Question 1

When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particular good,

Accepted Answer

A)  consumer surplus increases and total surplus increases in the market for that good. 
B)  consumer surplus increases and total surplus decreases in the market for that good. 
C)  consumer surplus decreases and total surplus increases in the market for that good. 
D)  consumer surplus decreases and total surplus decreases in the market for that good. 
A)  consumer surplus increases and total surplus increases in the market for that good. 
B)  consumer surplus increases and total surplus decreases in the market for that good. 
C)  consumer surplus decreases and total surplus increases in the market for that good. 
D)  consumer surplus decreases and total surplus decreases in the market for that good.

Question 2

An import quota

Accepted Answer

A)  is preferable to a tariff since an import quota does not create a deadweight loss. 
B)  is a tax on imported goods. 
C)  reduces the welfare of domestic consumers. 
D)  reduces the welfare of domestic producers. 
A)  is preferable to a tariff since an import quota does not create a deadweight loss. 
B)  is a tax on imported goods. 
C)  reduces the welfare of domestic consumers. 
D)  reduces the welfare of domestic producers.

Question 3

The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following assertions is not correct about the multilateral approach to free trade?

Accepted Answer

A)  The multilateral approach has the potential to result in freer trade than does the unilateral approach. 
B)  The multilateral approach may have a political advantage over the unilateral approach. 
C)  The multilateral approach is simpler than the unilateral approach. 
D)  NAFTA and GATT both represent multilateral approaches to free trade. 
A)  The multilateral approach has the potential to result in freer trade than does the unilateral approach. 
B)  The multilateral approach may have a political advantage over the unilateral approach. 
C)  The multilateral approach is simpler than the unilateral approach. 
D)  NAFTA and GATT both represent multilateral approaches to free trade.

Question 5

Figure 9-12  
-Refer to Figure 9-12. Producer surplus before trade is

Accepted Answer

A)  $14,400. 
B)  $16,800. 
C)  $21,600. 
D)  $24,800. 
A)  $14,400. 
B)  $16,800. 
C)  $21,600. 
D)  $24,800.

Question 6

Figure 9-21
The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit.  
-Refer to Figure 9-21. With free trade allowed, this country

Accepted Answer

A)  exports 200 units of the good. 
B)  exports 400 units of the good. 
C)  imports 400 units of the good. 
D)  exports 800 units of the good. 
A)  exports 200 units of the good. 
B)  exports 400 units of the good. 
C)  imports 400 units of the good. 
D)  exports 800 units of the good.

Question 7

Figure 9-1
The figure illustrates the market for coffee in Guatemala.  
-Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

Accepted Answer

A)  A + B + C. 
B)  A + B + C + D + F. 
C)  A + B + C + D + F + G. 
D)  A + B + C + D + F + G + H. 
A)  A + B + C. 
B)  A + B + C + D + F. 
C)  A + B + C + D + F + G. 
D)  A + B + C + D + F + G + H.

Question 8

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,

Accepted Answer

A)  consumer surplus increases and total surplus increases in the market for that good. 
B)  consumer surplus increases and total surplus decreases in the market for that good. 
C)  consumer surplus decreases and total surplus increases in the market for that good. 
D)  consumer surplus decreases and total surplus decreases in the market for that good. 
A)  consumer surplus increases and total surplus increases in the market for that good. 
B)  consumer surplus increases and total surplus decreases in the market for that good. 
C)  consumer surplus decreases and total surplus increases in the market for that good. 
D)  consumer surplus decreases and total surplus decreases in the market for that good.

Question 9

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. With trade and a tariff, consumer surplus is

Accepted Answer

A)  $625 and producer surplus is $25. 
B)  $625 and producer surplus is $225. 
C)  $1,225 and producer surplus is $25. 
D)  $1,225 and producer surplus is $225. 
A)  $625 and producer surplus is $25. 
B)  $625 and producer surplus is $225. 
C)  $1,225 and producer surplus is $25. 
D)  $1,225 and producer surplus is $225.

Question 10

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

Accepted Answer

A) True 
 B)False

Question 11

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Accepted Answer

A)  the domestic price of coffee will be greater than the world price of coffee. 
B)  the domestic price of coffee will be lower than the world price of coffee. 
C)  the domestic price of coffee will equal the world price of coffee. 
D)  The world price of coffee does not matter; the domestic price of coffee prevails. 
A)  the domestic price of coffee will be greater than the world price of coffee. 
B)  the domestic price of coffee will be lower than the world price of coffee. 
C)  the domestic price of coffee will equal the world price of coffee. 
D)  The world price of coffee does not matter; the domestic price of coffee prevails.

Question 12

Tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade, thus reducing the gains from trade.

Accepted Answer

A) True 
 B)False

Question 13

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

Accepted Answer

A)  confirmation of the virtues of free trade. 
B)  confirmation of the infant-industry argument. 
C)  confirmation that free trade agreements are not necessary. 
D)  confirmation that specialization in absolute advantage works. 
A)  confirmation of the virtues of free trade. 
B)  confirmation of the infant-industry argument. 
C)  confirmation that free trade agreements are not necessary. 
D)  confirmation that specialization in absolute advantage works.

Question 14

Suppose the world price of coffee is $2 per pound and Brazil's domestic price of coffee without trade is $3 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

Accepted Answer

Brazil wil

Question 15

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive from participating in a market.

Accepted Answer

A) True 
 B)False

Question 16

Figure 9-3. The domestic country is China.  
-Refer to Figure 9-3. The increase in total surplus in China when trade is allowed is

Accepted Answer

A)  $400. 
B)  $500. 
C)  $600. 
D)  $750. 
A)  $400. 
B)  $500. 
C)  $600. 
D)  $750.

Question 17

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

Accepted Answer

A)  Moldova can only import goods; it cannot export goods. 
B)  Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage. 
C)  only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant. 
D)  Moldova is a price taker. 
A)  Moldova can only import goods; it cannot export goods. 
B)  Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage. 
C)  only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant. 
D)  Moldova is a price taker.

Question 18

When the nation of Worldova allows trade and becomes an exporter of silk,

Accepted Answer

A)  residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova rises. 
B)  residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova falls. 
C)  residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises. 
D)  residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova falls. 
A)  residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova rises. 
B)  residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova falls. 
C)  residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises. 
D)  residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova falls.

Question 19

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

Accepted Answer

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

Question 20

If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be

Accepted Answer

A)  better off no matter how Honduras responds. 
B)  better off if Honduras gives in, and will be no worse off if it doesn't. 
C)  worse off if Honduras doesn't give in to the threat. 
D)  worse off no matter how Honduras responds. 
A)  better off no matter how Honduras responds. 
B)  better off if Honduras gives in, and will be no worse off if it doesn't. 
C)  worse off if Honduras doesn't give in to the threat. 
D)  worse off no matter how Honduras responds.

Exam 9: Application: International Trade

When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particular good,

An import quota

The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased.

Which of the following assertions is not correct about the multilateral approach to free trade?

Figure 9-12 -Refer to Figure 9-12. Producer surplus before trade is

Figure 9-21 The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit. -Refer to Figure 9-21. With free trade allowed, this country

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,

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. With trade and a tariff, consumer surplus is

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade, thus reducing the gains from trade.

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

Suppose the world price of coffee is $2 per pound and Brazil's domestic price of coffee without trade is $3 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive from participating in a market.

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. The increase in total surplus in China when trade is allowed is

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

When the nation of Worldova allows trade and becomes an exporter of silk,

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

If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be

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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