Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

Accepted Answer

A) True 
 B)False

Question 4

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?

Accepted Answer

Brazil wil...

Question 5

The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   consumer surplus increases and total surplus increases in the market for that good.
B)   consumer surplus increases and total surplus decreases in the market for that good.
C)   consumer surplus decreases and total surplus increases in the market for that good.
D)   consumer surplus decreases and total surplus decreases in the market for that good.E) A) and B)
F) All of the above

Question 7

In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

Accepted Answer

A)   Moldova can only import goods; it cannot export goods.
B)   Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage.
C)   only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
D)   Moldova is a price taker.E) A) and D)
F) B) and C)

Question 8

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) None of the above
F) A) and C)

Question 9

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.E) A) and B)
F) A) and C)

Question 10

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

Accepted Answer

A)   confirmation of the virtues of free trade.
B)   confirmation of the infant-industry argument.
C)   confirmation that free trade agreements are not necessary.
D)   confirmation that specialization in absolute advantage works.E) A) and B)
F) C) and D)

Question 11

Figure 9-23
The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit. 
-Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and a tariff, consumer surplus is

Accepted Answer

A)   $625 and producer surplus is $25.
B)   $625 and producer surplus is $225.
C)   $1,225 and producer surplus is $25.
D)   $1,225 and producer surplus is $225.E) None of the above
F) A) and B)

Question 12

Which of the following assertions is not correct about the multilateral approach to free trade?

Accepted Answer

A)   The multilateral approach has the potential to result in freer trade than does the unilateral approach.
B)   The multilateral approach may have a political advantage over the unilateral approach.
C)   The multilateral approach is simpler than the unilateral approach.
D)   NAFTA and GATT both represent multilateral approaches to free trade.E) B) and C)
F) B) and D)

Question 13

Figure 9-12 
-Refer to Figure 9-12. Producer surplus before trade is

Accepted Answer

A)   $14,400.
B)   $16,800.
C)   $21,600.
D)   $24,800.E) B) and C)
F) B) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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) None of the above
F) C) and D)

Question 16

Figure 9-21
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 9-21. With free trade allowed, this country

Accepted Answer

A)   exports 200 units of the good.
B)   exports 400 units of the good.
C)   imports 400 units of the good.
D)   exports 800 units of the good.E) A) and B)
F) A) and C)

Question 17

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Accepted Answer

A)   the domestic price of coffee will be greater than the world price of coffee.
B)   the domestic price of coffee will be lower than the world price of coffee.
C)   the domestic price of coffee will equal the world price of coffee.
D)   The world price of coffee does not matter; the domestic price of coffee prevails.E) All of the above
F) B) and C)

Question 18

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

Question 19

When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,

Accepted Answer

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

Question 20

When the nation of Worldova allows trade and becomes an exporter of silk,

Accepted Answer

A)   residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova rises.
B)   residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova falls.
C)   residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.
D)   residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova falls.E) B) and D)
F) B) and C)

Exam 9: Application: International Trade

Figure 9-23 The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit. -Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and a tariff, consumer surplus is

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Figure 9-21 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 9-21. With free trade allowed, this country

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The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased.

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Which of the following assertions is not correct about the multilateral approach to free trade?

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

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When the nation of Worldova allows trade and becomes an exporter of silk,

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In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that

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When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,

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Figure 9-12 -Refer to Figure 9-12. Producer surplus before trade is

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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

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Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

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Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

Correct AnswerverifiedShow Answer

An import quota

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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

Correct AnswerverifiedShow Answer

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedBrazil wil...View AnswerShow Answer

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Brazil wil...
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