Question 1

Figure 9-1
The figure illustrates the market for coffee in Guatemala.  
-Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala

Accepted Answer

A)  increases by the area B + D. 
B)  increases by the area B + D + G. 
C)  decreases by the area C + F. 
D)  decreases by the area G. 
A)  increases by the area B + D. 
B)  increases by the area B + D + G. 
C)  decreases by the area C + F. 
D)  decreases by the area G.

Question 2

Figure 9-28
The following diagram shows the domestic demand and domestic supply curves in a market.  
-Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free trade, how much is producer surplus?

Accepted Answer

With trade

Question 3

Figure 9-25
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit.  
-Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a tariff, total surplus is

Accepted Answer

A)  $1,700. 
B)  $1,800. 
C)  $1,900. 
D)  $2,000. 
A)  $1,700. 
B)  $1,800. 
C)  $1,900. 
D)  $2,000.

Question 4

When a country allows international trade and becomes an importer of a good, domestic producers of the good are better off, and domestic consumers of the good are worse off.

Accepted Answer

A) True 
 B)False

Question 5

A possible outcome of the multilateral approach to free trade is that such an approach can

Accepted Answer

A)  win political support when a unilateral approach cannot. 
B)  result in more restricted trade than under a unilateral approach, when international negotiations fail. 
C)  result in drastic reductions in tariffs for many countries. 
D)  All of the above are correct. 
A)  win political support when a unilateral approach cannot. 
B)  result in more restricted trade than under a unilateral approach, when international negotiations fail. 
C)  result in drastic reductions in tariffs for many countries. 
D)  All of the above are correct.

Question 6

Figure 9-3. The domestic country is China.  
-Refer to Figure 9-3. With no international trade,

Accepted Answer

A)  the equilibrium price is $12 and the equilibrium quantity is 300. 
B)  the equilibrium price is $16 and the equilibrium quantity is 200. 
C)  the equilibrium price is $16 and the equilibrium quantity is 300. 
D)  the equilibrium price is $16 and the equilibrium quantity is 450. 
A)  the equilibrium price is $12 and the equilibrium quantity is 300. 
B)  the equilibrium price is $16 and the equilibrium quantity is 200. 
C)  the equilibrium price is $16 and the equilibrium quantity is 300. 
D)  the equilibrium price is $16 and the equilibrium quantity is 450.

Question 7

Figure 9-25
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit.  
-Refer to Figure 9-25. Suppose the government imposes a tariff of $5 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 8

Figure 9-5
The figure illustrates the market for tricycles in a country.  
-Refer to Figure 9-5. With trade, this country

Accepted Answer

A)  exports 160 tricycles. 
B)  exports 320 tricycles. 
C)  imports 160 tricycles. 
D)  imports 320 tricycles. 
A)  exports 160 tricycles. 
B)  exports 320 tricycles. 
C)  imports 160 tricycles. 
D)  imports 320 tricycles.

Question 9

Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a market.  
-Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free trade, by how much do consumer surplus, producer surplus, and total surplus change with trade?

Accepted Answer

With trade, consumer surplus f

Question 10

Which of the following statements is true?

Accepted Answer

A)  Free trade benefits a country when it exports but harms it when it imports. 
B)  "Voluntary" limits on Canadian exports of hogs are better for the United States than U.S. tariffs placed on Canadian hog exports. 
C)  Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses, whereas quotas do not impose deadweight losses. 
D)  Free trade benefits a country both when it exports and when it imports. 
A)  Free trade benefits a country when it exports but harms it when it imports. 
B)  "Voluntary" limits on Canadian exports of hogs are better for the United States than U.S. tariffs placed on Canadian hog exports. 
C)  Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses, whereas quotas do not impose deadweight losses. 
D)  Free trade benefits a country both when it exports and when it imports.

Question 11

Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that, in the production of oranges,

Accepted Answer

A)  Mexico has a comparative advantage over other countries and Mexico will export oranges. 
B)  Mexico has a comparative advantage over other countries and Mexico will import oranges. 
C)  other countries have a comparative advantage over Mexico and Mexico will export oranges. 
D)  other countries have a comparative advantage over Mexico and Mexico will import oranges. 
A)  Mexico has a comparative advantage over other countries and Mexico will export oranges. 
B)  Mexico has a comparative advantage over other countries and Mexico will import oranges. 
C)  other countries have a comparative advantage over Mexico and Mexico will export oranges. 
D)  other countries have a comparative advantage over Mexico and Mexico will import oranges.

Question 12

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 9-2
• For a small country called Boxland, the equation of the domestic demand curve for cardboard is
   where
     represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard.
• For Boxland, the equation of the domestic supply curve for cardboard is
   where
     represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard.
-Refer to Scenario 9-2. Suppose the world price of cardboard is $60 and international trade is allowed. Then Boxland's consumers demand

Accepted Answer

A)  110 tons of cardboard and Boxland's producers supply 120 tons of cardboard. 
B)  96 tons of cardboard and Boxland's producers supply 96 tons of cardboard. 
C)  96 tons of cardboard and Boxland's producers supply 115 tons of cardboard. 
D)  80 tons of cardboard and Boxland's producers supply 120 tons of cardboard. 
A)  110 tons of cardboard and Boxland's producers supply 120 tons of cardboard. 
B)  96 tons of cardboard and Boxland's producers supply 96 tons of cardboard. 
C)  96 tons of cardboard and Boxland's producers supply 115 tons of cardboard. 
D)  80 tons of cardboard and Boxland's producers supply 120 tons of cardboard.

Question 14

Figure 9-10. The figure applies to Mexico and the good is rifles.  
-Refer to Figure 9-10. The area bounded by the points Q0, P0), Q2, P1), and Q1, P1) represents

Accepted Answer

A)  Mexico's gains from trade. 
B)  the amount by which Mexico's gain in producer surplus exceeds its loss in consumer surplus due to trade. 
C)  Mexico's loss in total surplus due to trade. 
D)  All of the above are correct. 
A)  Mexico's gains from trade. 
B)  the amount by which Mexico's gain in producer surplus exceeds its loss in consumer surplus due to trade. 
C)  Mexico's loss in total surplus due to trade. 
D)  All of the above are correct.

Question 15

Figure 9-11  
-Refer to Figure 9-11. The change in total surplus in this market because of trade is

Accepted Answer

A)  A, and this area represents a loss of total surplus. 
B)  B, and this area represents a gain in total surplus. 
C)  C, and this area represents a loss of total surplus. 
D)  D, and this area represents a gain in total surplus. 
A)  A, and this area represents a loss of total surplus. 
B)  B, and this area represents a gain in total surplus. 
C)  C, and this area represents a loss of total surplus. 
D)  D, and this area represents a gain in total surplus.

Question 16

GATT is an example of a successful unilateral approach to achieving free trade.

Accepted Answer

A) True 
 B)False

Question 17

The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes

Accepted Answer

A)  benefit the United States as a whole, because they generate revenue for the government. In addition, because the goods are priced below cost, the taxes do not harm domestic consumers. 
B)  benefit the United States as a whole, because they generate revenue for the government and increase producer surplus. 
C)  harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue. 
D)  harm the United States as a whole, because they reduce producer surplus by an amount that exceeds the gain in consumer surplus and government revenue. 
A)  benefit the United States as a whole, because they generate revenue for the government. In addition, because the goods are priced below cost, the taxes do not harm domestic consumers. 
B)  benefit the United States as a whole, because they generate revenue for the government and increase producer surplus. 
C)  harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue. 
D)  harm the United States as a whole, because they reduce producer surplus by an amount that exceeds the gain in consumer surplus and government revenue.

Question 18

What are the arguments in favor of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Accepted Answer

Arguments mentioned in the text include

Question 19

An important factor in the decline of the U.S. textile industry over the past 100 or so years is

Accepted Answer

A)  foreign competitors that can produce quality textile goods at low cost. 
B)  lower prices of goods that are substitutes for clothing. 
C)  a decrease in Americans' demand for clothing, due to increased incomes and the fact that clothing is an inferior good. 
D)  the fact that the minimum wage in the U.S. has failed to keep pace with the cost of living. 
A)  foreign competitors that can produce quality textile goods at low cost. 
B)  lower prices of goods that are substitutes for clothing. 
C)  a decrease in Americans' demand for clothing, due to increased incomes and the fact that clothing is an inferior good. 
D)  the fact that the minimum wage in the U.S. has failed to keep pace with the cost of living.

Question 20

Figure 9-11  
-Refer to Figure 9-11. Consumer surplus in this market after trade is

Accepted Answer

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

Exam 9: Application: International Trade

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala

Figure 9-28 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free trade, how much is producer surplus?

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. -Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a tariff, total surplus is

When a country allows international trade and becomes an importer of a good, domestic producers of the good are better off, and domestic consumers of the good are worse off.

A possible outcome of the multilateral approach to free trade is that such an approach can

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. With no international trade,

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. -Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. The amount of revenue collected by the government from the tariff is

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, this country

Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free trade, by how much do consumer surplus, producer surplus, and total surplus change with trade?

Which of the following statements is true?

Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that, in the production of oranges,

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. The area bounded by the points Q0, P0), Q2, P1), and Q1, P1) represents

Figure 9-11 -Refer to Figure 9-11. The change in total surplus in this market because of trade is

GATT is an example of a successful unilateral approach to achieving free trade.

The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes

What are the arguments in favor of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

An important factor in the decline of the U.S. textile industry over the past 100 or so years is

Figure 9-11 -Refer to Figure 9-11. Consumer surplus in this market after trade is

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

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