Question 1

Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called

Accepted Answer

A)  marginal cost of production. 
B)  marginal benefit of size. 
C)  economies of scale. 
D)  economies of production. 
A)  marginal cost of production. 
B)  marginal benefit of size. 
C)  economies of scale. 
D)  economies of production.

Question 2

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 3

When a country allows international trade and becomes an importer 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.

Question 4

Figure 9-1
The figure illustrates the market for coffee in Guatemala.  
-Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in

Accepted Answer

A)  Guatemalan consumers paying a higher price for coffee. 
B)  a decrease in producer surplus in Guatemala. 
C)  a decrease in total surplus in Guatemala. 
D)  All of the above are correct. 
A)  Guatemalan consumers paying a higher price for coffee. 
B)  a decrease in producer surplus in Guatemala. 
C)  a decrease in total surplus in Guatemala. 
D)  All of the above are correct.

Question 5

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 6

List four benefits of international trade.

Accepted Answer

Increased variety of goods; lo

Question 7

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

Accepted Answer

A)  A multilateral approach can reduce trade restrictions abroad as well as at home. 
B)  A multilateral approach has the potential to result in freer trade. 
C)  A multilateral approach requires the agreement of two or more nations. 
D)  A multilateral approach may have political advantages. 
A)  A multilateral approach can reduce trade restrictions abroad as well as at home. 
B)  A multilateral approach has the potential to result in freer trade. 
C)  A multilateral approach requires the agreement of two or more nations. 
D)  A multilateral approach may have political advantages.

Question 8

Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is
$52 per bushel. The U.S. is a price-taker in the market for peaches.
-Refer to Scenario 9-1. If trade in peaches is allowed, the

Accepted Answer

A)  price paid by American consumers of peaches is unchanged relative to the no-trade situation. 
B)  total well-being of American producers of peaches is diminished relative to the no-trade situation. 
C)  total well-being of American consumers of peaches is enhanced relative to the no-trade situation. 
D)  total well-being of the United States is enhanced relative to the no-trade situation. 
A)  price paid by American consumers of peaches is unchanged relative to the no-trade situation. 
B)  total well-being of American producers of peaches is diminished relative to the no-trade situation. 
C)  total well-being of American consumers of peaches is enhanced relative to the no-trade situation. 
D)  total well-being of the United States is enhanced relative to the no-trade situation.

Question 9

Domestic consumers gain and domestic producers lose when the government imposes a tariff on imports.

Accepted Answer

A) True 
 B)False

Question 10

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.

Question 11

Within a country, the domestic price of a product will equal the world price if

Accepted Answer

A)  trade restrictions are imposed on the product. 
B)  the country allows free trade. 
C)  the country chooses to import, but not export, the product. 
D)  the country chooses to export, but not import, the product. 
A)  trade restrictions are imposed on the product. 
B)  the country allows free trade. 
C)  the country chooses to import, but not export, the product. 
D)  the country chooses to export, but not import, the product.

Question 12

Figure 9-15  
-Refer to Figure 9-15. Producer surplus with trade and without a tariff is

Accepted Answer

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

Question 13

Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit.  
-Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The deadweight loss caused by the tariff is

Accepted Answer

A)  $25. 
B)  $50. 
C)  $75. 
D)  $100. 
A)  $25. 
B)  $50. 
C)  $75. 
D)  $100.

Question 14

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 15

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 16

Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

Accepted Answer

A)  Japan has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to Japan in producing sugar. 
B)  Japan has a comparative advantage relative to the United States in producing sugar, and Argentina has a comparative advantage relative to Japan in producing televisions. 
C)  Japan has an absolute advantage relative to the United States in producing televisions, and Argentina has an absolute advantage relative to Japan in producing sugar. 
D)  Japan has an absolute advantage relative to Argentina in producing sugar, and the United States has an absolute advantage relative to Japan in producing televisions. 
A)  Japan has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to Japan in producing sugar. 
B)  Japan has a comparative advantage relative to the United States in producing sugar, and Argentina has a comparative advantage relative to Japan in producing televisions. 
C)  Japan has an absolute advantage relative to the United States in producing televisions, and Argentina has an absolute advantage relative to Japan in producing sugar. 
D)  Japan has an absolute advantage relative to Argentina in producing sugar, and the United States has an absolute advantage relative to Japan in producing televisions.

Question 17

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 18

Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit.  
-Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much is tariff revenue?

Accepted Answer

With trade

Question 19

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

Accepted Answer

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

Question 20

When the nation of Brownland first permitted trade with other nations, domestic producers of wheat experienced an increase in producer surplus of $4 million and total surplus in Brownland's wheat market increased by $1 million.
We can conclude that

Accepted Answer

A)  Brownland became an exporter of wheat. 
B)  consumer surplus in Brownland increased by $3 million. 
C)  the opening of trade caused the domestic supply curve for wheat in Brownland to shift to the left. 
D)  this example is inconsistent with the economic theory of international trade. 
A)  Brownland became an exporter of wheat. 
B)  consumer surplus in Brownland increased by $3 million. 
C)  the opening of trade caused the domestic supply curve for wheat in Brownland to shift to the left. 
D)  this example is inconsistent with the economic theory of international trade.

Exam 9: Application: International Trade

Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called

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

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

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in

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

List four benefits of international trade.

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. -Refer to Scenario 9-1. If trade in peaches is allowed, the

Domestic consumers gain and domestic producers lose when the government imposes a tariff on imports.

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

Within a country, the domestic price of a product will equal the world price if

Figure 9-15 -Refer to Figure 9-15. Producer surplus with trade and without a tariff is

Figure 9-24 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The deadweight loss caused by the tariff is

Which of the following is the most accurate statement?

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?

Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

An import quota

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

When the nation of Brownland first permitted trade with other nations, domestic producers of wheat experienced an increase in producer surplus of $4 million and total surplus in Brownland's wheat market increased by $1 million. We can conclude that

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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