Question 1

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

Accepted Answer

A) True 
 B)False

Question 2

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2   According to Figure 20.2, if the world price per bushel of wheat is $25, what is the domestic production?

Accepted Answer

A) 300 bushels 
B) 450 bushels 
C) 400 bushels 
D) 150 bushels 
E) 200 bushels 
A) 300 bushels 
B) 450 bushels 
C) 400 bushels 
D) 150 bushels 
E) 200 bushels

Question 3

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 20.3   In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium quantity demanded?

Accepted Answer

A) 35 gallons 
B) 50 gallons 
C) 20 gallons 
D) 65 gallons 
E) 5 gallons 
A) 35 gallons 
B) 50 gallons 
C) 20 gallons 
D) 65 gallons 
E) 5 gallons

Question 4

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2   According to Figure 20.2, if the world price of wheat is $25 and a tariff of $10 is imposed by the domestic government, the total tariff revenue collected by the government is:

Accepted Answer

A) $4, 000. 
B) $0. 
C) $5, 000. 
D) $2, 000. 
E) $1, 000. 
A) $4, 000. 
B) $0. 
C) $5, 000. 
D) $2, 000. 
E) $1, 000.

Question 5

The figure below shows the demand (D)and supply (S)curves of a good produced domestically in an economy as well as traded in the international market. Figure 20.1   In the figure,
P1: Price of the good in the international market.
P2: Price of the good in the domestic market after the imposition of tariff by the government.
P3: No-trade price of the good in the domestic market.
According to Figure 20.1, the domestic equilibrium quantity of the good is:

Accepted Answer

A) Q1. 
B) Q5. 
C) Q2. 
D) Q3. 
E) Q4. 
A) Q1. 
B) Q5. 
C) Q2. 
D) Q3. 
E) Q4.

Question 6

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Accepted Answer

A) True 
 B)False

Question 7

As a result of the government procurement policy in the U.S.:

Accepted Answer

A) the domestic consumers are required to pay a higher price than the government for the domestically produced goods. 
B) the government wields the sole authority of importing goods from abroad. 
C) the government wields the sole authority of exporting goods. 
D) the government is required to buy the domestic goods if the domestic price is less than the world price. 
E) the government is required to sponsor research and development for the domestic firms. 
A) the domestic consumers are required to pay a higher price than the government for the domestically produced goods. 
B) the government wields the sole authority of importing goods from abroad. 
C) the government wields the sole authority of exporting goods. 
D) the government is required to buy the domestic goods if the domestic price is less than the world price. 
E) the government is required to sponsor research and development for the domestic firms.

Question 8

Many economists believe that the collapse of world trade and the depression in the 1930s were linked by a decrease in real income caused by producing on the basis of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 9

Protection of an infant industry should be withdrawn once that industry:

Accepted Answer

A) charges the same price as foreign competitors. 
B) goes public on the stock exchange. 
C) raises a large amount of sales revenue. 
D) achieves sufficient size to compete with foreign firms. 
E) earns enough profit as a result of the subsidies to remain in business. 
A) charges the same price as foreign competitors. 
B) goes public on the stock exchange. 
C) raises a large amount of sales revenue. 
D) achieves sufficient size to compete with foreign firms. 
E) earns enough profit as a result of the subsidies to remain in business.

Question 10

Which of the following statements about international trade restrictions is true?

Accepted Answer

A) They ensure that only efficient producers survive. 
B) They ensure that countries specialize only in those products that they can produce most efficiently. 
C) In the majority of cases, they harm domestic consumers. 
D) They typically benefit foreign producers at the expense of domestic consumers. 
E) They ensure that higher-quality goods are provided at lower prices. 
A) They ensure that only efficient producers survive. 
B) They ensure that countries specialize only in those products that they can produce most efficiently. 
C) In the majority of cases, they harm domestic consumers. 
D) They typically benefit foreign producers at the expense of domestic consumers. 
E) They ensure that higher-quality goods are provided at lower prices.

Question 11

The figure below shows the demand (D)and supply (S)curves of cocoa in the U.S. Figure 20.4   Refer to Figure 20.4.Assume that Ghana is the only cocoa exporter supplying cocoa in the world market at $6 per pound.If the U.S.enters into a free trade agreement (FTA)with Ghana, what would be its total cocoa imports?

Accepted Answer

A) 100 pounds 
B) 300 pounds 
C) 200 pounds 
D) 150 pounds 
E) 250 pounds 
A) 100 pounds 
B) 300 pounds 
C) 200 pounds 
D) 150 pounds 
E) 250 pounds

Question 12

Suppose that the world price of kiwi fruit ($10 per box)is below the domestic price ($12 per box).A tariff of $1 per box would:

Accepted Answer

A) cause foreign producers to be better off, because the price they charge is now higher by $1 per box. 
B) cause domestic producers to be worse off by $5 per box. 
C) allow domestic consumers to enjoy kiwi fruit for $5 more per box than the free trade price, but still $2 less than the domestic price. 
D) allow domestic consumers to enjoy kiwi fruit for $1 more per box than the free trade price, but still $1 less than the domestic price. 
E) cause domestic producers to be worse off by $10 per box. 
A) cause foreign producers to be better off, because the price they charge is now higher by $1 per box. 
B) cause domestic producers to be worse off by $5 per box. 
C) allow domestic consumers to enjoy kiwi fruit for $5 more per box than the free trade price, but still $2 less than the domestic price. 
D) allow domestic consumers to enjoy kiwi fruit for $1 more per box than the free trade price, but still $1 less than the domestic price. 
E) cause domestic producers to be worse off by $10 per box.

Question 13

Every country imposes tariffs on at least some imports.

Accepted Answer

A) True 
 B)False

Question 14

People who call for creating a "level playing field" believe that:

Accepted Answer

A) a country with relatively low wages is typically a country with an abundance of low-skilled labor. 
B) trading on the basis of comparative advantage benefits both domestic and foreign firms. 
C) creating a "level playing field" undermines the basis for specialization and economic efficiency. 
D) production in accordance with comparative advantage is unfair. 
E) free trade allocates the scarce resources in an efficient way. 
A) a country with relatively low wages is typically a country with an abundance of low-skilled labor. 
B) trading on the basis of comparative advantage benefits both domestic and foreign firms. 
C) creating a "level playing field" undermines the basis for specialization and economic efficiency. 
D) production in accordance with comparative advantage is unfair. 
E) free trade allocates the scarce resources in an efficient way.

Question 15

Nascent industries require adequate protection from foreign competition because:

Accepted Answer

A) they experience economies of scale. 
B) they experience diseconomies of scale. 
C) the quality of the products of such industries are comparatively inferior than the products of their foreign competitors. 
D) they do not have adequate resources to undertake research and development. 
E) their initial costs of production are considerably higher than the foreign firms. 
A) they experience economies of scale. 
B) they experience diseconomies of scale. 
C) the quality of the products of such industries are comparatively inferior than the products of their foreign competitors. 
D) they do not have adequate resources to undertake research and development. 
E) their initial costs of production are considerably higher than the foreign firms.

Question 16

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

Accepted Answer

A) True 
 B)False

Question 17

If an infant industry truly has a good chance to become competitive and produce profitably once it is well established, it is not at all clear that government should even offer protection to reduce short-run losses.

Accepted Answer

A) True 
 B)False

Question 18

Creating conditions for fair trade by limiting imports will make the domestic consumers better off, as they will be required to pay low prices for the products.

Accepted Answer

A) True 
 B)False

Question 19

The basic difference between a tariff and quota is that:

Accepted Answer

A) quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. 
B) quota yields revenue to the government whereas tariff does not yield any revenue. 
C) tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. 
D) tariff is a quantitative restriction on imports whereas quota is an import duty. 
E) a tariff raises the price of the product only in the domestic market whereas with a quota, both domestic and foreign producers receive a higher price. 
A) quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. 
B) quota yields revenue to the government whereas tariff does not yield any revenue. 
C) tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. 
D) tariff is a quantitative restriction on imports whereas quota is an import duty. 
E) a tariff raises the price of the product only in the domestic market whereas with a quota, both domestic and foreign producers receive a higher price.

Question 20

Agreements to abolish most barriers to trade among nations are known as:

Accepted Answer

A) free trade cartels. 
B) discriminatory trade agreements. 
C) neutral trade agreements. 
D) preferential trade agreements. 
E) retaliatory trade agreements. 
A) free trade cartels. 
B) discriminatory trade agreements. 
C) neutral trade agreements. 
D) preferential trade agreements. 
E) retaliatory trade agreements.

Exam 37: International Trade Restrictions

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2 According to Figure 20.2, if the world price per bushel of wheat is $25, what is the domestic production?

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 20.3 In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium quantity demanded?

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

As a result of the government procurement policy in the U.S.:

Many economists believe that the collapse of world trade and the depression in the 1930s were linked by a decrease in real income caused by producing on the basis of comparative advantage.

Protection of an infant industry should be withdrawn once that industry:

Which of the following statements about international trade restrictions is true?

Suppose that the world price of kiwi fruit ($10 per box)is below the domestic price ($12 per box).A tariff of $1 per box would:

Every country imposes tariffs on at least some imports.

People who call for creating a "level playing field" believe that:

Nascent industries require adequate protection from foreign competition because:

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

If an infant industry truly has a good chance to become competitive and produce profitably once it is well established, it is not at all clear that government should even offer protection to reduce short-run losses.

Creating conditions for fair trade by limiting imports will make the domestic consumers better off, as they will be required to pay low prices for the products.

The basic difference between a tariff and quota is that:

Agreements to abolish most barriers to trade among nations are known as:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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