Exam 9: Application: International Trade

Assume, for England, that the domestic price of wine without international trade is higher than the world price of wine. This suggests that, in the production of wine,

A country has a comparative advantage in a product if the world price is than that country's domestic price without trade.

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

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Figure 9-17 -Refer to Figure 9-17. The amount of revenue collected by the government from the tariff is

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.

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. -Refer to Figure 9-16. The area C + D + E + F represents

Figure 9-11 -Refer to Figure 9-11. Producer surplus plus consumer surplus in this market after trade is

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. With trade, producer surplus in China is

Domestic producers of a good become worse off, and domestic consumers of a good become better off, when a country begins allowing international trade in that good and

A multilateral approach to free trade has greater potential to increase the gains from trade than a unilateral approach, because the multilateral approach can reduce trade restrictions abroad as well as at home.

Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain imposes a $5 tariff on chips. As a result,

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 a

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

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

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 United States

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?

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, how many units will domestic consumers demand, and how many units will domestic producers produce?

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,