Question 1

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

Accepted Answer

A)  domestic producers become better off, and domestic consumers become worse off. 
B)  domestic producers become worse off, and domestic consumers become better off. 
C)  domestic consumers become better off, but the effect on the well-being of domestic producers is ambiguous. 
D)  domestic producers become worse off, but the effect on the well-being of domestic consumers is ambiguous. 
A)  domestic producers become better off, and domestic consumers become worse off. 
B)  domestic producers become worse off, and domestic consumers become better off. 
C)  domestic consumers become better off, but the effect on the well-being of domestic producers is ambiguous. 
D)  domestic producers become worse off, but the effect on the well-being of domestic consumers is ambiguous.

Question 2

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

Accepted Answer

A)  Wheatland has a comparative advantage, relative to other countries, in producing corn. 
B)  other countries have a comparative advantage, relative to Wheatland, in producing fish. 
C)  the price of fish in Wheatland exceeds the world price of fish. 
D)  if Wheatland were to allow trade, it would import corn. 
A)  Wheatland has a comparative advantage, relative to other countries, in producing corn. 
B)  other countries have a comparative advantage, relative to Wheatland, in producing fish. 
C)  the price of fish in Wheatland exceeds the world price of fish. 
D)  if Wheatland were to allow trade, it would import corn.

Question 3

Trade raises the economic well-being of a nation in the sense that

Accepted Answer

A)  the gains of the winners exceed the losses of the losers. 
B)  everyone in an economy gains from trade. 
C)  since countries can choose what products to trade, they will pick those products that are most beneficial to society. 
D)  the nation joins the international community when it begins to engage in trade. 
A)  the gains of the winners exceed the losses of the losers. 
B)  everyone in an economy gains from trade. 
C)  since countries can choose what products to trade, they will pick those products that are most beneficial to society. 
D)  the nation joins the international community when it begins to engage in trade.

Question 4

If the world price of coffee is lower than Colombia's domestic price of coffee without trade, then Colombia

Accepted Answer

A)  should import coffee. 
B)  has a comparative advantage in coffee. 
C)  should produce just enough coffee to satisfy domestic demand. 
D)  should produce no coffee domestically. 
A)  should import coffee. 
B)  has a comparative advantage in coffee. 
C)  should produce just enough coffee to satisfy domestic demand. 
D)  should produce no coffee domestically.

Question 5

Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit.  
-Refer to Figure 9-24. With free trade, the country

Accepted Answer

A)  exports 20 units of the good. 
B)  imports 20 units of the good. 
C)  exports 30 units of the good. 
D)  imports 30 units of the good. 
A)  exports 20 units of the good. 
B)  imports 20 units of the good. 
C)  exports 30 units of the good. 
D)  imports 30 units of the good.

Question 6

In a 2007 New York Times article Paul Krugman wrote that

Accepted Answer

A)  the infant-industry argument works well as an argument in favor of protection for the U.S. steel industry. 
B)  the negative effects of third world exports on U.S. wages may be increasing. 
C)  there are social gains to the U.S. from free trade. 
D)  high wage countries account for a growing share of U.S. imports of manufactured goods. 
A)  the infant-industry argument works well as an argument in favor of protection for the U.S. steel industry. 
B)  the negative effects of third world exports on U.S. wages may be increasing. 
C)  there are social gains to the U.S. from free trade. 
D)  high wage countries account for a growing share of U.S. imports of manufactured goods.

Question 7

Assume the nation of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine whether

Accepted Answer

A)  consumer surplus exceeds producer surplus in Teeveeland. 
B)  Teeveeland has an absolute advantage in producing televisions. 
C)  Teeveeland has a comparative advantage in producing televisions. 
D)  All of the above are correct. 
A)  consumer surplus exceeds producer surplus in Teeveeland. 
B)  Teeveeland has an absolute advantage in producing televisions. 
C)  Teeveeland has a comparative advantage in producing televisions. 
D)  All of the above are correct.

Question 8

A major difference between tariffs and import quotas is that

Accepted Answer

A)  tariffs create deadweight losses, but import quotas do not. 
B)  tariffs help domestic consumers, and import quotas help domestic producers. 
C)  tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. 
D)  All of the above are correct. 
A)  tariffs create deadweight losses, but import quotas do not. 
B)  tariffs help domestic consumers, and import quotas help domestic producers. 
C)  tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. 
D)  All of the above are correct.

Question 9

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

Accepted Answer

A)  consumer surplus increases and total surplus increases in the market for that good. 
B)  consumer surplus increases and total surplus decreases in the market for that good. 
C)  consumer surplus decreases and total surplus increases in the market for that good. 
D)  consumer surplus decreases and total surplus decreases in the market for that good. 
A)  consumer surplus increases and total surplus increases in the market for that good. 
B)  consumer surplus increases and total surplus decreases in the market for that good. 
C)  consumer surplus decreases and total surplus increases in the market for that good. 
D)  consumer surplus decreases and total surplus decreases in the market for that good.

Question 10

Import quotas and tariffs both cause the quantity of imports to fall.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 9-3
Suppose domestic demand and domestic supply in a market are given by the following equations:  
-Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

Accepted Answer

With trade, consumer surplus i

Question 12

Figure 9-1
The figure illustrates the market for coffee in Guatemala.  
-Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to

Accepted Answer

A)  750. 
B)  1,100. 
C)  1,514. 
D)  1,650. 
A)  750. 
B)  1,100. 
C)  1,514. 
D)  1,650.

Question 13

Figure 9-25
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit.  
-Refer to Figure 9-25. With free trade and a $5 per unit tariff, the country

Accepted Answer

A)  exports 20 units of the good. 
B)  imports 20 units of the good. 
C)  exports 40 units of the good. 
D)  imports 40 units of the good. 
A)  exports 20 units of the good. 
B)  imports 20 units of the good. 
C)  exports 40 units of the good. 
D)  imports 40 units of the good.

Question 14

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

Accepted Answer

A)  if it works consumer surplus will decline. 
B)  if it works producer surplus falls. 
C)  if it fails the country faces a choice between two bad options. 
D)  if it fails total surplus will increase. 
A)  if it works consumer surplus will decline. 
B)  if it works producer surplus falls. 
C)  if it fails the country faces a choice between two bad options. 
D)  if it fails total surplus will increase.

Question 15

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 16

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

Accepted Answer

A) True 
 B)False

Question 17

If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina

Accepted Answer

A)  should import apples. 
B)  has a comparative advantage in apples. 
C)  should produce just enough apples to meet its domestic demand. 
D)  should refrain altogether from producing apples. 
A)  should import apples. 
B)  has a comparative advantage in apples. 
C)  should produce just enough apples to meet its domestic demand. 
D)  should refrain altogether from producing apples.

Question 18

Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

Accepted Answer

A)  Japan has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to Japan in producing sugar. 
B)  Japan has a comparative advantage relative to the United States in producing sugar, and Argentina has a comparative advantage relative to Japan in producing televisions. 
C)  Japan has an absolute advantage relative to the United States in producing televisions, and Argentina has an absolute advantage relative to Japan in producing sugar. 
D)  Japan has an absolute advantage relative to Argentina in producing sugar, and the United States has an absolute advantage relative to Japan in producing televisions. 
A)  Japan has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to Japan in producing sugar. 
B)  Japan has a comparative advantage relative to the United States in producing sugar, and Argentina has a comparative advantage relative to Japan in producing televisions. 
C)  Japan has an absolute advantage relative to the United States in producing televisions, and Argentina has an absolute advantage relative to Japan in producing sugar. 
D)  Japan has an absolute advantage relative to Argentina in producing sugar, and the United States has an absolute advantage relative to Japan in producing televisions.

Question 19

Scenario 9-3
Suppose domestic demand and domestic supply in a market are given by the following equations:  
-Refer to Scenario 9-3. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Accepted Answer

Without trade, consu

Question 20

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off.

Accepted Answer

A) True 
 B)False

Exam 9: Application: International Trade

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

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

Trade raises the economic well-being of a nation in the sense that

If the world price of coffee is lower than Colombia's domestic price of coffee without trade, then Colombia

Figure 9-24 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-24. With free trade, the country

In a 2007 New York Times article Paul Krugman wrote that

Assume the nation of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine whether

A major difference between tariffs and import quotas is that

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

Import quotas and tariffs both cause the quantity of imports to fall.

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. -Refer to Figure 9-25. With free trade and a $5 per unit tariff, the country

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

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,

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina

Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off.

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

Filters