Question 1

Figure 9-17  
-Refer to Figure 9-17. With free trade, the country imports

Accepted Answer

A)  16 units of the good. 
B)  24 units of the good. 
C)  60 units of the good. 
D)  64 units of the good. 
A)  16 units of the good. 
B)  24 units of the good. 
C)  60 units of the good. 
D)  64 units of the good.

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

Figure 9-22
The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit.  
-Refer to Figure 9-22. With free trade, total surplus is

Accepted Answer

A)  $30,000. 
B)  $66,000. 
C)  $96,000. 
D)  $120,000. 
A)  $30,000. 
B)  $66,000. 
C)  $96,000. 
D)  $120,000.

Question 4

Figure 9-11  
-Refer to Figure 9-11. Producer surplus in this market before trade is

Accepted Answer

A)  C. 
B)  B + C. 
C)  A + B + D. 
D)  B + C + D. 
A)  C. 
B)  B + C. 
C)  A + B + D. 
D)  B + C + D.

Question 5

Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case that

Accepted Answer

A)  Iran is an exporter of lumber. 
B)  the domestic quantity of lumber supplied exceeds the domestic quantity of lumber demanded at the world price without the tariff. 
C)  the world price without the tariff is less than the price of lumber without trade. 
D)  the world price without the tariff is greater than the price of lumber without trade. 
A)  Iran is an exporter of lumber. 
B)  the domestic quantity of lumber supplied exceeds the domestic quantity of lumber demanded at the world price without the tariff. 
C)  the world price without the tariff is less than the price of lumber without trade. 
D)  the world price without the tariff is greater than the price of lumber without trade.

Question 6

Figure 9-6
The figure illustrates the market for roses in a country.  
-Refer to Figure 9-6. The imposition of a tariff on roses

Accepted Answer

A)  increases the number of roses imported by 100. 
B)  increases the number of roses imported by 200. 
C)  decreases the number of roses imported by 200. 
D)  decreases the number of roses imported by 400. 
A)  increases the number of roses imported by 100. 
B)  increases the number of roses imported by 200. 
C)  decreases the number of roses imported by 200. 
D)  decreases the number of roses imported by 400.

Question 7

Economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition.

Accepted Answer

A) True 
 B)False

Question 8

If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff.

Accepted Answer

A) True 
 B)False

Question 9

Figure 9-7. The figure applies to the nation of Wales and the good is cheese.  
-Refer to Figure 9-7. Which of the following is a valid equation for Welsh producer surplus with trade?

Accepted Answer

A)  Producer surplus with trade = 1/2)P0Q0. 
B)  Producer surplus with trade = 1/2)P1Q1. 
C)  Producer surplus with trade = 1/2)P1Q2. 
D)  None of the above is correct. 
A)  Producer surplus with trade = 1/2)P0Q0. 
B)  Producer surplus with trade = 1/2)P1Q1. 
C)  Producer surplus with trade = 1/2)P1Q2. 
D)  None of the above is correct.

Question 10

If Freedonia changes its laws to allow international trade in software and the world price is higher than its domestic price, then it must be the case that

Accepted Answer

A)  both consumer surplus and producer surplus increase. 
B)  consumer surplus increases and producer surplus decreases. 
C)  consumer surplus decreases and producer surplus increases. 
D)  both consumer surplus and producer surplus decrease. 
A)  both consumer surplus and producer surplus increase. 
B)  consumer surplus increases and producer surplus decreases. 
C)  consumer surplus decreases and producer surplus increases. 
D)  both consumer surplus and producer surplus decrease.

Question 11

Figure 9-17  
-Refer to Figure 9-17. Without trade, total surplus is

Accepted Answer

A)  $600. 
B)  $1,200. 
C)  $1,800. 
D)  $2,250. 
A)  $600. 
B)  $1,200. 
C)  $1,800. 
D)  $2,250.

Question 12

Figure 9-5
The figure illustrates the market for tricycles in a country.  
-Refer to Figure 9-5. The increase in total surplus resulting from trade is

Accepted Answer

A)  $640, since consumer surplus increases by $1,760 and producer surplus falls by $1,120. 
B)  $1,280, since consumer surplus increases by $3,520 and producer surplus falls by $2,240. 
C)  $2,240, since consumer surplus increases by $3,240 and producer surplus falls by $1,000. 
D)  $2,560, since consumer surplus increases by $7,040 and producer surplus falls by $4,480. 
A)  $640, since consumer surplus increases by $1,760 and producer surplus falls by $1,120. 
B)  $1,280, since consumer surplus increases by $3,520 and producer surplus falls by $2,240. 
C)  $2,240, since consumer surplus increases by $3,240 and producer surplus falls by $1,000. 
D)  $2,560, since consumer surplus increases by $7,040 and producer surplus falls by $4,480.

Question 13

The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new free­trade policy has

Accepted Answer

A)  increased consumer surplus and producer surplus in the incense market. 
B)  increased consumer surplus in the steel market and left producer surplus in the rug market unchanged. 
C)  decreased consumer surplus in both the steel and rug markets. 
D)  decreased consumer surplus in the steel market and increased total surplus in the incense market. 
A)  increased consumer surplus and producer surplus in the incense market. 
B)  increased consumer surplus in the steel market and left producer surplus in the rug market unchanged. 
C)  decreased consumer surplus in both the steel and rug markets. 
D)  decreased consumer surplus in the steel market and increased total surplus in the incense market.

Question 14

Figure 9-23
The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit.  
-Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The amount of revenue collected by the government from the tariff is

Accepted Answer

A)  $50. 
B)  $100. 
C)  $150. 
D)  $200. 
A)  $50. 
B)  $100. 
C)  $150. 
D)  $200.

Question 15

A major difference between tariffs and import quotas is that

Accepted Answer

A)  tariffs create deadweight losses, but import quotas do not. 
B)  tariffs help domestic consumers, and import quotas help domestic producers. 
C)  tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. 
D)  All of the above are correct. 
A)  tariffs create deadweight losses, but import quotas do not. 
B)  tariffs help domestic consumers, and import quotas help domestic producers. 
C)  tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. 
D)  All of the above are correct.

Question 16

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Accepted Answer

A)  other countries have a comparative advantage over Colombia in producing coffee. 
B)  Colombia has an absolute advantage over other countries in producing coffee. 
C)  Colombia will export coffee if international trade is allowed. 
D)  Colombian coffee buyers will become worse off if international trade is allowed. 
A)  other countries have a comparative advantage over Colombia in producing coffee. 
B)  Colombia has an absolute advantage over other countries in producing coffee. 
C)  Colombia will export coffee if international trade is allowed. 
D)  Colombian coffee buyers will become worse off if international trade is allowed.

Question 17

The results of a 2008 Los Angeles Times poll suggest that a significant majority of Americans believe that free international trade helps the American economy.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is the most accurate statement?

Accepted Answer

A)  The one argument for restricting trade that almost all economists accept as valid is the infant-industry argument. 
B)  Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. 
C)  The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade. 
D)  The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-industry argument. 
A)  The one argument for restricting trade that almost all economists accept as valid is the infant-industry argument. 
B)  Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. 
C)  The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade. 
D)  The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-industry argument.

Question 19

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars.  
-Refer to Figure 9-8. When the country for which the figure is drawn allows international trade in cars,

Accepted Answer

A)  consumer surplus increases by the area B. 
B)  producer surplus decreases by the area B + D. 
C)  total surplus increases by the area D. 
D)  All of the above are correct. 
A)  consumer surplus increases by the area B. 
B)  producer surplus decreases by the area B + D. 
C)  total surplus increases by the area D. 
D)  All of the above are correct.

Question 20

Without free trade, the domestic price of a good must be equal to the world price of a good.

Accepted Answer

A) True 
 B)False

Exam 9: Application: International Trade

Figure 9-17 -Refer to Figure 9-17. With free trade, the country imports

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.

Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. -Refer to Figure 9-22. With free trade, total surplus is

Figure 9-11 -Refer to Figure 9-11. Producer surplus in this market before trade is

Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case that

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. The imposition of a tariff on roses

Economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition.

If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff.

Figure 9-7. The figure applies to the nation of Wales and the good is cheese. -Refer to Figure 9-7. Which of the following is a valid equation for Welsh producer surplus with trade?

If Freedonia changes its laws to allow international trade in software and the world price is higher than its domestic price, then it must be the case that

Figure 9-17 -Refer to Figure 9-17. Without trade, total surplus is

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. The increase in total surplus resulting from trade is

The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new free­trade policy has

A major difference between tariffs and import quotas is that

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

The results of a 2008 Los Angeles Times poll suggest that a significant majority of Americans believe that free international trade helps the American economy.

Which of the following is the most accurate statement?

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. -Refer to Figure 9-8. When the country for which the figure is drawn allows international trade in cars,

Without free trade, the domestic price of a good must be equal to the world price 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 nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new freetrade policy has