Question 1

Use the following to answer questions :
Figure: The Market for Laptop Sleeves 
-(Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

Accepted Answer

A) A + B 
B) C + D + E + F 
C) D + E + F 
D) D + F

Question 2

Compared with autarky, international trade leads to _____ domestic production in exporting industries and _____ domestic production in import-competing industries.

Accepted Answer

A) higher; lower 
B) higher; higher 
C) lower; higher 
D) lower; lower

Question 3

Use the following to answer questions :
Figure: The Market for Melons in Russia II 
-(Figure: The Markets for Melons in Russia II) Look at the figure The Market for Melons in Russia II. Suppose Russia opens to trade and finds the world price to be $10. Russia will:

Accepted Answer

A) import 30 units of melons. 
B) export 30 units of melons. 
C) not find it beneficial to trade. 
D) import 40 units of melons.

Question 4

When a country exchanges goods with another country, in the short run:

Accepted Answer

A) producers in the exporting industry may be better off. 
B) consumers of the imported good may be worse off. 
C) consumers of the exported good may be better off. 
D) producers in the importing industry are better off.

Question 5

When a country moves from autarky to free international trade, consumers and producers in the import and export sectors all gain (i.e., both consumer surplus and producer surplus increase in both sectors).

Accepted Answer

A) True 
 B)False

Question 6

The World Trade Organization:

Accepted Answer

A) assists importers and exporters in conducting their trade. 
B) works together with United Nations forces to enforce international decisions. 
C) organizes the negotiations involved in trade agreements and resolves disputes among members. 
D) promotes trade by organizing educational conferences.

Question 7

The organization that oversees global trade negotiations and settles trade disputes among its members is the:

Accepted Answer

A) World Bank. 
B) European Union. 
C) World Trade Organization. 
D) North American Free Trade Agreement.

Question 8

Use the following to answer questions :
Figure: The Production Possibility Frontiers for Jackson and Tahoe 
-(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. Tahoe has an absolute advantage in producing:

Accepted Answer

A) wheat only. 
B) cattle only. 
C) both wheat and cattle. 
D) neither wheat nor cattle.

Question 9

In a Ricardian model of international trade, the production possibility frontiers are _____, indicating that the opportunity cost of increasing the production of one item relative to another _____.

Accepted Answer

A) convex; is constant 
B) concave; increases 
C) straight lines; is constant 
D) straight lines; decreases

Question 10

Use the following to answer questions :
Figure: The Market for MP3 Players 
-(Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, this country:

Accepted Answer

A) will import 150,000 MP3 players. 
B) will export 150,000 MP3 players. 
C) has a domestic supply equal to 250,000 MP3 players. 
D) has a domestic demand equal to 100,000 MP3 players.

Question 11

Use the following to answer questions :
Figure: The Market for MP3 Players 
-(Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. If the world price equals $100 and there is free trade, what is the gain in consumer surplus?

Accepted Answer

A) $5 million 
B) $2.5 million 
C) $2.625 million 
D) $750,000

Question 12

An urbanized country has 100 million workers living on 100 square miles of land. A country that is principally rural has 1 million workers living on 10 square miles of land. From this information we know that the urbanized country is _____ relative to the rural country.

Accepted Answer

A) land-abundant 
B) labor-abundant 
C) land-intensive 
D) labor-intensive

Question 13

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky the opportunity cost of beef:

Accepted Answer

A) is higher in the Netherlands than in Belgium. 
B) is lower in the Netherlands than in Belgium. 
C) is the same in the Netherlands as in Belgium. 
D) cannot be determined in either country.

Question 14

Gains from trade will result if a country specializes in:

Accepted Answer

A) all of its goods. 
B) the goods in which it has a comparative advantage. 
C) goods in which it has an absolute advantage. 
D) goods in which it has an absolute and comparative advantage.

Question 15

The absolute value of the slope of the production possibility frontier at any point:

Accepted Answer

A) gives the autarky price of the good on the vertical axis. 
B) is found by dividing the horizontal change by a vertical change. 
C) gives the quantity of the good on the vertical axis that must be given up to produce an additional unit of the good on the horizontal axis. 
D) gives the autarky price of the good on the horizontal axis relative to the autarky price of the good on the vertical axis.

Question 16

Use the following to answer questions :
Figure: The Market for Thumb Drives 
-(Figure: The Market for Thumb Drives) Look at the figure The Market for Thumb Drives. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. Consumer surplus in free trade equals the area:

Accepted Answer

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

Question 17

The belief that importing goods from low-wage countries will hurt the standard of living of workers in the importing country is known as the:

Accepted Answer

A) Heckscher-Ohlin theory. 
B) pauper labor fallacy. 
C) sweatshop labor fallacy. 
D) theory of absolute advantage.

Question 18

Use the following to answer questions :
Figure: A Tariff on Oranges in South Africa 
-(Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from PW to PT and domestic producer surplus _____ to _____.

Accepted Answer

A) falls; G + I 
B) falls; G + I + J + K 
C) rises; G + + J + K 
D) rises; G + H

Question 19

Use the following to answer questions :
Figure: The Domestic Supply and Demand for SUVs in the United States 
-(Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the figure The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. Calculate the loss of consumer surplus.

Accepted Answer

A) $41,250 million 
B) $30,000 million 
C) $52,500 million 
D) $22,250 million

Question 20

A blockade at the border between the United States and Canada prevents the entry of all lumber products to the United States from Canada. This blockade will:

Accepted Answer

A) increase the consumer surplus for American lumber consumers. 
B) decrease the producer surplus for Canadian lumber producers. 
C) increase the total surplus for the American lumber market. 
D) increase the total surplus for the Canadian lumber market.

Exam 5: International Trade 5

Compared with autarky, international trade leads to _ domestic production in exporting industries and _ domestic production in import-competing industries.

Use the following to answer questions : Figure: The Market for Melons in Russia II -(Figure: The Markets for Melons in Russia II) Look at the figure The Market for Melons in Russia II. Suppose Russia opens to trade and finds the world price to be $10. Russia will: