Question 1

A tariff

Accepted Answer

A)  lowers the domestic price of the exported good below the world price. 
B)  keeps the domestic price of the exported good the same as the world price. 
C)  raises the domestic price of the imported good above the world price. 
D)  lowers the domestic price of the imported good below the world price. 
A)  lowers the domestic price of the exported good below the world price. 
B)  keeps the domestic price of the exported good the same as the world price. 
C)  raises the domestic price of the imported good above the world price. 
D)  lowers the domestic price of the imported good below the world price.

Question 2

In a December 2007 New York Times column, Paul Krugman noted that

Accepted Answer

A)  it is difficult to find instances of trade between high-wage countries in the modern era. 
B)  it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C)  the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D)  the United States now imports more manufactured goods from the third world than from other advanced countries. 
A)  it is difficult to find instances of trade between high-wage countries in the modern era. 
B)  it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C)  the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D)  the United States now imports more manufactured goods from the third world than from other advanced countries.

Question 3

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland.
  
-Refer to Figure 9-18. Suppose Isoland changes from a no-trade policy to a policy that allows international trade. If the world price of peaches is $5, then the policy change results in

Accepted Answer

A)  a decrease in consumer surplus. 
B)  an increase in producer surplus. 
C)  an increase in total surplus. 
D)  All of the above are correct. 
A)  a decrease in consumer surplus. 
B)  an increase in producer surplus. 
C)  an increase in total surplus. 
D)  All of the above are correct.

Question 4

Figure 9-4. The domestic country is Nicaragua.  
-Refer to Figure 9-4. Which of the following statements is accurate?

Accepted Answer

A)  Consumer surplus with trade is $3,200. 
B)  Producer surplus with trade is $375. 
C)  The gains from trade amount to $800. 
D)  The gains from trade are represented on the graph by the area bounded by the points 0, $12), 300, $12), 300, $7) and 0, $7). 
A)  Consumer surplus with trade is $3,200. 
B)  Producer surplus with trade is $375. 
C)  The gains from trade amount to $800. 
D)  The gains from trade are represented on the graph by the area bounded by the points 0, $12), 300, $12), 300, $7) and 0, $7).

Question 5

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that

Accepted Answer

A)  other countries have an absolute advantage, relative to Isolani, in producing cars. 
B)  Isolani has a comparative advantage, relative to other countries, in producing cars. 
C)  if Isolani were to allow trade, it would import motorcycles. 
D)  the world price of motorcycles exceeds the price of motorcycles in Isolani. 
A)  other countries have an absolute advantage, relative to Isolani, in producing cars. 
B)  Isolani has a comparative advantage, relative to other countries, in producing cars. 
C)  if Isolani were to allow trade, it would import motorcycles. 
D)  the world price of motorcycles exceeds the price of motorcycles in Isolani.

Question 6

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland.
  
-Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Accepted Answer

A)  producer surplus will be smaller than it would be if Isoland banned trade. 
B)  consumer surplus will be smaller than it would be if Isoland banned trade. 
C)  the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied. 
D)  Isoland will be an importer of peaches. 
A)  producer surplus will be smaller than it would be if Isoland banned trade. 
B)  consumer surplus will be smaller than it would be if Isoland banned trade. 
C)  the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied. 
D)  Isoland will be an importer of peaches.

Question 7

Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a market.  
-Refer to Figure 9-26. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Accepted Answer

Consumer surplus is

Question 8

Figure 9-2
The figure illustrates the market for calculators in a country.  
-Refer to Figure 9-2. The world price for calculators represents

Accepted Answer

A)  the demand for calculators from the rest of the world. 
B)  the supply of calculators from the rest of the world. 
C)  the level of inefficiency in the domestic market caused by trade. 
D)  the gap between domestic quantity demanded and domestic quantity supplied and the resulting shortage. 
A)  the demand for calculators from the rest of the world. 
B)  the supply of calculators from the rest of the world. 
C)  the level of inefficiency in the domestic market caused by trade. 
D)  the gap between domestic quantity demanded and domestic quantity supplied and the resulting shortage.

Question 9

Figure 9-3. The domestic country is China.  
-Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,

Accepted Answer

A)  Chinese producers of pencil sharpeners would become worse off. 
B)  Chinese consumers of pencil sharpeners would become better off. 
C)  total surplus in the Chinese economy would increase. 
D)  All of the above are correct. 
A)  Chinese producers of pencil sharpeners would become worse off. 
B)  Chinese consumers of pencil sharpeners would become better off. 
C)  total surplus in the Chinese economy would increase. 
D)  All of the above are correct.

Question 10

Figure 9-27
The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit.  
-Refer to Figure 9-27. Suppose the country imposes a $5 per unit tariff. If the country allows trade with a tariff, how much are consumer surplus, producer surplus, tariff revenue, and total surplus?

Accepted Answer

With trade and a tariff, consu

Question 11

The results of a 2008 Los Angeles Times poll suggest that the percentage of Americans who believe trade is harmful to the economy exceeds the percentage of Americans who believe trade is beneficial to the economy.

Accepted Answer

A) True 
 B)False

Question 12

The "unfair­competition" argument might be cited by an American who believes that

Accepted Answer

A)  almost every country has a comparative advantage, relative to the United States, in producing almost all goods. 
B)  young industries should be protected against foreign competition until they become profitable. 
C)  the American automobile industry should be protected against Japanese firms that are able to produce automobiles at relatively low cost. 
D)  the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products. 
A)  almost every country has a comparative advantage, relative to the United States, in producing almost all goods. 
B)  young industries should be protected against foreign competition until they become profitable. 
C)  the American automobile industry should be protected against Japanese firms that are able to produce automobiles at relatively low cost. 
D)  the French government's subsidies to French farmers justify restrictions on American imports of French agricultural products.

Question 13

Figure 9-12  
-Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are

Accepted Answer

A)  1,200 and 800. 
B)  1,600 and 800. 
C)  800 and 1,200. 
D)  800 and 1,600. 
A)  1,200 and 800. 
B)  1,600 and 800. 
C)  800 and 1,200. 
D)  800 and 1,600.

Question 14

Use the graph to answer the following questions about CDs.   
a. What is the equilibrium price of CDs before trade?
b. What is the equilibrium quantity of CDs before trade?
c. What is the price of CDs after trade is allowed?
d. What is the quantity of CDs exported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?

Accepted Answer

a. $12
b. $50
c. $15

Question 15

A tariff is a

Accepted Answer

A)  limit on how much of a good can be exported. 
B)  limit on how much of a good can be imported. 
C)  tax on an exported good. 
D)  tax on an imported good. 
A)  limit on how much of a good can be exported. 
B)  limit on how much of a good can be imported. 
C)  tax on an exported good. 
D)  tax on an imported good.

Question 16

The before-trade price of fish in Denmark is $10.00 per pound. The world price of fish is $6.00 per pound. Denmark is a price-taker in the fish market. If Denmark begins to allow trade in fish, its consumers of fish will become

Accepted Answer

A)  better off, its producers of fish will become better off, and on balance the citizens of Denmark will become better off. 
B)  worse off, its producers of fish will become better off, and on balance the citizens of Denmark will become worse off 
C)  worse off, its producers of fish will become better off, and on balance the citizens of Denmark will become worse off. 
D)  better off, its producers of fish will become worse off, and on balance the citizens of Denmark will become better off 
A)  better off, its producers of fish will become better off, and on balance the citizens of Denmark will become better off. 
B)  worse off, its producers of fish will become better off, and on balance the citizens of Denmark will become worse off 
C)  worse off, its producers of fish will become better off, and on balance the citizens of Denmark will become worse off. 
D)  better off, its producers of fish will become worse off, and on balance the citizens of Denmark will become better off

Question 17

"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the

Accepted Answer

A)  national-security argument. 
B)  infant-industry argument. 
C)  unfair-competition argument. 
D)  jobs argument. 
A)  national-security argument. 
B)  infant-industry argument. 
C)  unfair-competition argument. 
D)  jobs argument.

Question 18

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Accepted Answer

A unilateral approach is when a country

Question 19

Workers displaced by trade eventually find jobs in

Accepted Answer

A)  another country. 
B)  the government sector. 
C)  the industries in which the country has a comparative advantage. 
D)  a different company in the same industry. 
A)  another country. 
B)  the government sector. 
C)  the industries in which the country has a comparative advantage. 
D)  a different company in the same industry.

Question 20

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

Accepted Answer

A)  domestic producers gain and domestic consumers lose. 
B)  domestic producers lose and domestic consumers gain. 
C)  domestic producers and domestic consumers both gain. 
D)  domestic producers and domestic consumers both lose. 
A)  domestic producers gain and domestic consumers lose. 
B)  domestic producers lose and domestic consumers gain. 
C)  domestic producers and domestic consumers both gain. 
D)  domestic producers and domestic consumers both lose.

A tariff

In a December 2007 New York Times column, Paul Krugman noted that

Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. Which of the following statements is accurate?

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland. -Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-26. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. The world price for calculators represents

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,

The results of a 2008 Los Angeles Times poll suggest that the percentage of Americans who believe trade is harmful to the economy exceeds the percentage of Americans who believe trade is beneficial to the economy.

The "unfaircompetition" argument might be cited by an American who believes that

Figure 9-12 -Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are

A tariff is a

The before-trade price of fish in Denmark is $10.00 per pound. The world price of fish is $6.00 per pound. Denmark is a price-taker in the fish market. If Denmark begins to allow trade in fish, its consumers of fish will become

"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Workers displaced by trade eventually find jobs in

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

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Exam 9: Application: International Trade

A tariff

In a December 2007 New York Times column, Paul Krugman noted that

Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. Which of the following statements is accurate?

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland. -Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-26. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. The world price for calculators represents

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,

The results of a 2008 Los Angeles Times poll suggest that the percentage of Americans who believe trade is harmful to the economy exceeds the percentage of Americans who believe trade is beneficial to the economy.

The "unfair­competition" argument might be cited by an American who believes that

Figure 9-12 -Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are

A tariff is a

The before-trade price of fish in Denmark is $10.00 per pound. The world price of fish is $6.00 per pound. Denmark is a price-taker in the fish market. If Denmark begins to allow trade in fish, its consumers of fish will become

"Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Workers displaced by trade eventually find jobs in

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

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

The "unfaircompetition" argument might be cited by an American who believes that