Question 1

The two basic approaches that a country can take as a means to achieve free trade are the

Accepted Answer

A) unilateral approach and the multilateral approach. 
B) short-run approach and the long-run approach. 
C) continental approach and the global approach. 
D) industry approach and the security approach. 
A) unilateral approach and the multilateral approach. 
B) short-run approach and the long-run approach. 
C) continental approach and the global approach. 
D) industry approach and the security approach. A

Question 2

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. Suppose Isoland changes from a no-trade policy to a policy that allows international trade. If the world price of peaches is $5, then the policy change results in

Accepted Answer

A) a decrease in consumer surplus. 
B) an increase in producer surplus. 
C) an increase in total surplus. 
D) All of the above are correct. 
A) a decrease in consumer surplus. 
B) an increase in producer surplus. 
C) an increase in total surplus. 
D) All of the above are correct. D

Question 3

Figure 9-9  
-Refer to Figure 9-9. Consumer surplus in this market before trade is

Accepted Answer

A) A. 
B) A + B. 
C) A + B + D. 
D) C. 
A) A. 
B) A + B. 
C) A + B + D. 
D) C. B

Question 4

Assume, for the U.S., that the domestic price of tea without international trade is higher than the world price of tea. This suggests that

Accepted Answer

A) other countries have a comparative advantage over the U.S. in producing tea. 
B) the U.S. has an absolute advantage over other countries in producing tea. 
C) the U.S. will export tea if international trade is allowed. 
D) American tea buyers will become worse off if international trade is allowed. 
A) other countries have a comparative advantage over the U.S. in producing tea. 
B) the U.S. has an absolute advantage over other countries in producing tea. 
C) the U.S. will export tea if international trade is allowed. 
D) American tea buyers will become worse off if international trade is allowed.

Question 5

If the world price of sugar is lower than Brazil's domestic price of sugar without trade, then Brazil

Accepted Answer

A) should import sugar. 
B) has a comparative advantage in sugar. 
C) should produce just enough sugar to satisfy domestic demand. 
D) should produce no sugar domestically. 
A) should import sugar. 
B) has a comparative advantage in sugar. 
C) should produce just enough sugar to satisfy domestic demand. 
D) should produce no sugar domestically.

Question 6

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price.  
-Refer to Figure 9-16. The area C + D + E + F represents

Accepted Answer

A) the decrease in consumer surplus caused by the tariff. 
B) the decrease in total surplus caused by the tariff. 
C) the deadweight loss of the tariff minus government revenue raised by the tariff. 
D) the deadweight loss of the tariff plus government revenue raised by the tariff. 
A) the decrease in consumer surplus caused by the tariff. 
B) the decrease in total surplus caused by the tariff. 
C) the deadweight loss of the tariff minus government revenue raised by the tariff. 
D) the deadweight loss of the tariff plus government revenue raised by the tariff.

Question 7

A quota is

Accepted Answer

A) a tax placed on imports. 
B) a limit on the quantity of imports. 
C) a tax on exports to other countries. 
D) an excess of exports over imports. 
A) a tax placed on imports. 
B) a limit on the quantity of imports. 
C) a tax on exports to other countries. 
D) an excess of exports over imports.

Question 8

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

Accepted Answer

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

Question 9

With which of the Ten Principles of Economics is the study of international trade most closely connected?

Accepted Answer

A) People face tradeoffs. 
B) Trade can make everyone better off. 
C) Governments can sometimes improve market outcomes. 
D) Prices rise when the government prints too much money. 
A) People face tradeoffs. 
B) Trade can make everyone better off. 
C) Governments can sometimes improve market outcomes. 
D) Prices rise when the government prints too much money.

Question 10

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so

Accepted Answer

A) because it is impossible to analyze the gains and losses from international trade without making this assumption. 
B) because then we can assume that world prices of goods are unaffected by that country's participation in international trade. 
C) in order to rule out the possibility of tariffs or quotas. 
D) All of the above are correct. 
A) because it is impossible to analyze the gains and losses from international trade without making this assumption. 
B) because then we can assume that world prices of goods are unaffected by that country's participation in international trade. 
C) in order to rule out the possibility of tariffs or quotas. 
D) All of the above are correct.

Question 11

Figure 9-10. The figure applies to Mexico and the good is rifles.  
-Refer to Figure 9-10. Mexico's gains from trade are represented by the area that is bounded by the points

Accepted Answer

A) (0, P0), (Q0, P0), (Q2, P1), and (0, P1). 
B) (0, P1), (0, P2), (Q0, P0), and (Q1, P1). 
C) (Q0, P0), (Q2, P1), and (Q1, P1). 
D) (0, P0), (0, P2), and (Q0, P0). 
A) (0, P0), (Q0, P0), (Q2, P1), and (0, P1). 
B) (0, P1), (0, P2), (Q0, P0), and (Q1, P1). 
C) (Q0, P0), (Q2, P1), and (Q1, P1). 
D) (0, P0), (0, P2), and (Q0, P0).

Question 12

If the world price of textiles is higher than Vietnam's domestic price of textiles without trade, then Vietnam

Accepted Answer

A) should import textiles. 
B) has a comparative advantage in textiles. 
C) should produce just enough textiles to meet its domestic demand. 
D) should refrain altogether from producing textiles. 
A) should import textiles. 
B) has a comparative advantage in textiles. 
C) should produce just enough textiles to meet its domestic demand. 
D) should refrain altogether from producing textiles.

Question 13

Figure 9-20
The figure illustrates the market for rice in Vietnam.  
-Refer to Figure 9-20. With trade, Vietnamese rice producers will produce

Accepted Answer

A) 2,000 units of rice and their producer surplus will be 4,000. 
B) 2,000 units of rice and their producer surplus will be 7,500. 
C) 3,000 units of rice and their producer surplus will be 7,500. 
D) 3,000 units of rice and their producer surplus will be 9,000. 
A) 2,000 units of rice and their producer surplus will be 4,000. 
B) 2,000 units of rice and their producer surplus will be 7,500. 
C) 3,000 units of rice and their producer surplus will be 7,500. 
D) 3,000 units of rice and their producer surplus will be 9,000.

Question 14

A major difference between tariffs and import quotas is that

Accepted Answer

A) tariffs create deadweight losses, but import quotas do not. 
B) tariffs help domestic consumers, and import quotas help domestic producers. 
C) tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. 
D) All of the above are correct. 
A) tariffs create deadweight losses, but import quotas do not. 
B) tariffs help domestic consumers, and import quotas help domestic producers. 
C) tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. 
D) All of the above are correct.

Question 15

Suppose England exports cars to Australia and imports cheese from Mexico. This situation suggests that

Accepted Answer

A) England has a comparative advantage relative to Mexico in producing cheese, and Australia has a comparative advantage relative to England in producing cars. 
B) England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese. 
C) England has an absolute advantage relative to Mexico in producing cheese, and Australia has an absolute advantage relative to England in producing cars. 
D) England has an absolute advantage relative to Australia in producing cars, and Mexico has an absolute advantage relative to England in producing cheese. 
A) England has a comparative advantage relative to Mexico in producing cheese, and Australia has a comparative advantage relative to England in producing cars. 
B) England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese. 
C) England has an absolute advantage relative to Mexico in producing cheese, and Australia has an absolute advantage relative to England in producing cars. 
D) England has an absolute advantage relative to Australia in producing cars, and Mexico has an absolute advantage relative to England in producing cheese.

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

Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Congressman Smith's reasoning is that he ignores the fact that

Accepted Answer

A) there is no evidence that any worker ever lost his or her job because of free trade. 
B) unemployment of labor is not a serious problem relative to other economic problems. 
C) the gains from trade are based on comparative advantage. 
D) the gains from trade are based on absolute advantage. 
A) there is no evidence that any worker ever lost his or her job because of free trade. 
B) unemployment of labor is not a serious problem relative to other economic problems. 
C) the gains from trade are based on comparative advantage. 
D) the gains from trade are based on absolute advantage.

Question 18

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 19

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

Accepted Answer

A) A multilateral approach can reduce trade restrictions abroad as well as at home. 
B) A multilateral approach has the potential to result in freer trade. 
C) A multilateral approach requires the agreement of two or more nations. 
D) A multilateral approach may have political advantages. 
A) A multilateral approach can reduce trade restrictions abroad as well as at home. 
B) A multilateral approach has the potential to result in freer trade. 
C) A multilateral approach requires the agreement of two or more nations. 
D) A multilateral approach may have political advantages.

Question 20

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

Exam 9: Application: International Trade

The two basic approaches that a country can take as a means to achieve free trade are the

Figure 9-9 -Refer to Figure 9-9. Consumer surplus in this market before trade is

Assume, for the U.S., that the domestic price of tea without international trade is higher than the world price of tea. This suggests that

If the world price of sugar is lower than Brazil's domestic price of sugar without trade, then Brazil

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. -Refer to Figure 9-16. The area C + D + E + F represents

A quota is

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

With which of the Ten Principles of Economics is the study of international trade most closely connected?

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. Mexico's gains from trade are represented by the area that is bounded by the points

If the world price of textiles is higher than Vietnam's domestic price of textiles without trade, then Vietnam

Figure 9-20 The figure illustrates the market for rice in Vietnam. -Refer to Figure 9-20. With trade, Vietnamese rice producers will produce

A major difference between tariffs and import quotas is that

Suppose England exports cars to Australia and imports cheese from Mexico. This situation suggests that

A tariff is a tax placed on

Congressman Smith cites the "jobs argument" when he argues in favor of restrictions on trade; he argues that everything can be produced at lower cost in other countries. The likely flaw in Congressman Smith's reasoning is that he ignores the fact that

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.

Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?

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.

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

Application: The Costs of Taxation

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters