Question 1

A quota is a stated quality standard that an imported good must reach before it can be allowed into the borders of the importing country.

Accepted Answer

A) True 
 B)False

Question 2

Studies show that more openness to trade __________ income and _______ child labor.

Accepted Answer

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

Question 3

Use the following to answer questions:
Figure: Foreign Trade with a Tariff  
-(Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff results in:

Accepted Answer

A)  an increase in imports of 80 million units. 
B)  a decrease in imports of 80 million units. 
C)  an increase in imports of 100 million units. 
D)  a decrease in imports of 100 million units. 
A)  an increase in imports of 80 million units. 
B)  a decrease in imports of 80 million units. 
C)  an increase in imports of 100 million units. 
D)  a decrease in imports of 100 million units.

Question 4

If, at a world price of $200, domestic consumers buy 900 units and domestic producers sell 600 units, imports equal 1,500.

Accepted Answer

A) True 
 B)False

Question 5

If the United States imports teacups from other countries, then U.S. producers of teacups are better off, and U.S. consumers of teacups are worse off, as a result of trade.

Accepted Answer

A) True 
 B)False

Question 6

If the world price of a good is greater than the domestic price in a country that can engage in international trade, then that country becomes an importer of that good.

Accepted Answer

A) True 
 B)False

Question 7

Trade makes people better off when preferences are the same.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements describes reasons why free trade is beneficial for the United States?

Accepted Answer

A)  Free trade increases consumer surplus for imported goods that are cheaper than U.S. goods. 
B)  Free trade directs U.S. resources to those goods and services for which the United States has a comparative advantage. 
C)  Through specialization, the United States and its trading partners can use the same overall amount of resources to produce and consume a larger amount of goods. 
D)  All of the statements are correct. 
A)  Free trade increases consumer surplus for imported goods that are cheaper than U.S. goods. 
B)  Free trade directs U.S. resources to those goods and services for which the United States has a comparative advantage. 
C)  Through specialization, the United States and its trading partners can use the same overall amount of resources to produce and consume a larger amount of goods. 
D)  All of the statements are correct.

Question 9

A quota caps the quantity of an import.

Accepted Answer

A) True 
 B)False

Question 10

Some goods generate spillover benefits from production, but it is:

Accepted Answer

A)  difficult to know in advance which goods those are. 
B)  in the government's interest to hear such arguments. 
C)  not possible to encourage the production of those goods. 
D)  not possible that the spillover benefits are very large. 
A)  difficult to know in advance which goods those are. 
B)  in the government's interest to hear such arguments. 
C)  not possible to encourage the production of those goods. 
D)  not possible that the spillover benefits are very large.

Question 11

Use the following to answer questions:
Figure: Trade 2  
-(Figure: Trade 2) Refer to the figure. In this figure representing the market for oil, what are the total revenues generated by the tariff?

Accepted Answer

A)  $25,000 
B)  $20,000 
C)  $10,000 
D)  $5,000 
A)  $25,000 
B)  $20,000 
C)  $10,000 
D)  $5,000

Question 12

Trade restrictions:

Accepted Answer

A)  help to save jobs in the protected industry, which causes these workers to spend more money in other industries, netting increased output and job opportunities throughout the economy. 
B)  are a very inexpensive way of saving jobs, cheaper than job retraining programs. 
C)  may save jobs in one industry but at a cost of less job growth in other industries. 
D)  often have little support by politicians, media, and the public. 
A)  help to save jobs in the protected industry, which causes these workers to spend more money in other industries, netting increased output and job opportunities throughout the economy. 
B)  are a very inexpensive way of saving jobs, cheaper than job retraining programs. 
C)  may save jobs in one industry but at a cost of less job growth in other industries. 
D)  often have little support by politicians, media, and the public.

Question 13

Use the following to answer questions:
Figure: Foreign Trade  
-(Figure: Foreign Trade) Refer to the figure. What quantity would be traded in a free-trade environment?

Accepted Answer

A)  600 
B)  1,400 
C)  1,000 
D)  800 
A)  600 
B)  1,400 
C)  1,000 
D)  800

Question 14

Which statement(s) is TRUE?
I. When U.S. consumers buy lower-priced imports, they have more money to buy other goods, leading to increased jobs in other industries.
II. On net, free trade reduces total employment.
III. When foreign producers receive U.S. dollars for their exports, some of these dollars are used to buy U.S. goods and assets, increasing employment in U.S. exporting industries.

Accepted Answer

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

Question 15

Technology and trade:

Accepted Answer

A)  both destroy jobs in the short run but increase the standard of living in the long run. 
B)  both create jobs in the short run but decrease the standard of living in the long run. 
C)  cannot continue to increase forever. 
D)  are not very similar to each other. 
A)  both destroy jobs in the short run but increase the standard of living in the long run. 
B)  both create jobs in the short run but decrease the standard of living in the long run. 
C)  cannot continue to increase forever. 
D)  are not very similar to each other.

Question 16

Protectionism:

Accepted Answer

A)  benefits domestic consumers and foreign producers. 
B)  places a tax on exports. 
C)  restricts trade through policies that favor domestic producers. 
D)  restricts the quantity of goods that can be exported. 
A)  benefits domestic consumers and foreign producers. 
B)  places a tax on exports. 
C)  restricts trade through policies that favor domestic producers. 
D)  restricts the quantity of goods that can be exported.

Question 17

Use the following to answer questions:
Figure: International Trade 1  
-(Figure: International Trade 1) Refer to the figure. According to the figure, which of the following statements is TRUE?

Accepted Answer

A)  After international trade, price falls by $4 and consumption increases by 4 units. 
B)  After international trade, price falls by $4 and consumption decreases by 4 units. 
C)  After international trade, price rises by $4 and consumption increases by 8 units. 
D)  After international trade, price stays the same and consumption increases by 8 units. 
A)  After international trade, price falls by $4 and consumption increases by 4 units. 
B)  After international trade, price falls by $4 and consumption decreases by 4 units. 
C)  After international trade, price rises by $4 and consumption increases by 8 units. 
D)  After international trade, price stays the same and consumption increases by 8 units.

Question 18

Use the following to answer questions:
Figure: International Trade 4  
-(Figure: International Trade 4) Refer to the figure. If, in this figure, the government allowed free trade, consumer surplus would:

Accepted Answer

A)  increase by $118. 
B)  increase by $31.50. 
C)  decrease by $81. 
D)  increase by $66.50. 
A)  increase by $118. 
B)  increase by $31.50. 
C)  decrease by $81. 
D)  increase by $66.50.

Question 19

Use the following to answer questions:
Figure: Foreign Trade Market  
-(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

Accepted Answer

A)  $10,000 
B)  $4,000 
C)  $7,500 
D)  $6,000 
A)  $10,000 
B)  $4,000 
C)  $7,500 
D)  $6,000

Question 20

If a tariff decreases domestic consumption of a good from 230 million units to 150 million units and raises the domestic price by $1.50, given a linear domestic demand curve and a perfectly elastic world supply curve, what is the value of the unexploited gains from trade caused by decreased domestic consumption?

Accepted Answer

A)  $45 million 
B)  $60 million 
C)  $80 million 
D)  $120 million 
A)  $45 million 
B)  $60 million 
C)  $80 million 
D)  $120 million

Exam 9: International Trade

A quota is a stated quality standard that an imported good must reach before it can be allowed into the borders of the importing country.

Studies show that more openness to trade __________ income and _______ child labor.

Use the following to answer questions: Figure: Foreign Trade with a Tariff -(Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff results in:

If, at a world price of $200, domestic consumers buy 900 units and domestic producers sell 600 units, imports equal 1,500.

If the United States imports teacups from other countries, then U.S. producers of teacups are better off, and U.S. consumers of teacups are worse off, as a result of trade.

If the world price of a good is greater than the domestic price in a country that can engage in international trade, then that country becomes an importer of that good.

Trade makes people better off when preferences are the same.

Which of the following statements describes reasons why free trade is beneficial for the United States?

A quota caps the quantity of an import.

Some goods generate spillover benefits from production, but it is:

Use the following to answer questions: Figure: Trade 2 -(Figure: Trade 2) Refer to the figure. In this figure representing the market for oil, what are the total revenues generated by the tariff?

Trade restrictions:

Use the following to answer questions: Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure. What quantity would be traded in a free-trade environment?

Technology and trade:

Protectionism:

Use the following to answer questions: Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure. According to the figure, which of the following statements is TRUE?

Use the following to answer questions: Figure: International Trade 4 -(Figure: International Trade 4) Refer to the figure. If, in this figure, the government allowed free trade, consumer surplus would:

Use the following to answer questions: Figure: Foreign Trade Market -(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

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

Studies show that more openness to trade ____ income and _ child labor.