  will become an exporter of beef 
C)  could become either an importer of beef or an exporter of beef 
D)  will neither import nor export beef

Question 15

'Tariffs are needed to reduce imports during times of recession in order to increase domestic output.' This statement would be most closely associated with which argument for restricting trade?

Accepted Answer

A)  the jobs argument 
B)  the infant industry argument 
C)  the national security argument 
D)  the unfair competition argument 
A)  the jobs argument 
B)  the infant industry argument 
C)  the national security argument 
D)  the unfair competition argument

Question 16

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive in a market.

Accepted Answer

A) True 
 B)False

Question 17

Use the following information to answer the following questions.
The before-trade price of logs in New Zealand is $100 per cubic metre. The world price of logs is $200 per cubic metre. New Zealand is a price taker in the world log market.
-When a country allows trade and becomes an exporter of a good:

Accepted Answer

A)  both domestic producers and domestic consumers are better off 
B)  domestic producers are better off and domestic consumers are worse off 
C)  domestic producers are worse off and domestic consumers are better off 
D)  both domestic producers and domestic consumers are worse off 
A)  both domestic producers and domestic consumers are better off 
B)  domestic producers are better off and domestic consumers are worse off 
C)  domestic producers are worse off and domestic consumers are better off 
D)  both domestic producers and domestic consumers are worse off

Question 18

Benefits from free trade include increased variety of goods and increased competition.

Accepted Answer

A) True 
 B)False

Question 19

Graph 9-14
  
-Considering Graph 9-14, assume that the government imposes a $ one tariff on hammers. Answer the following questions, given this information.
a. What is the domestic price and quantity demanded of hammers after the tariff is imposed?
b. What is the quantity of hammers imported before the tariff?
c. What is the quantity of hammers imported after the tariff?
d. What would be the amount of consumer surplus before the tariff?
e. What would be the amount of consumer surplus after the tariff?
f. What would be the amount of producer surplus before the tariff?
g. What would be the amount of producer surplus after the tariff?
h. What would be the amount of government revenue because of the tariff?
i. What would be the total amount of deadweight loss due to the tariff?

Accepted Answer

a. $6, 84
b. 66
c. 4

Question 20

Graph 9-6
This graph refers to the market for oil in Spain.
  
-According to Graph 9-6, consumer surplus in Spain after trade would be:

Accepted Answer

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

Exam 9: Application: International Trade

The economic consequences of opening trade and permitting increased imports are:

New Zealand is a large exporter of dairy products. This means that NZ dairy exporters are better off as a result of this trade but domestic customers are worse off.

In practice, it has proven to be extraordinarily difficult for governments to pick the right infant industries to protect.

Suppose France imposes a tariff on imported US computers. The tariff will raise the price of computers and will make both French producers and consumers of computers worse off.

Graph 9-3 -In Graph 9-3, area E represents:

In general, if a country allows trade and becomes an importer of a good, domestic producers of the good are worse off, domestic consumers of the good are better off, but the economic wellbeing of the country increases.

Graph 9-2 This graph refers to the market for saddles in Argentina. -According Graph 9-2, the quantity of saddles exported from Argentina is:

A tariff and an import quota will both:

Graph 9-9 -In Graph 9-9, as a result of the tariff, deadweight loss would be:

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

A quota can potentially cause an even larger deadweight loss than a tariff.

Graph 9-1 This graph refers to the market for beef in Japan. -According to Graph 9-1, if trade in beef is allowed, Japan:

'Tariffs are needed to reduce imports during times of recession in order to increase domestic output.' This statement would be most closely associated with which argument for restricting trade?

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive in a market.

Benefits from free trade include increased variety of goods and increased competition.

Graph 9-6 This graph refers to the market for oil in Spain. -According to Graph 9-6, consumer surplus in Spain after trade would be:

Ten Lessons From 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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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