Question 1

Tariffs and import quotas both result in

Accepted Answer

A)  lower levels of domestic production. 
B)  the domestic government gaining revenue. 
C)  lower levels of imports. 
D)  higher levels of domestic consumption. 
A)  lower levels of domestic production. 
B)  the domestic government gaining revenue. 
C)  lower levels of imports. 
D)  higher levels of domestic consumption. C

Question 2

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
-In the figure above, international trade ________ producer surplus in the United States by ________ .

Accepted Answer

A)  increases; $320 million 
B)  decreases; $192 million 
C)  increases; $192 million 
D)  decreases; $320 million 
A)  increases; $320 million 
B)  decreases; $192 million 
C)  increases; $192 million 
D)  decreases; $320 million B

Question 3

A major purpose of tariffs is to

Accepted Answer

A)  encourage imports. 
B)  encourage exports. 
C)  discourage imports. 
D)  discourage exports. 
A)  encourage imports. 
B)  encourage exports. 
C)  discourage imports. 
D)  discourage exports. C

Question 4

A U.S. tariff on textiles would ________ U.S. clothing prices and ________ jobs in the U.S. textile industry.

Accepted Answer

A)  reduce; decrease 
B)  reduce; increase 
C)  raise; decrease 
D)  raise; increase 
A)  reduce; decrease 
B)  reduce; increase 
C)  raise; decrease 
D)  raise; increase

Question 5

In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars". What are the effects of a cut in tariffs?

Accepted Answer

A)  The quantity of bananas imported into the EU will increase. 
B)  The price of bananas for consumers will increase. 
C)  The quantity of bananas produced in the EU (such as in France and Spain) will increase. 
D)  Europe will start to export bananas. 
A)  The quantity of bananas imported into the EU will increase. 
B)  The price of bananas for consumers will increase. 
C)  The quantity of bananas produced in the EU (such as in France and Spain) will increase. 
D)  Europe will start to export bananas.

Question 6

The activities in which U.S. workers are relatively more productive

Accepted Answer

A)  pay higher wages. 
B)  are those in which the United States has a comparative advantage. 
C)  are at risk of disappearing from the United States when NAFTA is completed. 
D)  Both answers A and B are correct. 
A)  pay higher wages. 
B)  are those in which the United States has a comparative advantage. 
C)  are at risk of disappearing from the United States when NAFTA is completed. 
D)  Both answers A and B are correct.

Question 7

Of the groups listed below, which is most likely to lobby for protection?

Accepted Answer

A)  workers in importing industries 
B)  workers in exporting industries 
C)  consumers of imported goods 
D)  producers in exporting industries 
A)  workers in importing industries 
B)  workers in exporting industries 
C)  consumers of imported goods 
D)  producers in exporting industries

Question 8

Dumping occurs when a foreign firm ________.

Accepted Answer

A)  pollutes international waters 
B)  disposes of waste materials in other countries 
C)  sells inferior output to foreigners 
D)  sells its exports at a lower price than its cost of production 
A)  pollutes international waters 
B)  disposes of waste materials in other countries 
C)  sells inferior output to foreigners 
D)  sells its exports at a lower price than its cost of production

Question 9

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

Accepted Answer

A)  avoiding import quotas. 
B)  increasing its gains from trade. 
C)  dumping. 
D)  engaging in learning-by-doing. 
A)  avoiding import quotas. 
B)  increasing its gains from trade. 
C)  dumping. 
D)  engaging in learning-by-doing.

Question 10

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, with the tariff the United States imports ________ million shirts per year.

Accepted Answer

A)  24 
B)  8 
C)  32 
D)  16 
A)  24 
B)  8 
C)  32 
D)  16

Question 11

An import quota specifies the

Accepted Answer

A)  price that can be charged for any imported good. 
B)  amount of taxes that must be paid on any imported good. 
C)  maximum amount of a good that may be imported during a specified period. 
D)  minimum amount of a good that may be imported during a specified period. 
A)  price that can be charged for any imported good. 
B)  amount of taxes that must be paid on any imported good. 
C)  maximum amount of a good that may be imported during a specified period. 
D)  minimum amount of a good that may be imported during a specified period.

Question 12

Suppose the world price of a good is $4. Based on the table below, the country would

Accepted Answer

A)  import 20 units. 
B)  export 20 units. 
C)  import 10 units. 
D)  export 10 units. 
A)  import 20 units. 
B)  export 20 units. 
C)  import 10 units. 
D)  export 10 units.

Question 13

Economics demonstrates that opening up unrestricted free international trade is beneficial to all nations. However, are there any losers from such a policy change?

Accepted Answer

Yes, there are losers from opening up to

Question 14

Which of the following is a valid reason for protecting an industry?

Accepted Answer

A)  The industry is unable to compete with low-wage foreign competitors. 
B)  Protection penalizes lax environmental standards. 
C)  Protection keeps richer nations from exploiting the workers of poorer countries. 
D)  None of the above reasons is a valid reason for protection. 
A)  The industry is unable to compete with low-wage foreign competitors. 
B)  Protection penalizes lax environmental standards. 
C)  Protection keeps richer nations from exploiting the workers of poorer countries. 
D)  None of the above reasons is a valid reason for protection.

Question 15

A country opens up to trade and imports clothing. In the clothing market, surplus has been redistributed from

Accepted Answer

A)  producers to consumers 
B)  consumers to producers 
C)  government to consumers 
D)  producers to government 
A)  producers to consumers 
B)  consumers to producers 
C)  government to consumers 
D)  producers to government

Question 16

A key difference between tariffs and quotas is that

Accepted Answer

A)  consumers are hurt with quotas but not with tariffs. 
B)  consumers are hurt with tariffs but not with quotas. 
C)  the government receives revenue with tariffs, but the importer receives added profit with quotas. 
D)  the government receives revenue with quotas, but the importer receives added profit with tariffs. 
A)  consumers are hurt with quotas but not with tariffs. 
B)  consumers are hurt with tariffs but not with quotas. 
C)  the government receives revenue with tariffs, but the importer receives added profit with quotas. 
D)  the government receives revenue with quotas, but the importer receives added profit with tariffs.

Question 17

Import quotas

Accepted Answer

A)  are the same as tariffs. 
B)  set the maximum quantity of a good that can be imported. 
C)  are not used by the United States. 
D)  set the minimum percentage of the value of a product that must consist of imported components. 
A)  are the same as tariffs. 
B)  set the maximum quantity of a good that can be imported. 
C)  are not used by the United States. 
D)  set the minimum percentage of the value of a product that must consist of imported components.

Question 18

Most economists agree that valid reasons for protecting trade include which of the following? I. The economies of scale argument
II) The saving jobs argument
III) The protection of high wages argument

Accepted Answer

A)  I only 
B)  I and II 
C)  I and III 
D)  None of the reasons are valid. 
A)  I only 
B)  I and II 
C)  I and III 
D)  None of the reasons are valid.

Question 19

Two arguments used to promote trade barriers are the infant-industry argument, and the dumping argument. Explain each of these arguments and evaluate whether each one has any flaws.

Accepted Answer

The infant-industry argument is that it

Question 20

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

Accepted Answer

A)  imports will increase, price will fall, and quantity supplied will fall 
B)  exports will increase, price will be unchanged, and quantity supplied will increase 
C)  imports will increase, price will decrease, and the supply curve will shift to the left 
D)  quantity demanded will decrease, quantity supplied will decrease, and price will decrease 
A)  imports will increase, price will fall, and quantity supplied will fall 
B)  exports will increase, price will be unchanged, and quantity supplied will increase 
C)  imports will increase, price will decrease, and the supply curve will shift to the left 
D)  quantity demanded will decrease, quantity supplied will decrease, and price will decrease

Exam 7: Global Markets in Action

Tariffs and import quotas both result in

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, international trade ________ producer surplus in the United States by ________ .

A major purpose of tariffs is to

A U.S. tariff on textiles would ________ U.S. clothing prices and ________ jobs in the U.S. textile industry.

In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars". What are the effects of a cut in tariffs?

The activities in which U.S. workers are relatively more productive

Of the groups listed below, which is most likely to lobby for protection?

Dumping occurs when a foreign firm ________.

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

An import quota specifies the

Suppose the world price of a good is $4. Based on the table below, the country would

Economics demonstrates that opening up unrestricted free international trade is beneficial to all nations. However, are there any losers from such a policy change?

Which of the following is a valid reason for protecting an industry?

A country opens up to trade and imports clothing. In the clothing market, surplus has been redistributed from

A key difference between tariffs and quotas is that

Import quotas

Most economists agree that valid reasons for protecting trade include which of the following? I. The economies of scale argument II) The saving jobs argument III) The protection of high wages argument

Two arguments used to promote trade barriers are the infant-industry argument, and the dumping argument. Explain each of these arguments and evaluate whether each one has any flaws.

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, international trade producer surplus in the United States by .

A U.S. tariff on textiles would U.S. clothing prices and jobs in the U.S. textile industry.