Question 1

The small-economy assumption is necessary to analyze the gains and losses from international trade.

Accepted Answer

A) True 
 B)False

Question 2

Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit.  
-Refer to Figure 9-29. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus?

Accepted Answer

Without trade, consu

Question 3

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

Accepted Answer

A) consumer surplus and producer surplus both increase. 
B) consumer surplus and producer surplus both decrease. 
C) consumer surplus increases and producer surplus decreases. 
D) consumer surplus decreases and producer surplus increases. 
A) consumer surplus and producer surplus both increase. 
B) consumer surplus and producer surplus both decrease. 
C) consumer surplus increases and producer surplus decreases. 
D) consumer surplus decreases and producer surplus increases.

Question 4

A logical starting point from which the study of international trade begins is

Accepted Answer

A) the recognition that not all markets are competitive. 
B) the recognition that government intervention in markets sometimes enhances the economic welfare of the society. 
C) the principle of absolute advantage. 
D) the principle of comparative advantage. 
A) the recognition that not all markets are competitive. 
B) the recognition that government intervention in markets sometimes enhances the economic welfare of the society. 
C) the principle of absolute advantage. 
D) the principle of comparative advantage.

Question 5

Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that, in the production of oranges,

Accepted Answer

A) Mexico has a comparative advantage over other countries and Mexico will export oranges. 
B) Mexico has a comparative advantage over other countries and Mexico will import oranges. 
C) other countries have a comparative advantage over Mexico and Mexico will export oranges. 
D) other countries have a comparative advantage over Mexico and Mexico will import oranges. 
A) Mexico has a comparative advantage over other countries and Mexico will export oranges. 
B) Mexico has a comparative advantage over other countries and Mexico will import oranges. 
C) other countries have a comparative advantage over Mexico and Mexico will export oranges. 
D) other countries have a comparative advantage over Mexico and Mexico will import oranges.

Question 6

The world price of a ton of steel is $1,000. Before Russia allowed trade in steel, the price of a ton of steel there was $650. Once Russia allowed trade in steel with other countries, Russia began

Accepted Answer

A) exporting steel and the price per ton in Russia remained at $650. 
B) exporting steel and the price per ton in Russia increased to $1,000. 
C) importing steel and the price per ton in Russia remained at $650. 
D) importing steel and the price per ton in Russia increased to $1,000. 
A) exporting steel and the price per ton in Russia remained at $650. 
B) exporting steel and the price per ton in Russia increased to $1,000. 
C) importing steel and the price per ton in Russia remained at $650. 
D) importing steel and the price per ton in Russia increased to $1,000.

Question 7

Figure 9-2
The figure illustrates the market for calculators in a country.  
-Refer to Figure 9-2. As a result of trade, total surplus increases by

Accepted Answer

A) $50. 
B) $100. 
C) $250. 
D) $500. 
A) $50. 
B) $100. 
C) $250. 
D) $500.

Question 8

Suppose the Ivory Coast, a small country, imports wheat at the world price of $4 per bushel. If the Ivory Coast imposes a tariff of $1 per bushel on imported wheat, then, other things equal, the price of wheat in Ivory Coast will increase, but by less than $1.

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) $600. 
B) $1,200. 
C) $1,800. 
D) $2,250. 
A) $600. 
B) $1,200. 
C) $1,800. 
D) $2,250.

Question 11

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

Accepted Answer

A) True 
 B)False

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. 
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.

Question 13

Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 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. 
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.

Question 14

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

Accepted Answer

A) the losses of the domestic producers of coal exceed the gains of the domestic consumers of coal. 
B) the losses of the domestic consumers of coal exceed the gains of the domestic producers of coal. 
C) the gains of the domestic producers of coal exceed the losses of the domestic consumers of coal. 
D) the gains of the domestic consumers of coal exceed the losses of the domestic producers of coal. 
A) the losses of the domestic producers of coal exceed the gains of the domestic consumers of coal. 
B) the losses of the domestic consumers of coal exceed the gains of the domestic producers of coal. 
C) the gains of the domestic producers of coal exceed the losses of the domestic consumers of coal. 
D) the gains of the domestic consumers of coal exceed the losses of the domestic producers of coal.

Question 15

If Honduras were to subsidize the production of wool blankets and sell them in Sweden at artificially low prices, the Swedish economy would be worse off.

Accepted Answer

A) True 
 B)False

Question 16

A tariff is a tax placed on

Accepted Answer

A) an exported good and it lowers the domestic price of the good below the world price. 
B) an exported good and it ensures that the domestic price of the good stays the same as the world price. 
C) an imported good and it lowers the domestic price of the good below the world price. 
D) an imported good and it raises the domestic price of the good above the world price. 
A) an exported good and it lowers the domestic price of the good below the world price. 
B) an exported good and it ensures that the domestic price of the good stays the same as the world price. 
C) an imported good and it lowers the domestic price of the good below the world price. 
D) an imported good and it raises the domestic price of the good above the world price.

Question 17

In a December 2007 New York Times column Paul Krugman argued in favor of

Accepted Answer

A) protectionism based on the national-security argument. 
B) protectionism based on the infant-industry argument. 
C) protectionism based on the unfair-competition argument. 
D) keeping world markets relatively open. 
A) protectionism based on the national-security argument. 
B) protectionism based on the infant-industry argument. 
C) protectionism based on the unfair-competition argument. 
D) keeping world markets relatively open.

Question 18

If a country is exporting a good, this is because the country has an absolute advantage in the production of that good.
​

Accepted Answer

A) True 
 B)False

Question 19

Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to

Accepted Answer

A) cause these factories to pay the U.S. minimum wage. 
B) increase the rate of technological advance in poor countries so that they can afford to pay higher wages. 
C) increase poverty in poor countries and benefit U.S. firms which compete with these imports. 
D) harm U.S. firms which compete with these imports. 
A) cause these factories to pay the U.S. minimum wage. 
B) increase the rate of technological advance in poor countries so that they can afford to pay higher wages. 
C) increase poverty in poor countries and benefit U.S. firms which compete with these imports. 
D) harm U.S. firms which compete with these imports.

Question 20

Scenario 9-3
Suppose domestic demand and domestic supply in a market are given by the following equations:  
-Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

Accepted Answer

With trade, consumer surplus i

Exam 9: Application: International Trade

The small-economy assumption is necessary to analyze the gains and losses from international trade.

Figure 9-29 The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit. -Refer to Figure 9-29. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus?

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

A logical starting point from which the study of international trade begins is

Assume, for Mexico, that the domestic price of oranges without international trade is lower than the world price of oranges. This suggests that, in the production of oranges,

The world price of a ton of steel is $1,000. Before Russia allowed trade in steel, the price of a ton of steel there was $650. Once Russia allowed trade in steel with other countries, Russia began

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. As a result of trade, total surplus increases by

Suppose the Ivory Coast, a small country, imports wheat at the world price of $4 per bushel. If the Ivory Coast imposes a tariff of $1 per bushel on imported wheat, then, other things equal, the price of wheat in Ivory Coast will increase, but by less than $1.

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.

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

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

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

Figure 9-24 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 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

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

If Honduras were to subsidize the production of wool blankets and sell them in Sweden at artificially low prices, the Swedish economy would be worse off.

A tariff is a tax placed on

In a December 2007 New York Times column Paul Krugman argued in favor of

If a country is exporting a good, this is because the country has an absolute advantage in the production of that good. ​

Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

If a country is exporting a good, this is because the country has an absolute advantage in the production of that good.