Question 1

Under autarky,consumer surplus is represented by the area

Accepted Answer

A)  above the supply curve and below the equilibrium price. 
B)  above the supply curve and below the demand curve. 
C)  below the demand curve and above the equilibrium price. 
D)  above the demand curve and below the supply curve. 
A)  above the supply curve and below the equilibrium price. 
B)  above the supply curve and below the demand curve. 
C)  below the demand curve and above the equilibrium price. 
D)  above the demand curve and below the supply curve.

Question 2

Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.

Accepted Answer

A) True 
 B)False

Question 3

If the opportunity cost of production for two goods is different between two countries,then

Accepted Answer

A)  trade cannot benefit either country. 
B)  only one country can be made better off by trade. 
C)  mutually beneficial trade is possible. 
D)  trade will only benefit both countries if one can lower its opportunity costs. 
A)  trade cannot benefit either country. 
B)  only one country can be made better off by trade. 
C)  mutually beneficial trade is possible. 
D)  trade will only benefit both countries if one can lower its opportunity costs.

Question 4

China has developed a comparative advantage in the production of clothing.The source of this comparative advantage is

Accepted Answer

A)  a large supply of natural resources. 
B)  a large supply of unskilled workers and relatively little capital. 
C)  investment in capital used to produce clothing. 
D)  superior process technology. 
A)  a large supply of natural resources. 
B)  a large supply of unskilled workers and relatively little capital. 
C)  investment in capital used to produce clothing. 
D)  superior process technology.

Question 5

The United States is a leading exporter of wheat.What explains the comparative advantage of the United States in wheat production?

Accepted Answer

A)  positive externalities 
B)  investment by multinational firms such as Archer-Daniels-Midland and the Tyson Foods Inc. 
C)  climate and soil conditions in the United States which are well-suited for wheat production 
D)  a large supply of unskilled labor 
A)  positive externalities 
B)  investment by multinational firms such as Archer-Daniels-Midland and the Tyson Foods Inc. 
C)  climate and soil conditions in the United States which are well-suited for wheat production 
D)  a large supply of unskilled labor

Question 6

Which of the following statements about the importance of trade to the U.S.economy is true?

Accepted Answer

A)  Since 1950, both exports and imports have steadily decreased as a fraction of U.S. gross domestic product. 
B)  Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly on exports. 
C)  The United States is the largest exporter in the world. 
D)  The U.S. economy is highly dependent on international trade for growth in its gross domestic product. 
A)  Since 1950, both exports and imports have steadily decreased as a fraction of U.S. gross domestic product. 
B)  Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly on exports. 
C)  The United States is the largest exporter in the world. 
D)  The U.S. economy is highly dependent on international trade for growth in its gross domestic product.

Question 7

Figure 9-2
   
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.The increase in domestic producer surplus as a result of the tariff is equal to the area

Accepted Answer

A)  C. 
B)  C + G. 
C)  A + C + G. 
D)  C + D + G + H + I. 
A)  C. 
B)  C + G. 
C)  A + C + G. 
D)  C + D + G + H + I.

Question 8

The selling of a product for a price below its cost of production is called

Accepted Answer

A)  fair competition. 
B)  dumping. 
C)  unfair competition. 
D)  operating at a loss. 
A)  fair competition. 
B)  dumping. 
C)  unfair competition. 
D)  operating at a loss.

Question 9

A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is

Accepted Answer

A)  false since it ignores the workers who lose their jobs as result of international trade. 
B)  false since not all countries participate in international trade. 
C)  true because it refers to countries; individuals may be losers as a result of international trade. 
D)  true because all consumers and workers benefit from international trade. 
A)  false since it ignores the workers who lose their jobs as result of international trade. 
B)  false since not all countries participate in international trade. 
C)  true because it refers to countries; individuals may be losers as a result of international trade. 
D)  true because all consumers and workers benefit from international trade.

Question 10

Figure 9-4
   
Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure 9-4 shows the demand and supply curves for sugar and the impact of this tariff.
-Use Figure 9-4 to answer questions a-i.
a.Following the imposition of the tariff,what is the price that domestic consumers must now pay and what is the quantity purchased?
b.Calculate the value of consumer surplus with the tariff in place.
c.What is the quantity supplied by domestic sugar producers with the tariff in place?
d.Calculate the value of producer surplus received by U.S.sugar producers with the tariff in place.
e.What is the quantity of sugar imported with the tariff in place?
f.What is the amount of tariff revenue collected by the government?
g.The tariff has reduced consumer surplus.Calculate the loss in consumer surplus due to the tariff.
h.What portion of the consumer surplus loss is redistributed to domestic producers? To the government?
i.Calculate the deadweight loss due to the tariff.

Accepted Answer

a.Price = $2.00 per pound; Quantity purc

Question 11

Once a country has lost its comparative advantage in producing a good,its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Accepted Answer

A)  higher; less efficient 
B)  higher; more efficient 
C)  lower; less efficient 
D)  lower; more efficient 
A)  higher; less efficient 
B)  higher; more efficient 
C)  lower; less efficient 
D)  lower; more efficient

Question 12

Table 9-1
   
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
-Refer to Table 9-1.Select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming. 
B)  Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming. 
C)  Sandy has an absolute advantage in dog bathing and dog grooming. 
D)  Linda has an absolute advantage in dog bathing and dog grooming. 
A)  Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming. 
B)  Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming. 
C)  Sandy has an absolute advantage in dog bathing and dog grooming. 
D)  Linda has an absolute advantage in dog bathing and dog grooming.

Question 13

Many people assume that if child workers in developing countries weren't working in factories,they would be in school.In fact,children in developing countries

Accepted Answer

A)  split their time evenly between work and school. 
B)  usually have few good alternatives to work. 
C)  are only allowed to work if they have attended school up to age 15. 
D)  who work are relatively rare, as most do attend school full time. 
A)  split their time evenly between work and school. 
B)  usually have few good alternatives to work. 
C)  are only allowed to work if they have attended school up to age 15. 
D)  who work are relatively rare, as most do attend school full time.

Question 14

A tariff is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A) True 
 B)False

Question 15

Figure 9-3
   
Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota.
-Refer to Figure 9-3.What is the area of domestic producer surplus after the imposition of a quota?

Accepted Answer

A)  B 
B)  B + C 
C)  B + E + I + J + M 
D)  E + I + J + M 
A)  B 
B)  B + C 
C)  B + E + I + J + M 
D)  E + I + J + M

Question 16

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products.Why,then,do some people support protectionism?

Accepted Answer

A)  The criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment. 
B)  Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries. 
C)  Supporters of protectionism believe free trade will cause their countries to lose their comparative advantage. 
D)  Supporters of protectionism believe that free trade will lead to inflation. 
A)  The criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment. 
B)  Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries. 
C)  Supporters of protectionism believe free trade will cause their countries to lose their comparative advantage. 
D)  Supporters of protectionism believe that free trade will lead to inflation.

Question 17

a.What is the World Trade Organization?
b.When was it established?
c.How many countries are members of the World Trade Organization?

Accepted Answer

a.The World Trade Organization (WTO)is a

Question 18

Figure 9-2
   
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.As a result of the tariff,domestic producers increase their quantity supplied by

Accepted Answer

A)  31 million pounds of rice. 
B)  22 million pounds of rice. 
C)  15 million pounds or rice. 
D)  6 million pounds of rice. 
A)  31 million pounds of rice. 
B)  22 million pounds of rice. 
C)  15 million pounds or rice. 
D)  6 million pounds of rice.

Question 19

The U.S.economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Accepted Answer

A) True 
 B)False

Question 20

Figure 9-2
   
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2.The tariff causes domestic consumption of rice

Accepted Answer

A)  to fall by 27 million pounds. 
B)  to fall by 11 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 16 million pounds. 
A)  to fall by 27 million pounds. 
B)  to fall by 11 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 16 million pounds.

Under autarky,consumer surplus is represented by the area

Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.

If the opportunity cost of production for two goods is different between two countries,then

China has developed a comparative advantage in the production of clothing.The source of this comparative advantage is

The United States is a leading exporter of wheat.What explains the comparative advantage of the United States in wheat production?

Which of the following statements about the importance of trade to the U.S.economy is true?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.The increase in domestic producer surplus as a result of the tariff is equal to the area

The selling of a product for a price below its cost of production is called

A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is

Once a country has lost its comparative advantage in producing a good,its income will be and its economy will be if it switches from producing the good to importing it.

Table 9-1 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. -Refer to Table 9-1.Select the statement that accurately interprets the data in the table.

Many people assume that if child workers in developing countries weren't working in factories,they would be in school.In fact,children in developing countries

A tariff is a numerical limit on the quantity of a good that can be imported.

Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. -Refer to Figure 9-3.What is the area of domestic producer surplus after the imposition of a quota?

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products.Why,then,do some people support protectionism?

a.What is the World Trade Organization? b.When was it established? c.How many countries are members of the World Trade Organization?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.As a result of the tariff,domestic producers increase their quantity supplied by

The U.S.economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.The tariff causes domestic consumption of rice

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 7: Comparative Advantage and the Gains From International Trade

Under autarky,consumer surplus is represented by the area

Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.

If the opportunity cost of production for two goods is different between two countries,then

China has developed a comparative advantage in the production of clothing.The source of this comparative advantage is

The United States is a leading exporter of wheat.What explains the comparative advantage of the United States in wheat production?

Which of the following statements about the importance of trade to the U.S.economy is true?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.The increase in domestic producer surplus as a result of the tariff is equal to the area

The selling of a product for a price below its cost of production is called

A Federal Reserve publication proclaimed that "Trade is a win-win situation for all countries that participate." This statement is

Once a country has lost its comparative advantage in producing a good,its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Table 9-1 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. -Refer to Table 9-1.Select the statement that accurately interprets the data in the table.

Many people assume that if child workers in developing countries weren't working in factories,they would be in school.In fact,children in developing countries

A tariff is a numerical limit on the quantity of a good that can be imported.

Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. -Refer to Figure 9-3.What is the area of domestic producer surplus after the imposition of a quota?

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products.Why,then,do some people support protectionism?

a.What is the World Trade Organization? b.When was it established? c.How many countries are members of the World Trade Organization?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.As a result of the tariff,domestic producers increase their quantity supplied by

The U.S.economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.The tariff causes domestic consumption of rice

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency,government Price Setting,and Taxes

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Once a country has lost its comparative advantage in producing a good,its income will be and its economy will be if it switches from producing the good to importing it.