Exam 9: Application International Trade: Part B

Since a tariff can increase employment in an industry,the result is a net increase in total surplus.

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

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

NAFTA is an example of a multilateral approach to achieving free trade.

Economists feel that national security concerns never provide a legitimate rationale for trade restrictions.

Free trade allows firms to realize economies of scale,resulting in higher costs of production.

For Country A,the world price of textiles exceeds the domestic equilibrium price of textiles.As a result,international trade allows sellers of textiles in Country A to experience greater producer surplus than they otherwise would experience.

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 a country's domestic price of a good is lower than the world price,then that country has a comparative advantage in producing that good.

When a country abandons no-trade policies in favor of free-trade policies and becomes an importer of steel,then the domestic price of steel will increase as a result.

If Belgium exports chocolate to the rest of the world,then Belgian chocolate producers benefit from higher producer surplus,Belgian chocolate consumers are worse off because of lower consumer surplus,and total surplus in Belgium increases because of the exports of chocolate.

For Country A,the world price of soybeans exceeds the domestic equilibrium price of soybeans.As a result,international trade allows buyers of soybeans in Country A to experience greater consumer surplus than they otherwise would experience.

Most economists support the infant-industry argument because it is so easy to implement in practice.

The rules established under the General Agreement on Tariffs and Trade (GATT)are enforced by an international body called the World Trade Organization (WTO).

There are only increases in total surplus when a country exports a good,since more units of the country's output of that good are produced.

William and Jamal live in the country of Dumexia.When Dumexia legalized international trade in bananas,the price of bananas in Dumexia increased.As a result,William became better off and Jamal became worse off.It follows that William is a seller,and Jamal is a buyer,of bananas.

The nation of Cranolia used to prohibit international trade,but now trade is allowed,and Cranolia is exporting furniture.Relative to the previous no-trade situation,buyers of furniture in Cranolia are now better off.

The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade policy.If the world price of goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound,then Aviana should export goose meat.

When a government imposes a tariff on a product,the domestic price will equal the world price.

Suppose Ecuador imposes a tariff on imported bananas.If the increase in producer surplus is $50 million,the reduction in consumer surplus is $150 million,and the deadweight loss of the tariff is $30 million,then the tariff generates $130 million in revenue for the government.