Question 1

For a country that is considering the adoption of either a tariff or an import quota on a particular good,an important difference is that

Accepted Answer

A)  an import quota has no effect on consumer surplus,while a tariff decreases consumer surplus. 
B)  an import quota has no effect on producer surplus,while a tariff decreases producer surplus. 
C)  a tariff raises total surplus,while an import quota does not. 
D)  a tariff raises revenue for that country's government,while an import quota does not. 
A)  an import quota has no effect on consumer surplus,while a tariff decreases consumer surplus. 
B)  an import quota has no effect on producer surplus,while a tariff decreases producer surplus. 
C)  a tariff raises total surplus,while an import quota does not. 
D)  a tariff raises revenue for that country's government,while an import quota does not.

Question 2

One should be especially wary of the national-security argument for restricting trade when that argument is made by

Accepted Answer

A)  representatives of industry. 
B)  representatives of the defense establishment. 
C)  members of households. 
D)  foreign government officials. 
A)  representatives of industry. 
B)  representatives of the defense establishment. 
C)  members of households. 
D)  foreign government officials.

Question 3

The North American Free Trade Agreement

Accepted Answer

A)  is an example of the unilateral approach to free trade. 
B)  eliminated tariffs on imports to North America from the rest of the world. 
C)  reduced trade restrictions among Canada,Mexico and the United States. 
D)  All of the above are correct. 
A)  is an example of the unilateral approach to free trade. 
B)  eliminated tariffs on imports to North America from the rest of the world. 
C)  reduced trade restrictions among Canada,Mexico and the United States. 
D)  All of the above are correct.

Question 4

When a country allows trade and becomes an exporter of a good,

Accepted Answer

A)  consumer surplus and producer surplus both increase. 
B)  consumer surplus and producer surplus both decrease. 
C)  consumer surplus increases and producer surplus decreases. 
D)  consumer surplus decreases and producer surplus increases. 
A)  consumer surplus and producer surplus both increase. 
B)  consumer surplus and producer surplus both decrease. 
C)  consumer surplus increases and producer surplus decreases. 
D)  consumer surplus decreases and producer surplus increases.

Question 5

Figure 9-3.The domestic country is China.  
-Refer to Figure 9-3.Relative to a no-trade situation,which of the following comes with trade?

Accepted Answer

A)  Consumer surplus increases by $1,800 and producer surplus increases by $1,600. 
B)  Consumer surplus decreases by $1,000 and producer surplus increases by $1,500. 
C)  Consumer surplus decreases by $1,000 and producer surplus increases by $1,750. 
D)  Total surplus increases by $400. 
A)  Consumer surplus increases by $1,800 and producer surplus increases by $1,600. 
B)  Consumer surplus decreases by $1,000 and producer surplus increases by $1,500. 
C)  Consumer surplus decreases by $1,000 and producer surplus increases by $1,750. 
D)  Total surplus increases by $400.

Question 6

Figure 9-15  
-Refer to Figure 9-15.With the tariff,the quantity of saddles imported is

Accepted Answer

A)  Q3 - Q1. 
B)  Q3 - Q2. 
C)  Q4 - Q1. 
D)  Q4 - Q2. 
A)  Q3 - Q1. 
B)  Q3 - Q2. 
C)  Q4 - Q1. 
D)  Q4 - Q2.

Question 7

Figure 9-2  
-Refer to Figure 9-2.At the world price and with free trade,

Accepted Answer

A)  the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied. 
B)  the basket market is in equilibrium. 
C)  the domestic demand for baskets is perfectly inelastic. 
D)  both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade. 
A)  the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied. 
B)  the basket market is in equilibrium. 
C)  the domestic demand for baskets is perfectly inelastic. 
D)  both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade.

Question 8

Figure 9-9  
-Refer to Figure 9-9.The change in total surplus in this market because of trade is

Accepted Answer

A)  D,and this area represents a loss of total surplus because of trade. 
B)  D,and this area represents a gain in total surplus because of trade. 
C)  B + D,and this area represents a loss of total surplus because of trade. 
D)  B + D,and this area represents a gain in total surplus because of trade. 
A)  D,and this area represents a loss of total surplus because of trade. 
B)  D,and this area represents a gain in total surplus because of trade. 
C)  B + D,and this area represents a loss of total surplus because of trade. 
D)  B + D,and this area represents a gain in total surplus because of trade.

Question 9

Figure 9-5  
-Refer to Figure 9-5.Total surplus with trade exceeds total surplus without trade by

Accepted Answer

A)  $60. 
B)  $75. 
C)  $135. 
D)  $210. 
A)  $60. 
B)  $75. 
C)  $135. 
D)  $210.

Question 10

When a country allows trade and becomes an importer of steel,

Accepted Answer

A)  the losses of the domestic producers of steel exceed the gains of the domestic consumers of steel. 
B)  the losses of the domestic consumers of steel exceed the gains of the domestic producers of steel. 
C)  the gains of the domestic producers of steel exceed the losses of the domestic consumers of steel. 
D)  the gains of the domestic consumers of steel exceed the losses of the domestic producers of steel. 
A)  the losses of the domestic producers of steel exceed the gains of the domestic consumers of steel. 
B)  the losses of the domestic consumers of steel exceed the gains of the domestic producers of steel. 
C)  the gains of the domestic producers of steel exceed the losses of the domestic consumers of steel. 
D)  the gains of the domestic consumers of steel exceed the losses of the domestic producers of steel.

Question 11

The nation of Waterland forbids international trade.In Waterland,you can obtain a computer by trading 2 bicycles.In other countries,you can obtain a computer by trading 3 bicycles.These facts indicate that

Accepted Answer

A)  if Waterland were to allow trade,it would export computers. 
B)  Waterland has an absolute advantage,relative to other countries,in producing computers. 
C)  Waterland has a comparative advantage,relative to other countries,in producing bicycles. 
D)  All of the above are correct. 
A)  if Waterland were to allow trade,it would export computers. 
B)  Waterland has an absolute advantage,relative to other countries,in producing computers. 
C)  Waterland has a comparative advantage,relative to other countries,in producing bicycles. 
D)  All of the above are correct.

Question 12

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 13

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

Accepted Answer

A)  5 units of the good. 
B)  10 units of the good. 
C)  15 units of the good. 
D)  20 units of the good. 
A)  5 units of the good. 
B)  10 units of the good. 
C)  15 units of the good. 
D)  20 units of the good.

Question 14

Figure 9-4.The domestic country is Jamaica.  
-Refer to Figure 9-4.Which of the following statements is accurate?

Accepted Answer

A)  Consumer surplus with trade is $3,200. 
B)  Producer surplus with trade is $375. 
C)  The gains from trade amount to $800. 
D)  The gains from trade are represented on the graph by the area bounded by the points (0,$12),(300,$12),(300,$7)and (0,$7). 
A)  Consumer surplus with trade is $3,200. 
B)  Producer surplus with trade is $375. 
C)  The gains from trade amount to $800. 
D)  The gains from trade are represented on the graph by the area bounded by the points (0,$12),(300,$12),(300,$7)and (0,$7).

Question 15

Honduras is an importer of goose-down pillows.The world price of these pillows is $50.Honduras imposes a $7 tariff on pillows.Honduras is a price-taker in the pillow market.As a result of the tariff,the price of goose-down pillows in Honduras

Accepted Answer

A)  remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases. 
B)  increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
C)  increases to a new price between $50 and $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
D)  increases to a new price above $57 and the quantity of goose-down pillows purchased in Honduras remains the same. 
A)  remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases. 
B)  increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
C)  increases to a new price between $50 and $57 and the quantity of goose-down pillows purchased in Honduras decreases. 
D)  increases to a new price above $57 and the quantity of goose-down pillows purchased in Honduras remains the same.

Question 16

Relative to a situation in which domestic firms do not compete with foreign firms,firms in countries that engage in free trade

Accepted Answer

A)  can realize economies of scale more fully. 
B)  have greater market power. 
C)  experience larger producer surplus. 
D)  All of the above are correct. 
A)  can realize economies of scale more fully. 
B)  have greater market power. 
C)  experience larger producer surplus. 
D)  All of the above are correct.

Question 17

In principle,trade can make a nation better off,because the gains to the winners exceed the losses to the losers.

Accepted Answer

A) True 
 B)False

Question 18

Figure 9-7.The figure applies to the nation of Wales and the good is cheese.  
-Refer to Figure 9-7.Which of the following is a valid equation for Welsh producer surplus with trade?

Accepted Answer

A)  Producer surplus with trade = (1/2)P0Q0. 
B)  Producer surplus with trade = (1/2)P1Q1. 
C)  Producer surplus with trade = (1/2)P1Q2. 
D)  None of the above is correct. 
A)  Producer surplus with trade = (1/2)P0Q0. 
B)  Producer surplus with trade = (1/2)P1Q1. 
C)  Producer surplus with trade = (1/2)P1Q2. 
D)  None of the above is correct.

Question 19

Figure 9-15  
-Refer to Figure 9-15.Producer surplus with the tariff is

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 20

Without free trade,the domestic price of a good must be equal to the world price of a good.

Accepted Answer

A) True 
 B)False

Exam 9: Application: International Trade

For a country that is considering the adoption of either a tariff or an import quota on a particular good,an important difference is that

One should be especially wary of the national-security argument for restricting trade when that argument is made by

The North American Free Trade Agreement

When a country allows trade and becomes an exporter of a good,

Figure 9-3.The domestic country is China. -Refer to Figure 9-3.Relative to a no-trade situation,which of the following comes with trade?

Figure 9-15 -Refer to Figure 9-15.With the tariff,the quantity of saddles imported is

Figure 9-2 -Refer to Figure 9-2.At the world price and with free trade,

Figure 9-9 -Refer to Figure 9-9.The change in total surplus in this market because of trade is

Figure 9-5 -Refer to Figure 9-5.Total surplus with trade exceeds total surplus without trade by

When a country allows trade and becomes an importer of steel,

The nation of Waterland forbids international trade.In Waterland,you can obtain a computer by trading 2 bicycles.In other countries,you can obtain a computer by trading 3 bicycles.These facts indicate that

An import quota

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

Figure 9-4.The domestic country is Jamaica. -Refer to Figure 9-4.Which of the following statements is accurate?

Honduras is an importer of goose-down pillows.The world price of these pillows is $50.Honduras imposes a $7 tariff on pillows.Honduras is a price-taker in the pillow market.As a result of the tariff,the price of goose-down pillows in Honduras

Relative to a situation in which domestic firms do not compete with foreign firms,firms in countries that engage in free trade

In principle,trade can make a nation better off,because the gains to the winners exceed the losses to the losers.

Figure 9-7.The figure applies to the nation of Wales and the good is cheese. -Refer to Figure 9-7.Which of the following is a valid equation for Welsh producer surplus with trade?

Figure 9-15 -Refer to Figure 9-15.Producer surplus with the tariff is

Without free trade,the domestic price of a good must be equal to the world price of a good.

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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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