Exam 9: Application: International Trade

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit, and suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much are consumer surplus, producer surplus, tariff revenue, and total surplus?

Which of the following statements is true?

Tariffs and quotas are different in the sense that

The North American Free Trade Agreement

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

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

Both tariffs and import quotas

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

Suppose in the country of Jumanji that the price of wheat with no trade allowed is above the world price of wheat. If Jumanji allows free trade, will Jumanji be an importer or an exporter of wheat?

Economists feel that national security concerns never provide a legitimate rationale for trade restrictions.

According to the principle of comparative advantage, all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

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

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

When a country that imports a particular good imposes an import quota on that good,

Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil

The two basic approaches that a country can take as a means to achieve free trade are the

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 price of peaches in the United States

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. If Isoland allows international trade, then it will be an exporter of peaches if and only if the world price of peaches is

Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result,

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