Exam 9: Application: International Trade

Graph 9-2 This graph refers to the market for saddles in Argentina. -According to Graph 9-2, the price and quantity demanded of saddles in Argentina after trade would be:

Graph 9-7 -According to Graph 9-7, how many units of this product would be exported after trade is allowed?

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

The main justification for imposing restrictions on free international trade is:

Graph 9-8 -According to Graph 9-8, producer surplus after trade would be:

An import quota increases domestic producer surplus and the surplus of import licence holders, reduces domestic consumer surplus, and creates deadweight loss.

Suppose that Tonga, a small country, imports apples at the world price of $4 per kilogram. If Tonga imposes a tariff of $1 per kilogram on imported apples, the price of apples in Tonga will increase, but by less than $1, ceteris paribus.

The infant industry argument:

When a country allows trade and becomes an importer of a good, which of the following is NOT true?

Graph 9-7 -According to Graph 9-7, consumer surplus before trade would be:

Graph 9-7 -According to Graph 9-7, producer surplus before trade would be:

When Australia engages in international trade with India:

If the domestic price of a good is low relative to the world price, the country has a comparative advantage in producing that good.

If a country allows trade and the domestic price of a good is lower than the world price:

Graph 9-5 This graph refers to the market for oil in Spain. -According to Graph 9-5, the price of oil and the quantity demanded in Spain after trade would be:

Economists contend that imposing trade restrictions in order to protect industries for national security reasons is never justified.

When goods that are produced in China are sold to Australia, the goods are:

Graph 9-4 This graph refers to the market for kiwifruit in New Zealand. -According to Graph 9-4, producer surplus in New Zealand before trade is:

When a government imposes a tariff on a product, the domestic price will equal the world price.

A multilateral approach to free trade has the potential to increase the gains from trade more than a unilateral approach does, because the multilateral approach can reduce trade restrictions abroad as well as at home.