Question 1

Tariffs and import quotas have the following differing outcomes:

Accepted Answer

A)  import quotas do not create deadweight losses but tariffs do 
B)  tariffs help domestic consumers and import quotas help domestic producers 
C)  tariffs raise revenue for the government but import quotas create a surplus for import licence holders 
D)  tariffs increase prices but import quotas do not. 
A)  import quotas do not create deadweight losses but tariffs do 
B)  tariffs help domestic consumers and import quotas help domestic producers 
C)  tariffs raise revenue for the government but import quotas create a surplus for import licence holders 
D)  tariffs increase prices but import quotas do not.

Question 2

Graph 9-9
  
-In Graph 9-9, producer surplus with free trade would be:

Accepted Answer

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

Question 3

When resources devoted to lobbying are included in the analysis of restrictions to international trade:

Accepted Answer

A)  deadweight losses may increase. 
B)  deadweight losses from fall 
C)  the welfare of domestic consumers will increase 
D)  domestic prices will equal world prices 
A)  deadweight losses may increase. 
B)  deadweight losses from fall 
C)  the welfare of domestic consumers will increase 
D)  domestic prices will equal world prices

Question 4

The Closer Economic Relations agreement between New Zealand and Australia is designed to ensure both Australia and New Zealand can exercise their own comparative advantage.

Accepted Answer

A) True 
 B)False

Question 5

Graph 9-7
  
-According to Graph 9-7, equilibrium price and quantity before trade would be:

Accepted Answer

A)  $20, 2000 
B)  $20, 2400 
C)  $10, 2000 
D)  $10, 2400 
A)  $20, 2000 
B)  $20, 2400 
C)  $10, 2000 
D)  $10, 2400

Question 6

Graph 9-8
  
-According to Graph 9-8, domestic production and domestic consumption after trade would be:

Accepted Answer

A)  600, 600 
B)  600, 300 
C)  300, 900 
D)  600, 900 
A)  600, 600 
B)  600, 300 
C)  300, 900 
D)  600, 900

Question 7

Suppose that you are advising Russian policy makers on trade issues, and the issue of protection for the Russian vodka industry comes up. You argue in favour of free trade but the policymakers are convinced that some protection is needed. They are leaning in favour of an import quota. What will you tell them about the relative effects of import quotas and equivalent tariffs on the wellbeing of Russian vodka producers, Russian vodka consumers and the Russian government budget?

Accepted Answer

A typical import quota has identical eff

Question 8

The before-trade domestic price of honey in Australia is $6 per gallon. The world price of honey is $5 per gallon. Australia is a price taker in the honey market. Given this information, answer the following questions.
a. Will Australia import or export honey?
b. What will the price of honey be in Australia if free trade is allowed?
c. Who will benefit from free trade in this case?
d. Who will lose from free trade?

Accepted Answer

a. Australia will import honey because t

Question 9

When a quota is imposed on a market, the:

Accepted Answer

A)  supply curve (above the world price) shifts to the right by the amount of the quota 
B)  supply curve (above the world price) shifts to the left by the amount of the quota 
C)  demand curve (above the world price) shifts to the right by the amount of the quota 
D)  demand curve (above the world price) shifts to the left by the amount of the quota 
A)  supply curve (above the world price) shifts to the right by the amount of the quota 
B)  supply curve (above the world price) shifts to the left by the amount of the quota 
C)  demand curve (above the world price) shifts to the right by the amount of the quota 
D)  demand curve (above the world price) shifts to the left by the amount of the quota

Question 10

Suppose the before-trade domestic price of natural gas in Australia is $15 per kg. The world price of natural gas is $30 per kg. Australia is a price-taker in the natural gas market.
-According to this statement, if trade in natural gas is allowed, the price of natural gas in Australia:

Accepted Answer

A)  will increase 
B)  will decrease 
C)  will be unaffected 
D)  could increase or decrease 
A)  will increase 
B)  will decrease 
C)  will be unaffected 
D)  could increase or decrease

Question 11

Graph 9-8
  
-According to Graph 9-8, equilibrium price and quantity before trade would be:

Accepted Answer

A)  $19 400 
B)  $19 800 
C)  $15 400 
D)  $15 600 
A)  $19 400 
B)  $19 800 
C)  $15 400 
D)  $15 600

Question 12

One of the important outcomes of international trade is that countries specialise in the output of things they are best at.

Accepted Answer

A) True 
 B)False

Question 13

Graph 9-9
  
-In Graph 9-9, as a result of the tariff, government tariff revenue 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 14

A country is deemed to have a comparative advantage in a product if:

Accepted Answer

A)  the world price is lower than its domestic price 
B)  the world price is higher than its domestic price 
C)  the world price is equal to its domestic price 
D)  none of the above 
A)  the world price is lower than its domestic price 
B)  the world price is higher than its domestic price 
C)  the world price is equal to its domestic price 
D)  none of the above

Question 15

If Japan subsidised the production of rice and then exported the rice to Australia at artificially low prices, then the Australian economy would be worse off.

Accepted Answer

A) True 
 B)False

Question 16

If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue and domestic consumers will gain consumer surplus.

Accepted Answer

A) True 
 B)False

Question 17

When a country allows free trade:

Accepted Answer

A)  the domestic price will be greater than the world price 
B)  the domestic price will be lower than the world price 
C)  the domestic price will equal the world price 
D)  it does not matter what the world price is, the domestic price is the prevailing price 
A)  the domestic price will be greater than the world price 
B)  the domestic price will be lower than the world price 
C)  the domestic price will equal the world price 
D)  it does not matter what the world price is, the domestic price is the prevailing price

Question 18

A quota is:

Accepted Answer

A)  a type of tax imposed on imports 
B)  a physical limit on the quantity of internationally traded goods 
C)  a physical limit on the tax level on internationally traded goods 
D)  a tool to encourage imports into a country 
A)  a type of tax imposed on imports 
B)  a physical limit on the quantity of internationally traded goods 
C)  a physical limit on the tax level on internationally traded goods 
D)  a tool to encourage imports into a country

Question 19

Suppose that a country that has been isolated from the rest of the world decides to open its borders to international trade. The country produces chickens and soccer balls. On what basis can the country decide which good to import and which good to export?

Accepted Answer

The country should export the good in wh

Question 20

Graph 9-15
  
-Using Graph 9-15, assume that the government imposes an import quota of 20 hammers. Answer the following questions, given this information.
a. What is the equilibrium price and quantity of hammers after the quota is imposed?
b. What is the quantity of hammers imported before the quota?
c. What is the quantity of hammers imported after the quota?
d. What is the amount of consumer surplus before the quota?
e. What is the amount of consumer surplus after the quota?
f. What is the amount of producer surplus before the quota?
g. What is the amount of producer surplus after the quota?
h. What would be the amount of deadweight loss due to the quota?

Accepted Answer

a. $7, 70
b. 66
c. 2

Exam 9: Application: International Trade

Tariffs and import quotas have the following differing outcomes:

Graph 9-9 -In Graph 9-9, producer surplus with free trade would be:

When resources devoted to lobbying are included in the analysis of restrictions to international trade:

The Closer Economic Relations agreement between New Zealand and Australia is designed to ensure both Australia and New Zealand can exercise their own comparative advantage.

Graph 9-7 -According to Graph 9-7, equilibrium price and quantity before trade would be:

Graph 9-8 -According to Graph 9-8, domestic production and domestic consumption after trade would be:

When a quota is imposed on a market, the:

Suppose the before-trade domestic price of natural gas in Australia is $15 per kg. The world price of natural gas is $30 per kg. Australia is a price-taker in the natural gas market. -According to this statement, if trade in natural gas is allowed, the price of natural gas in Australia:

Graph 9-8 -According to Graph 9-8, equilibrium price and quantity before trade would be:

One of the important outcomes of international trade is that countries specialise in the output of things they are best at.

Graph 9-9 -In Graph 9-9, as a result of the tariff, government tariff revenue would be:

A country is deemed to have a comparative advantage in a product if:

If Japan subsidised the production of rice and then exported the rice to Australia at artificially low prices, then the Australian economy would be worse off.

If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue and domestic consumers will gain consumer surplus.

When a country allows free trade:

A quota is:

Suppose that a country that has been isolated from the rest of the world decides to open its borders to international trade. The country produces chickens and soccer balls. On what basis can the country decide which good to import and which good to export?

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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