Question 1

If a country's domestic price of a good is lower than the world price, then that country has a comparative advantage in producing that good.

Accepted Answer

A) True 
 B)False

Question 2

The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing rice, exporting steel, and neither importing nor exporting TVs. We can conclude that producer surplus in Aquilonia is now

Accepted Answer

A) higher in the steel market, lower in the rice market, and unchanged in the TV market. 
B) higher in the rice and steel markets, and unchanged in the TV market. 
C) lower in the rice and TV markets, and higher in the steel market. 
D) lower in the rice and steel markets, and the same in the TV market. 
A) higher in the steel market, lower in the rice market, and unchanged in the TV market. 
B) higher in the rice and steel markets, and unchanged in the TV market. 
C) lower in the rice and TV markets, and higher in the steel market. 
D) lower in the rice and steel markets, and the same in the TV market.

Question 3

Refer to Figure 9-16. The tariff

Accepted Answer

A) decreases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F. 
B) decreases producer surplus by the area C + D and decreases consumer surplus by the area D + E + F. 
C) increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F. 
D) increases producer surplus by the area B + C and decrease consumer surplus by the area D + E + F. 
A) decreases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F. 
B) decreases producer surplus by the area C + D and decreases consumer surplus by the area D + E + F. 
C) increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F. 
D) increases producer surplus by the area B + C and decrease consumer surplus by the area D + E + F.

Question 4

When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experienced a decrease in producer surplus of $5 million and total surplus in Mooseland's sugar market increased by $2 million. We can conclude that

Accepted Answer

A) Mooseland became an exporter of sugar. 
B) the overall economic well-being of participants in the sugar market in Mooseland fell because of trade. 
C) consumer surplus in Mooseland increased by $7 million. 
D) the opening of trade caused the domestic demand curve for sugar in Mooseland to shift to the right. 
A) Mooseland became an exporter of sugar. 
B) the overall economic well-being of participants in the sugar market in Mooseland fell because of trade. 
C) consumer surplus in Mooseland increased by $7 million. 
D) the opening of trade caused the domestic demand curve for sugar in Mooseland to shift to the right.

Question 5

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

Accepted Answer

A) True 
 B)False

Question 6

In principle, trade can make a nation better off, because the gains to the winners exceed the losses to the losers.

Accepted Answer

A) True 
 B)False

Question 7

Figure 9-1
The figure illustrates the market for coffee in Guatemala.  
-Refer to Figure 9-1. From the figure it is apparent that

Accepted Answer

A) Guatemala will export coffee if trade is allowed. 
B) Guatemala will import coffee if trade is allowed. 
C) Guatemala has nothing to gain either by importing or exporting coffee. 
D) the world price will fall if Guatemala begins to allow its citizens to trade with other countries. 
A) Guatemala will export coffee if trade is allowed. 
B) Guatemala will import coffee if trade is allowed. 
C) Guatemala has nothing to gain either by importing or exporting coffee. 
D) the world price will fall if Guatemala begins to allow its citizens to trade with other countries.

Question 8

Figure 9-2
The figure illustrates the market for calculators in a country.  
-Refer to Figure 9-2. Without trade, consumer surplus is

Accepted Answer

A) $423. 
B) $845. 
C) $1,690. 
D) $3,380. 
A) $423. 
B) $845. 
C) $1,690. 
D) $3,380.

Question 9

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Accepted Answer

A unilateral approach is when a country

Question 10

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. 
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.

Question 11

Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade

Accepted Answer

A) can realize economies of scale more fully. 
B) have greater market power. 
C) experience larger producer surplus. 
D) All of the above are correct. 
A) can realize economies of scale more fully. 
B) have greater market power. 
C) experience larger producer surplus. 
D) All of the above are correct.

Question 12

Figure 9-22
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 9-22. With free trade, total surplus is

Accepted Answer

A) $30,000. 
B) $66,000. 
C) $96,000. 
D) $120,000. 
A) $30,000. 
B) $66,000. 
C) $96,000. 
D) $120,000.

Question 13

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, domestic production and domestic consumption, respectively, are

Accepted Answer

A) 1,200 and 800. 
B) 1,600 and 1,200. 
C) 1,600 and 800. 
D) 1,200 and 1,200 
A) 1,200 and 800. 
B) 1,600 and 1,200. 
C) 1,600 and 800. 
D) 1,200 and 1,200

Question 14

Figure 9-5
The figure illustrates the market for tricycles in a country.  
-Refer to Figure 9-5. Bearing in mind that this country is "small," what would happen if there were a decrease in the price of tricycle helmets within this country, given that tricycles and tricycle helmets are complements?

Accepted Answer

A) The quantity of tricycles that this country imports would increase. 
B) The quantity of tricycles that this country imports would decrease, but the country would still be an importer of tricycles. 
C) This country would switch from being an importer of tricycles to an exporter of tricycles. 
D) The domestic price without trade would move closer to the world price. 
A) The quantity of tricycles that this country imports would increase. 
B) The quantity of tricycles that this country imports would decrease, but the country would still be an importer of tricycles. 
C) This country would switch from being an importer of tricycles to an exporter of tricycles. 
D) The domestic price without trade would move closer to the world price.

Question 15

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. With free trade, total surplus is

Accepted Answer

A) $500. 
B) $800. 
C) $1,000. 
D) $1,300. 
A) $500. 
B) $800. 
C) $1,000. 
D) $1,300.

Question 16

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. The deadweight loss caused by the tariff is

Accepted Answer

A) $25. 
B) $50. 
C) $75. 
D) $100. 
A) $25. 
B) $50. 
C) $75. 
D) $100.

Question 17

Figure 9-17  
-Refer to Figure 9-17. With free trade, the country imports

Accepted Answer

A) 16 units of the good. 
B) 24 units of the good. 
C) 60 units of the good. 
D) 64 units of the good. 
A) 16 units of the good. 
B) 24 units of the good. 
C) 60 units of the good. 
D) 64 units of the good.

Question 18

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

Accepted Answer

A) if Canada were to allow trade, it would export hockey sticks. 
B) Canada has an absolute advantage, relative to other countries, in producing hockey sticks. 
C) Canada has a comparative advantage, relative to other countries, in producing baseball bats. 
D) All of the above are correct. 
A) if Canada were to allow trade, it would export hockey sticks. 
B) Canada has an absolute advantage, relative to other countries, in producing hockey sticks. 
C) Canada has a comparative advantage, relative to other countries, in producing baseball bats. 
D) All of the above are correct.

Question 19

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 $3, then

Accepted Answer

A) Isoland has a comparative advantage, relative to other countries, in producing peaches. 
B) Isoland will export peaches. 
C) producer surplus with trade exceeds producer surplus without trade. 
D) consumer surplus with trade exceeds consumer surplus without trade. 
A) Isoland has a comparative advantage, relative to other countries, in producing peaches. 
B) Isoland will export peaches. 
C) producer surplus with trade exceeds producer surplus without trade. 
D) consumer surplus with trade exceeds consumer surplus without trade.

Question 20

Suppose the world price of coffee is $3 per pound and Brazil's domestic price of coffee without trade is $2 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

Accepted Answer

Brazil wil

Exam 9: Application: International Trade

If a country's domestic price of a good is lower than the world price, then that country has a comparative advantage in producing that good.

The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing rice, exporting steel, and neither importing nor exporting TVs. We can conclude that producer surplus in Aquilonia is now

Refer to Figure 9-16. The tariff

When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experienced a decrease in producer surplus of $5 million and total surplus in Mooseland's sugar market increased by $2 million. We can conclude that

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

In principle, trade can make a nation better off, because the gains to the winners exceed the losses to the losers.

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. From the figure it is apparent that

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. Without trade, consumer surplus is

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

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

Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade

Figure 9-22 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 9-22. With free trade, total surplus is

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, domestic production and domestic consumption, respectively, are

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. Bearing in mind that this country is "small," what would happen if there were a decrease in the price of tricycle helmets within this country, given that tricycles and tricycle helmets are complements?

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. With free trade, total surplus is

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. The deadweight loss caused by the tariff is

Figure 9-17 -Refer to Figure 9-17. With free trade, the country imports

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

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 $3, then

Suppose the world price of coffee is $3 per pound and Brazil's domestic price of coffee without trade is $2 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

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

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