Question 1

When the government increases tariffs:

Accepted Answer

A)  production switches from low-cost foreign producers to high-cost domestic producers, causing resources to be wasted. 
B)  domestic consumers buy more goods, increasing the gains from trade. 
C)  domestic producers produce more output, increasing the gains from trade. 
D)  deadweight losses are eliminated because foreign producers sell their product below cost. 
A)  production switches from low-cost foreign producers to high-cost domestic producers, causing resources to be wasted. 
B)  domestic consumers buy more goods, increasing the gains from trade. 
C)  domestic producers produce more output, increasing the gains from trade. 
D)  deadweight losses are eliminated because foreign producers sell their product below cost.

Question 2

Without trade restrictions the price of tennis shoes is $30, and with trade restrictions the price of tennis shoes is $45. The difference in the two prices reflects:

Accepted Answer

A)  per-unit profits. 
B)  the value of the extra resources for domestic production of an additional pair of tennis shoes. 
C)  the gain in consumer surplus from free trade. 
D)  All of the answers are correct. 
A)  per-unit profits. 
B)  the value of the extra resources for domestic production of an additional pair of tennis shoes. 
C)  the gain in consumer surplus from free trade. 
D)  All of the answers are correct.

Question 3

If the United States bans the importation of Japanese automobiles:

Accepted Answer

A)  U.S. consumers of cars will be better off because their consumer surplus increases. 
B)  there will likely be more U.S. auto workers but fewer Americans working in other industries. 
C)  U.S. producers of cars will be worse off because their producer surplus shrinks. 
D)  everyone in the United States will be much better off. 
A)  U.S. consumers of cars will be better off because their consumer surplus increases. 
B)  there will likely be more U.S. auto workers but fewer Americans working in other industries. 
C)  U.S. producers of cars will be worse off because their producer surplus shrinks. 
D)  everyone in the United States will be much better off.

Question 4

The total number of child laborers is usually smaller for middle-income countries than for very poor countries.

Accepted Answer

A) True 
 B)False

Question 5

Rising tariffs increase domestic production, but reduce domestic consumption.

Accepted Answer

A) True 
 B)False

Question 6

Consider the following two statements and select the best answer.
I. The national security argument might be a valid argument for trade protection.
II. Industries with spillover effects should be protected from foreign competition.

Accepted Answer

A)  I and II are both true. 
B)  I and II are both false. 
C)  I is likely to be true, and II is likely to be false. 
D)  I is likely to be false, and II is likely to be true. 
A)  I and II are both true. 
B)  I and II are both false. 
C)  I is likely to be true, and II is likely to be false. 
D)  I is likely to be false, and II is likely to be true.

Question 7

Economic growth requires:

Accepted Answer

A)  job destruction. 
B)  trade barriers. 
C)  government intervention. 
D)  job creation. 
A)  job destruction. 
B)  trade barriers. 
C)  government intervention. 
D)  job creation.

Question 8

We pay for our exports with our imports.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions:
Figure: World Imports  
-(Figure: World Imports) Refer to the figure. The solution for a country without trade restrictions is where the equilibrium price and quantity are ________, respectively.

Accepted Answer

A)  $20 and 4 
B)  $40 and 11 
C)  $20 and 11 
D)  $20 and 20 
A)  $20 and 4 
B)  $40 and 11 
C)  $20 and 11 
D)  $20 and 20

Question 10

After a pair of wars in the late seventeenth and early eighteenth centuries, French-British relations decayed to the point that England began putting high tariffs on French wines. A large part of the support for this law came from British brewers and distillers who feared the return of French competition after the wars. These tariffs help explain why, to this day, the English prefer beer over wine. Of the arguments against free trade, which seems most likely to apply here, given the information provided?

Accepted Answer

A)  saving domestic jobs 
B)  preventing child labor 
C)  the importance of national security 
D)  alcohol being a "key industry" 
A)  saving domestic jobs 
B)  preventing child labor 
C)  the importance of national security 
D)  alcohol being a "key industry"

Question 11

A tariff ______ the amount of output produced by domestic firms and ______ the amount of goods bought by domestic consumers.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 12

Economists consider tariffs to be:

Accepted Answer

A)  necessary. 
B)  beneficial to domestic consumers. 
C)  harmful to domestic producers. 
D)  obstacles that reduce gains from trade. 
A)  necessary. 
B)  beneficial to domestic consumers. 
C)  harmful to domestic producers. 
D)  obstacles that reduce gains from trade.

Question 13

Which economic concept best explains why poorer countries have higher concentrations of child labor?

Accepted Answer

A)  producer surplus 
B)  opportunity cost 
C)  deadweight loss 
D)  marginal cost 
A)  producer surplus 
B)  opportunity cost 
C)  deadweight loss 
D)  marginal cost

Question 14

Use the following to answer questions:
Figure: Foreign Trade Market  
-Which, if any, of the following conditions for efficient market functioning do tariffs and quotas violate?
I. demanders with the highest willingness to pay purchase the supply of goods
II. producers with the lowest costs produce and sell the supply of goods
III. the sum of consumer and producer surplus is maximized

Accepted Answer

A)  I only 
B)  II and III only 
C)  I, II, and III 
D)  III only 
A)  I only 
B)  II and III only 
C)  I, II, and III 
D)  III only

Question 15

During the recent financial crisis many workers lost their jobs. Amy, for example, lost her job as a pharmaceutical salesperson. After five months of unemployment she spent $6,000 on a class that taught her the skills she would need to sell medical devices. Today Amy makes 25%more than she did in pharmaceutical sales and enjoys her new job much more than her old job. Which of the following concepts best illustrates this scenario?

Accepted Answer

A)  Trade restrictions result in loss of jobs. 
B)  Trade re-allocates jobs across industries. 
C)  Trade results in a misallocation of resources. 
D)  Unemployment is a bad thing. 
A)  Trade restrictions result in loss of jobs. 
B)  Trade re-allocates jobs across industries. 
C)  Trade results in a misallocation of resources. 
D)  Unemployment is a bad thing.

Question 16

Protectionism policies restrain trade through price controls that burden foreign producers but not domestic producers.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer questions:
Figure: International Trade 1  
-(Figure: International Trade 1) Refer to the figure. With the international trade in this figure, domestic consumption is ______ units, and ______ of those units are imported.

Accepted Answer

A)  9; 5 
B)  13; 5 
C)  13; 8 
D)  20; 9 
A)  9; 5 
B)  13; 5 
C)  13; 8 
D)  20; 9

Question 18

Figure: Consumption with and without Trade   
Refer to the figure. Suppose this diagram represents the market for sugar in the United States.
a. What is the equilibrium price of sugar before trade?
b. What is the equilibrium quantity of sugar before trade?
c. What is the price of sugar after trade is allowed?
d. What is the quantity of sugar imported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. By how much does consumer surplus increase after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?

Accepted Answer

a. 29 cents per pound
b. 20 billion poun

Question 19

Child labor is primarily a result of:

Accepted Answer

A)  increased demand for foreign goods. 
B)  trade restrictions such as tariffs and quotas. 
C)  absence of schools in developing nations. 
D)  poverty in the child's circumstances. 
A)  increased demand for foreign goods. 
B)  trade restrictions such as tariffs and quotas. 
C)  absence of schools in developing nations. 
D)  poverty in the child's circumstances.

Question 20

Because of pressure from the United States, the garment industry in Bangladesh dismissed 30,000 to 50,000 child laborers. This action:

Accepted Answer

A)  was very beneficial, since most of the children returned to school full time. 
B)  resulted in many of the children turning to prostitution, street begging, or working in jobs with even worse working conditions. 
C)  led to a civil uprising in Bangladesh, claiming the lives of almost 4,000 of these children. 
D)  None of the answers are correct. 
A)  was very beneficial, since most of the children returned to school full time. 
B)  resulted in many of the children turning to prostitution, street begging, or working in jobs with even worse working conditions. 
C)  led to a civil uprising in Bangladesh, claiming the lives of almost 4,000 of these children. 
D)  None of the answers are correct.

Exam 9: International Trade

When the government increases tariffs:

Without trade restrictions the price of tennis shoes is $30, and with trade restrictions the price of tennis shoes is $45. The difference in the two prices reflects:

If the United States bans the importation of Japanese automobiles:

The total number of child laborers is usually smaller for middle-income countries than for very poor countries.

Rising tariffs increase domestic production, but reduce domestic consumption.

Consider the following two statements and select the best answer. I. The national security argument might be a valid argument for trade protection. II. Industries with spillover effects should be protected from foreign competition.

Economic growth requires:

We pay for our exports with our imports.

Use the following to answer questions: Figure: World Imports -(Figure: World Imports) Refer to the figure. The solution for a country without trade restrictions is where the equilibrium price and quantity are ________, respectively.

A tariff ______ the amount of output produced by domestic firms and ______ the amount of goods bought by domestic consumers.

Economists consider tariffs to be:

Which economic concept best explains why poorer countries have higher concentrations of child labor?

Protectionism policies restrain trade through price controls that burden foreign producers but not domestic producers.

Use the following to answer questions: Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure. With the international trade in this figure, domestic consumption is ______ units, and ______ of those units are imported.

Child labor is primarily a result of:

Because of pressure from the United States, the garment industry in Bangladesh dismissed 30,000 to 50,000 child laborers. This action:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

A tariff the amount of output produced by domestic firms and the amount of goods bought by domestic consumers.

Use the following to answer questions: Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure. With the international trade in this figure, domestic consumption is units, and of those units are imported.