Question 1

Countries that restrict foreign trade are likely to

Accepted Answer

A)  forgo the additional surplus that trade allows, but will probably enjoy economies of scale. 
B)  forgo the additional surplus that trade allows, but will be compensated by a higher rate of technological change. 
C)  forgo the additional surplus that trade allows, but will have a lower rate of unemployment. 
D)  have more firms with domestic market power. 
A)  forgo the additional surplus that trade allows, but will probably enjoy economies of scale. 
B)  forgo the additional surplus that trade allows, but will be compensated by a higher rate of technological change. 
C)  forgo the additional surplus that trade allows, but will have a lower rate of unemployment. 
D)  have more firms with domestic market power.

Question 2

Figure 9-20
The figure illustrates the market for rice in Vietnam.  
-Refer to Figure 9-20. From the figure it is apparent that

Accepted Answer

A)  Vietnam will experience a shortage of rice if trade is not allowed. 
B)  Vietnam will experience a surplus of rice if trade is not allowed. 
C)  Vietnam has a comparative advantage in producing rice, relative to the rest of the world. 
D)  foreign countries have a comparative advantage in producing rice, relative to Vietnam. 
A)  Vietnam will experience a shortage of rice if trade is not allowed. 
B)  Vietnam will experience a surplus of rice if trade is not allowed. 
C)  Vietnam has a comparative advantage in producing rice, relative to the rest of the world. 
D)  foreign countries have a comparative advantage in producing rice, relative to Vietnam.

Question 3

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 4

Figure 9-28
The following diagram shows the domestic demand and domestic supply curves in a market.  
-Refer to Figure 9-28. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Accepted Answer

Consumer surplus is

Question 5

With which of the Ten Principles of Economics is the study of international trade most closely connected?

Accepted Answer

A)  People face tradeoffs. 
B)  Trade can make everyone better off. 
C)  Governments can sometimes improve market outcomes. 
D)  Prices rise when the government prints too much money. 
A)  People face tradeoffs. 
B)  Trade can make everyone better off. 
C)  Governments can sometimes improve market outcomes. 
D)  Prices rise when the government prints too much money.

Question 6

Several arguments for restricting trade have been advanced. Those arguments do not include

Accepted Answer

A)  the jobs argument. 
B)  the protection-as-a-bargaining-chip argument. 
C)  the no-deadweight-loss argument. 
D)  the infant-industry argument. 
A)  the jobs argument. 
B)  the protection-as-a-bargaining-chip argument. 
C)  the no-deadweight-loss argument. 
D)  the infant-industry argument.

Question 7

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 $45. Then Boxland's gains from international trade in cardboard amount to

Accepted Answer

A)  $88.75. 
B)  $102.50. 
C)  $122.50. 
D)  $135.00. 
A)  $88.75. 
B)  $102.50. 
C)  $122.50. 
D)  $135.00.

Question 8

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that

Accepted Answer

A)  Spain imports olive oil. 
B)  the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. 
C)  consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. 
D)  All of the above are correct. 
A)  Spain imports olive oil. 
B)  the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. 
C)  consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. 
D)  All of the above are correct.

Question 9

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 10

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 11

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 12

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

Accepted Answer

A) True 
 B)False

Question 13

A tax on an imported good is called a

Accepted Answer

A)  quota. 
B)  tariff. 
C)  supply tax. 
D)  trade tax. 
A)  quota. 
B)  tariff. 
C)  supply tax. 
D)  trade tax.

Question 14

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

Accepted Answer

A)  if it works consumer surplus will decline. 
B)  if it works producer surplus falls. 
C)  if it fails the country faces a choice between two bad options. 
D)  if it fails total surplus will increase. 
A)  if it works consumer surplus will decline. 
B)  if it works producer surplus falls. 
C)  if it fails the country faces a choice between two bad options. 
D)  if it fails total surplus will increase.

Question 15

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 16

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

Accepted Answer

A)  domestic producers become better off, and domestic consumers become worse off. 
B)  domestic producers become worse off, and domestic consumers become better off. 
C)  domestic consumers become better off, but the effect on the well-being of domestic producers is ambiguous. 
D)  domestic producers become worse off, but the effect on the well-being of domestic consumers is ambiguous. 
A)  domestic producers become better off, and domestic consumers become worse off. 
B)  domestic producers become worse off, and domestic consumers become better off. 
C)  domestic consumers become better off, but the effect on the well-being of domestic producers is ambiguous. 
D)  domestic producers become worse off, but the effect on the well-being of domestic consumers is ambiguous.

Question 17

For a given country, comparing the world price of aluminum and the domestic price of aluminum before trade indicates whether that country's demand for aluminum exceeds the demand for aluminum in other countries.

Accepted Answer

A) True 
 B)False

Question 18

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 19

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Accepted Answer

A)  in increase in exports of low-priced goods from developing countries to developed countries. 
B)  the replacement of manufacturing jobs with service jobs in developed countries. 
C)  economic dislocations caused by the North American Free Trade Agreement (NAFT
A)  in the 1990s. 
D)  high tariffs imposed during the Great Depression of the 1930s. 
A)  in increase in exports of low-priced goods from developing countries to developed countries. 
B)  the replacement of manufacturing jobs with service jobs in developed countries. 
C)  economic dislocations caused by the North American Free Trade Agreement (NAFT
A)  in the 1990s. 
D)  high tariffs imposed during the Great Depression of the 1930s.

Question 20

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

Accepted Answer

A)  domestic producers of the good become better off. 
B)  domestic consumers of the good become worse off. 
C)  the gains of the winners exceed the losses of the losers. 
D)  All of the above are correct. 
A)  domestic producers of the good become better off. 
B)  domestic consumers of the good become worse off. 
C)  the gains of the winners exceed the losses of the losers. 
D)  All of the above are correct.

Exam 9: Application: International Trade

Countries that restrict foreign trade are likely to

Figure 9-20 The figure illustrates the market for rice in Vietnam. -Refer to Figure 9-20. From the figure it is apparent that

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

Figure 9-28 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-28. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

With which of the Ten Principles of Economics is the study of international trade most closely connected?

Several arguments for restricting trade have been advanced. Those arguments do not include

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that

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

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

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

A tax on an imported good is called a

The problem with the protection-as-a-bargaining-chip argument for trade restrictions is

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

For a given country, comparing the world price of aluminum and the domestic price of aluminum before trade indicates whether that country's demand for aluminum exceeds the demand for aluminum in other countries.

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

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

When a country allows international 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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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