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. C

Question 2

Figure 9-5   Bragabong currently both produces and imports almonds. The government of Bragabong decides to restrict international trade in almonds by imposing a quota that allows imports of only 10 million kilos each year. Figure 9-5 shows the estimated demand and supply curves for almonds in Bragabong and the results of imposing the quota.
-Use Figure 9-5 to answer questions a-j .
a.If there is no quota what is the domestic price of almonds and what is the quantity of almonds demanded by consumers?
b.If there is no quota how many kilos of almonds would domestic producers supply and what quantity would be imported?
c.If there is no quota what is the dollar value of consumer surplus?
d.If there is no quota what is the dollar value of producer surplus received by producers in Bragabong?
e.If there is no quota what is the revenue received by foreign producers who supply almonds to Bragabong?
f.With a quota in place what is the price that consumers of Bragabong must now pay and what is the quantity demanded?
g.With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h.With a quota in place what is the dollar value of producer surplus received by producers in Bragabong? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Bragabong after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

Accepted Answer

a.Price without a quota = $3 per kilo; quantity demanded = 36 million kilos
b.Quantity supplied by domestic producers when there is no quota = 14 million kilos; quantity imported = 22 million kilos
c.Consumer surplus without a quota = 1/2 × $6 × 36 million = $108 million
d.Domestic producer surplus without a quota = 1/2 × 14 million × $2.40 = $16.8 million
e.Revenue received by foreign producers when there is no quota =22 million × $3 = $66 million
f.Price with a quota = $4.00 per kilo; quantity demanded = 30 million kilos
g.Consumer surplus with a quota = 1/2 × $5 × 30 million = $75 million.No,consumers are worse off.
h.Domestic producer surplus with a quota = 1/2 × $3.40 × 20 million = $34 million.Yes,domestic producers are better off.
i.With a quota revenue to foreign producers = $4 × 10 million = $40 million
j.Deadweight loss = 1/2 × $1 × 6 million + 1/2 × $1 × 6 million = $6 million

Question 3

In the U.S.steel market,a "Buy American" provision in the 2009 stimulus package would

Accepted Answer

A)  convert some consumer surplus to deadweight loss. 
B)  transfer some deadweight loss to producer surplus. 
C)  transfer some producer surplus to consumer surplus. 
D)  reduce the producer surplus received by foreign manufacturers. 
A)  convert some consumer surplus to deadweight loss. 
B)  transfer some deadweight loss to producer surplus. 
C)  transfer some producer surplus to consumer surplus. 
D)  reduce the producer surplus received by foreign manufacturers. A

Question 4

Absolute advantage is

Accepted Answer

A)  the ability to produce more of a good or service than competitors when using the same amount of resources. 
B)  the ability to produce higher quality goods compared to one's competitors. 
C)  the ability to produce a good or service at a higher opportunity cost than one's competitors. 
D)  the ability to produce more of a good or service than competitors that have more resources. 
A)  the ability to produce more of a good or service than competitors when using the same amount of resources. 
B)  the ability to produce higher quality goods compared to one's competitors. 
C)  the ability to produce a good or service at a higher opportunity cost than one's competitors. 
D)  the ability to produce more of a good or service than competitors that have more resources.

Question 5

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.With the tariff in place,the United States

Accepted Answer

A)  imports 16 million pounds of rice. 
B)  imports 9 million pounds of rice. 
C)  imports 15 million pounds of rice. 
D)  exports 31 million pounds of rice. 
A)  imports 16 million pounds of rice. 
B)  imports 9 million pounds of rice. 
C)  imports 15 million pounds of rice. 
D)  exports 31 million pounds of rice.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Figure 9-1  
 Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Under autarky,the consumer surplus is ________ and the producer surplus is ________.

Accepted Answer

A)  $195; $105 
B)  $300; $285 
C)  $260; $40 
D)  $555; $105 
A)  $195; $105 
B)  $300; $285 
C)  $260; $40 
D)  $555; $105

Question 8

Examples of ________ show how trade between two countries can make each better off.

Accepted Answer

A)  absolute advantage 
B)  comparative advantage 
C)  autarky 
D)  trade barriers 
A)  absolute advantage 
B)  comparative advantage 
C)  autarky 
D)  trade barriers

Question 9

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

Accepted Answer

A)  they do not want to offend their employers who want them. 
B)  politicians lobby to convince workers the restrictions will make them better off. 
C)  they believe the restrictions will protect their jobs. 
D)  they don't understand that the restrictions will threaten their jobs. 
A)  they do not want to offend their employers who want them. 
B)  politicians lobby to convince workers the restrictions will make them better off. 
C)  they believe the restrictions will protect their jobs. 
D)  they don't understand that the restrictions will threaten their jobs.

Question 10

Tastes for products such as beer differ.As a result

Accepted Answer

A)  we see countries specializing completely in the production of beer. 
B)  consumers of beer have difficulty deciding what type of imported beer to buy. 
C)  the quality of imported beer is less than it could be. 
D)  different countries may each have a comparative advantage in producing different types of beer. 
A)  we see countries specializing completely in the production of beer. 
B)  consumers of beer have difficulty deciding what type of imported beer to buy. 
C)  the quality of imported beer is less than it could be. 
D)  different countries may each have a comparative advantage in producing different types of beer.

Question 11

An economic principle that explains why countries produce different goods and services is

Accepted Answer

A)  absolute advantage. 
B)  trade as a percentage of GDP. 
C)  comparative advantage. 
D)  NAFTA. 
A)  absolute advantage. 
B)  trade as a percentage of GDP. 
C)  comparative advantage. 
D)  NAFTA.

Question 12

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 consumer surplus after the imposition of the quota?

Accepted Answer

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

Question 13

Economists believe the most persuasive argument for protectionism is to protect infant industries.But the argument has a drawback.What is this drawback?

Accepted Answer

A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up." 
A)  Governments always make the level of protection for infant industries too high. 
B)  Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. 
C)  Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). 
D)  Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Question 14

How have U.S.imports and exports,as a fraction of GDP,changed from 1950 to the present?

Accepted Answer

Since 1950,both exports and imports have

Question 15

In the 1970s and 1980s,the United States lost its comparative advantage in consumer electronics goods to Japan.What factor was most responsible for the development of Japan's comparative advantage in consumer electronics goods?

Accepted Answer

A)  Japanese firms benefited from external economies. 
B)  Japan has abundant supplies of labor. 
C)  Japanese firms excelled in process technology. 
D)  Japan has abundant supplies of natural resources needed to produce electronics goods. 
A)  Japanese firms benefited from external economies. 
B)  Japan has abundant supplies of labor. 
C)  Japanese firms excelled in process technology. 
D)  Japan has abundant supplies of natural resources needed to produce electronics goods.

Question 16

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to voluntary export restraints.With voluntary export restraints,foreign producers

Accepted Answer

A)  agree to meet specific quality standards required by the importing country. 
B)  limit their exports to a country. 
C)  pay a tax on all products they export. 
D)  must agree to import an equal quantity of products that they export. 
A)  agree to meet specific quality standards required by the importing country. 
B)  limit their exports to a country. 
C)  pay a tax on all products they export. 
D)  must agree to import an equal quantity of products that they export.

Question 17

Suppose in Finland a worker can produce either 32 cell phones or 4 kayaks while in Canada a worker can produce either 40 cell phones or 10 kayaks.
a.Which country has an absolute advantage in cell phone production? In kayak production?
b.What is the opportunity cost of 1 cell phone in Finland? In Canada?
c.What is the opportunity cost of 1 kayak in Finland? In Canada?
d.Which country has a comparative advantage in cell phone production? In kayak production?
e.Suppose each country has 1,000 workers.Currently,each country devotes 40 percent of its labor force to cell phone production and 60 percent to kayak production.What is the output of cell phones and kayaks for each country and what is the total output of cell phones and kayaks between the two countries?
f.Suppose each country specializes in the production of the good in which it has a comparative advantage.What is the total output of cell phones and kayaks in the two countries?
g.Provide a numerical example to show how Finland and Canada can both gain from trade.Assume that the terms of trade are established at 6 cell phones for 1 kayak.

Accepted Answer

a.Canada has an absolute advantage in th

Question 18

Distinguish between a voluntary export restraint and a quota.

Accepted Answer

A voluntary export restraint is an agree

Question 19

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 without a quota?

Accepted Answer

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

Question 20

Caterpillar's sales are now greater outside the United States than inside the United States.

Accepted Answer

A) True 
 B)False

Exam 9: Comparative Advantage and the Gains From International Trade

Under autarky,consumer surplus is represented by the area

In the U.S.steel market,a "Buy American" provision in the 2009 stimulus package would

Absolute advantage is

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.With the tariff in place,the United States

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

Figure 9-1 Figure 9-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-1.Under autarky,the consumer surplus is ________ and the producer surplus is ________.

Examples of ________ show how trade between two countries can make each better off.

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

Tastes for products such as beer differ.As a result

An economic principle that explains why countries produce different goods and services is

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 consumer surplus after the imposition of the quota?

Economists believe the most persuasive argument for protectionism is to protect infant industries.But the argument has a drawback.What is this drawback?

How have U.S.imports and exports,as a fraction of GDP,changed from 1950 to the present?

In the 1970s and 1980s,the United States lost its comparative advantage in consumer electronics goods to Japan.What factor was most responsible for the development of Japan's comparative advantage in consumer electronics goods?

In order to avoid the imposition of other types of trade barriers,foreign producers will sometimes agree to voluntary export restraints.With voluntary export restraints,foreign producers

Distinguish between a voluntary export restraint and a quota.

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 without a quota?

Caterpillar's sales are now greater outside the United States than inside the United States.

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

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

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

Figure 9-1 Figure 9-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-1.Under autarky,the consumer surplus is and the producer surplus is .