Question 1

In a December 2007 New York Times column, Paul Krugman noted that

Accepted Answer

A)  it is difficult to find instances of trade between high-wage countries in the modern era. 
B)  it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C)  the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D)  the United States now imports more manufactured goods from the third world than from other advanced countries. 
A)  it is difficult to find instances of trade between high-wage countries in the modern era. 
B)  it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era. 
C)  the United States now imports more oil and other raw materials from other advanced countries than from the third world. 
D)  the United States now imports more manufactured goods from the third world than from other advanced countries.

Question 2

A common argument in favor of restricting international trade in good x is based on the premise that

Accepted Answer

A)  international trade reduces total surplus in countries that export good x. 
B)  international trade reduces total surplus in countries that import good x. 
C)  international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another. 
D)  trade restrictions can be useful when one country bargains with its trading partners. 
A)  international trade reduces total surplus in countries that export good x. 
B)  international trade reduces total surplus in countries that import good x. 
C)  international trade is desirable only when countries with different domestic supplies of natural resources play by different rules when trading with one another. 
D)  trade restrictions can be useful when one country bargains with its trading partners.

Question 3

If the United States imports televisions and the U.S. government imposes a tariff on televisions, then

Accepted Answer

A)  total surplus in the American television market decreases. 
B)  producer surplus in the American television market increases. 
C)  U.S. imports of foreign televisions decrease. 
D)  All of the above are correct. 
A)  total surplus in the American television market decreases. 
B)  producer surplus in the American television market increases. 
C)  U.S. imports of foreign televisions decrease. 
D)  All of the above are correct.

Question 4

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, then it will be an exporter of peaches if and only if the world price of peaches is

Accepted Answer

A)  above $2. 
B)  below $4. 
C)  above $4. 
D)  below $7. 
A)  above $2. 
B)  below $4. 
C)  above $4. 
D)  below $7.

Question 5

Figure 9-4. The domestic country is Nicaragua.  
-Refer to Figure 9-4. Which of the following statements is accurate?

Accepted Answer

A)  Consumer surplus with trade is $3,200. 
B)  Producer surplus with trade is $375. 
C)  The gains from trade amount to $800. 
D)  The gains from trade are represented on the graph by the area bounded by the points 0, $12), 300, $12), 300, $7) and 0, $7). 
A)  Consumer surplus with trade is $3,200. 
B)  Producer surplus with trade is $375. 
C)  The gains from trade amount to $800. 
D)  The gains from trade are represented on the graph by the area bounded by the points 0, $12), 300, $12), 300, $7) and 0, $7).

Question 6

Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs. An economist would argue that

Accepted Answer

A)  foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding. 
B)  foreign competition may cause unemployment in import-competing industries, but the increase in consumer surplus due to free trade is more valuable than the lost jobs. 
C)  the critics are correct, so countries must protect their industries with tariffs or quotas. 
D)  foreign competition may cause unemployment in import-competing industries, but the increase in the variety of goods consumers can choose from is more valuable than the lost jobs. 
A)  foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding. 
B)  foreign competition may cause unemployment in import-competing industries, but the increase in consumer surplus due to free trade is more valuable than the lost jobs. 
C)  the critics are correct, so countries must protect their industries with tariffs or quotas. 
D)  foreign competition may cause unemployment in import-competing industries, but the increase in the variety of goods consumers can choose from is more valuable than the lost jobs.

Question 7

Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is
$52 per bushel. The U.S. is a price-taker in the market for peaches.
-Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States

Accepted Answer

A)  will be greater than the world price. 
B)  will be equal to the world price. 
C)  will be less than the world price. 
D)  could be greater than, equal to, or less than the world price; this cannot be determined. 
A)  will be greater than the world price. 
B)  will be equal to the world price. 
C)  will be less than the world price. 
D)  could be greater than, equal to, or less than the world price; this cannot be determined.

Question 8

The principle of comparative advantage asserts that

Accepted Answer

A)  not all countries can benefit from trade with other countries. 
B)  the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good. 
C)  countries can become better off by exporting goods, but they cannot become better off by importing goods. 
D)  countries can become better off by specializing in what they do best. 
A)  not all countries can benefit from trade with other countries. 
B)  the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good. 
C)  countries can become better off by exporting goods, but they cannot become better off by importing goods. 
D)  countries can become better off by specializing in what they do best.

Question 9

Figure 9-28
The following diagram shows the domestic demand and domestic supply curves in a market.  
-Refer to Figure 9-28. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Accepted Answer

Consumer surplus is

Question 10

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, consumer surplus is

Accepted Answer

A)  $48,000 and producer surplus is $48,000. 
B)  $18,000 and producer surplus is $12,000. 
C)  $108,000 and producer surplus is $12,000. 
D)  $18,000 and producer surplus is $48,000. 
A)  $48,000 and producer surplus is $48,000. 
B)  $18,000 and producer surplus is $12,000. 
C)  $108,000 and producer surplus is $12,000. 
D)  $18,000 and producer surplus is $48,000.

Question 11

Figure 9-11  
-Refer to Figure 9-11. The change in total surplus in this market because of trade is

Accepted Answer

A)  A, and this area represents a loss of total surplus. 
B)  B, and this area represents a gain in total surplus. 
C)  C, and this area represents a loss of total surplus. 
D)  D, and this area represents a gain in total surplus. 
A)  A, and this area represents a loss of total surplus. 
B)  B, and this area represents a gain in total surplus. 
C)  C, and this area represents a loss of total surplus. 
D)  D, and this area represents a gain in total surplus.

Question 12

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive from participating in a market.

Accepted Answer

A) True 
 B)False

Question 13

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

Accepted Answer

A) True 
 B)False

Question 14

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

Accepted Answer

A)  exporting almonds and the price per pound in Uruguay remained at $3.00. 
B)  exporting almonds and the price per pound in Uruguay increased to $4.50. 
C)  importing almonds and the price per pound in Uruguay remained at $3.00. 
D)  importing almonds and the price per pound in Uruguay increased to $4.50. 
A)  exporting almonds and the price per pound in Uruguay remained at $3.00. 
B)  exporting almonds and the price per pound in Uruguay increased to $4.50. 
C)  importing almonds and the price per pound in Uruguay remained at $3.00. 
D)  importing almonds and the price per pound in Uruguay increased to $4.50.

Question 15

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price.  
-Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area

Accepted Answer

A)  E. 
B)  B + E. 
C)  D + E + F. 
D)  B + D + E + F. 
A)  E. 
B)  B + E. 
C)  D + E + F. 
D)  B + D + E + F.

Question 16

If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff.

Accepted Answer

A) True 
 B)False

Question 17

The world price of cotton is the highest price of cotton observed anywhere in the world.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Scenario 9-2
• For a small country called Boxland, the equation of the domestic demand curve for cardboard is
   where
     represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard.
• For Boxland, the equation of the domestic supply curve for cardboard is
   where
     represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard.
-Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, relative to the no-trade situation, international trade in cardboard

Accepted Answer

A)  benefits Boxlandian consumers by $750 and harms Boxlandian producers by $660. 
B)  harms Boxlandian consumers by $736 and harms Boxlandian producers by $598. 
C)  harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864. 
D)  harms Boxlandian consumers by $804 and benefits Boxlandian producers by $984. 
A)  benefits Boxlandian consumers by $750 and harms Boxlandian producers by $660. 
B)  harms Boxlandian consumers by $736 and harms Boxlandian producers by $598. 
C)  harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864. 
D)  harms Boxlandian consumers by $804 and benefits Boxlandian producers by $984.

Question 20

Zelzar 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 incense, exporting steel, and neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of the new free-trade policy?

Accepted Answer

A)  producers of incense and consumers of steel 
B)  consumers of all three goods 
C)  consumers of incense and producers of rugs 
D)  producers of steel and consumers of incense 
A)  producers of incense and consumers of steel 
B)  consumers of all three goods 
C)  consumers of incense and producers of rugs 
D)  producers of steel and consumers of incense

Exam 9: Application: International Trade

In a December 2007 New York Times column, Paul Krugman noted that

A common argument in favor of restricting international trade in good x is based on the premise that

If the United States imports televisions and the U.S. government imposes a tariff on televisions, then

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, then it will be an exporter of peaches if and only if the world price of peaches is

Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. Which of the following statements is accurate?

Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs. An economist would argue that

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. -Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States

The principle of comparative advantage asserts that

Figure 9-28 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-28. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

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, consumer surplus is

Figure 9-11 -Refer to Figure 9-11. The change in total surplus in this market because of trade is

The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive from participating in a market.

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. -Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area

If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff.

The world price of cotton is the highest price of cotton observed anywhere in the world.

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

Zelzar 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 incense, exporting steel, and neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of the new free-trade policy?

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

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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