Question 1

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.E) C) and D)
F) B) and D)

Question 2

Figure 9-2
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 9-2.Suppose the government imposes a tariff of $20 per unit.With trade and a tariff,consumer surplus is

Accepted Answer

A)   $75,000 and producer surplus is $27,000.
B)   $63,000 and producer surplus is $12,000.
C)   $75,000 and producer surplus is $12,000.
D)   $63,000 and producer surplus is $27,000.E) None of the above
F) A) and B)

Question 3

Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs.An economist would argue that

Accepted Answer

A)   foreign competition may cause unemployment in import-competing industries,but the effect is temporary because other industries,especially exporting industries,will be expanding.
B)   foreign competition may cause unemployment in import-competing industries,but the increase in consumer surplus due to free trade is more valuable than the lost jobs.
C)   the critics are correct,so countries must protect their industries with tariffs or quotas.
D)   foreign competition may cause unemployment in import-competing industries,but the increase in the variety of goods consumers can choose from is more valuable than the lost jobs.E) None of the above
F) B) and C)

Question 4

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

Accepted Answer

A)   will import sugar.
B)   will export sugar.
C)   will either export sugar or export sugar,but it is not clear from the given information.
D)   would have nothing to gain either from exporting or importing sugar.E) B) and C)
F) None of the above

Question 5

The rules established under GATT are enforced by the

Accepted Answer

A)   governments of the nations that are involved in GATT.
B)   North American Free Trade Association.
C)   World Trade Organization.
D)   European Union.E) C) and D)
F) A) and B)

Question 6

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

Accepted Answer

A)   producer surplus increases and total surplus increases in the market for that good.
B)   producer surplus increases and total surplus decreases in the market for that good.
C)   producer surplus decreases and total surplus increases in the market for that good.
D)   producer surplus decreases and total surplus decreases in the market for that good.E) C) and D)
F) A) and B)

Question 7

Figure 9-1
The following diagram shows the domestic demand and domestic supply for a market.In addition,assume that the world price in this market is $40 per unit. 
-Refer to Figure 9-1.With free trade,the domestic price and domestic quantity demanded are

Accepted Answer

A)   $30 and 1,200.
B)   $40 and 800.
C)   $30 and 800.
D)   $40 and 1,600.E) All of the above
F) A) and D)

Question 8

Suppose a country abandons a no-trade policy in favor of a free-trade policy.If,as a result,the domestic price of beans increases to equal the world price of beans,then

Accepted Answer

A)   that country becomes an exporter of beans.
B)   that country has a comparative advantage in producing beans.
C)   at the world price,the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 9

Figure 9-3.The domestic country is China. 
-Refer to Figure 9-3.The increase in total surplus in China when trade is allowed is

Accepted Answer

A)   $400.
B)   $500.
C)   $600.
D)   $750.E) A) and B)
F) All of the above

Question 10

For Country A,the world price of soybeans exceeds the domestic equilibrium price of soybeans.As a result,international trade allows buyers of soybeans in Country A to experience greater consumer surplus than they otherwise would experience.

Accepted Answer

A) True 
 B)False

Question 11

Figure 9-2 
-Refer to Figure 9-2.As a result of trade,total surplus increases by

Accepted Answer

A)   $80.
B)   $97.50.
C)   $162.50.
D)   $495.50.E) B) and D)
F) All of the above

Question 12

Figure 9-15 2 - Q1. B)  Q3 - Q2. C)  Q4 - Q3. D)  Q4 - Q3 + Q2 - Q1." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 9-15.A result of the tariff is that,relative to the free-trade situation,the quantity of saddles imported decreases by

Accepted Answer

A)   Q2 - Q1.
B)   Q3 - Q2.
C)   Q4 - Q3.
D)   Q4 - Q3 + Q2 - Q1.E) None of the above
F) C) and D)

Question 13

A common argument in favor of restricting international trade in good x is based on the premise that

Accepted Answer

A)   international trade reduces total surplus in countries that export good x.
B)   international trade reduces total surplus in countries that import good x.
C)   international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another.
D)   trade restrictions can be useful when one country bargains with its trading partners.E) A) and D)
F) B) and C)

Question 14

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.E) A) and D)
F) A) and B)

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.If Isoland allows international trade and if the world price of peaches is $5,then

Accepted Answer

A)   Isoland has a comparative advantage,relative to other countries,in producing peaches.
B)   Isoland will import peaches.
C)   consumer surplus with trade exceeds consumer surplus without trade.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 16

Figure 9-17 
-Refer to Figure 9-17.Without trade,consumer surplus is

Accepted Answer

A)   $400 and producer surplus is $200.
B)   $400 and producer surplus is $800.
C)   $1,600 and producer surplus is $200.
D)   $1,600 and producer surplus is $800.E) A) and B)
F) C) and D)

Question 17

Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues of free trade.

Accepted Answer

A) True 
 B)False

Question 18

A tariff on a product

Accepted Answer

A)   is a direct quantitative restriction on the amount of a good that can be imported.
B)   increases the domestic quantity supplied.
C)   increases domestic consumer surplus.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 19

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

Accepted Answer

A)   A + B.
B)   A + B + C.
C)   A + B + C + D.
D)   B + C + D.E) All of the above
F) B) and C)

Question 20

Figure 9-12 
-Refer to Figure 9-12.Equilibrium price and equilibrium quantity without trade are

Accepted Answer

A)   $27 and 400.
B)   $27 and 800.
C)   $21 and 400.
D)   $21 and 600.E) A) and C)
F) A) and B)

Exam 9: Application: International Trade

Figure 9-2 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 9-2.Suppose the government imposes a tariff of $20 per unit.With trade and a tariff,consumer surplus is

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The rules established under GATT are enforced by the

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

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Figure 9-17 -Refer to Figure 9-17.Without trade,consumer surplus is

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Figure 9-3.The domestic country is China. -Refer to Figure 9-3.The increase in total surplus in China when trade is allowed is

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A common argument in favor of restricting international trade in good x is based on the premise that

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Figure 9-15 -Refer to Figure 9-15.A result of the tariff is that,relative to the free-trade situation,the quantity of saddles imported decreases by

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Figure 9-12 -Refer to Figure 9-12.Equilibrium price and equilibrium quantity without trade are

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

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

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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 and if the world price of peaches is $5,then

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

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For Country A,the world price of soybeans exceeds the domestic equilibrium price of soybeans.As a result,international trade allows buyers of soybeans in Country A to experience greater consumer surplus than they otherwise would experience.

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An import quota

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Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs.An economist would argue that

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Suppose a country abandons a no-trade policy in favor of a free-trade policy.If,as a result,the domestic price of beans increases to equal the world price of beans,then

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Figure 9-1 The following diagram shows the domestic demand and domestic supply for a market.In addition,assume that the world price in this market is $40 per unit. -Refer to Figure 9-1.With free trade,the domestic price and domestic quantity demanded are

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Figure 9-2 -Refer to Figure 9-2.As a result of trade,total surplus increases by

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Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues of free trade.

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A tariff on a product

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