Question 1

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 2

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. Consumer surplus with free trade is

Accepted Answer

A)  $4,000. 
B)  $8,000. 
C)  $16,000. 
D)  $18,000. 
A)  $4,000. 
B)  $8,000. 
C)  $16,000. 
D)  $18,000.

Question 3

Figure 9-6
The figure illustrates the market for roses in a country.  
-Refer to Figure 9-6. With trade and without a tariff,

Accepted Answer

A)  the domestic price is equal to the world price. 
B)  roses are sold at $4 in this market. 
C)  there is a shortage of 400 roses in this market. 
D)  this country imports 200 roses. 
A)  the domestic price is equal to the world price. 
B)  roses are sold at $4 in this market. 
C)  there is a shortage of 400 roses in this market. 
D)  this country imports 200 roses.

Question 4

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 5

Since World War II, GATT has been responsible for reducing the average tariff among member countries from about

Accepted Answer

A)  40 percent to about 5 percent. 
B)  40 percent to about 20 percent. 
C)  80 percent to about 20 percent. 
D)  20 percent to about 10 percent. 
A)  40 percent to about 5 percent. 
B)  40 percent to about 20 percent. 
C)  80 percent to about 20 percent. 
D)  20 percent to about 10 percent.

Question 6

Figure 9-6
The figure illustrates the market for roses in a country.  
-Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is

Accepted Answer

A)  $200. 
B)  $400. 
C)  $500. 
D)  $600. 
A)  $200. 
B)  $400. 
C)  $500. 
D)  $600.

Question 7

When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation in the sense that

Accepted Answer

A)  both producers of automobiles and consumers of automobiles in that nation became better off as a result. 
B)  the gains to automobile producers in that nation exceeded the losses of the automobile consumers in that nation. 
C)  the gains to automobile consumers in that nation exceeded the losses of the automobile producers in that nation. 
D)  even though total surplus in that nation decreased, it was still true that consumer surplus and producer surplus increased. 
A)  both producers of automobiles and consumers of automobiles in that nation became better off as a result. 
B)  the gains to automobile producers in that nation exceeded the losses of the automobile consumers in that nation. 
C)  the gains to automobile consumers in that nation exceeded the losses of the automobile producers in that nation. 
D)  even though total surplus in that nation decreased, it was still true that consumer surplus and producer surplus increased.

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

Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called

Accepted Answer

A)  marginal cost of production. 
B)  marginal benefit of size. 
C)  economies of scale. 
D)  economies of production. 
A)  marginal cost of production. 
B)  marginal benefit of size. 
C)  economies of scale. 
D)  economies of production.

Question 10

Figure 9-23
The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit.  
-Refer to Figure 9-23. Consumer surplus with free trade is

Accepted Answer

A)  $75. 
B)  $150. 
C)  $200. 
D)  $300. 
A)  $75. 
B)  $150. 
C)  $200. 
D)  $300.

Question 11

A logical starting point from which the study of international trade begins is

Accepted Answer

A)  the recognition that not all markets are competitive. 
B)  the recognition that government intervention in markets sometimes enhances the economic welfare of the society. 
C)  the principle of absolute advantage. 
D)  the principle of comparative advantage. 
A)  the recognition that not all markets are competitive. 
B)  the recognition that government intervention in markets sometimes enhances the economic welfare of the society. 
C)  the principle of absolute advantage. 
D)  the principle of comparative advantage.

Question 12

Which of the following is the most accurate statement?

Accepted Answer

A)  The one argument for restricting trade that almost all economists accept as valid is the infant-industry argument. 
B)  Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. 
C)  The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade. 
D)  The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-industry argument. 
A)  The one argument for restricting trade that almost all economists accept as valid is the infant-industry argument. 
B)  Almost all economists insist that it is never appropriate to protect "key" industries, even when there are legitimate concerns about national security. 
C)  The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade. 
D)  The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-industry argument.

Question 13

Figure 9-2
The figure illustrates the market for calculators in a country.  
-Refer to Figure 9-2. With free trade, this country will

Accepted Answer

A)  import 50 calculators. 
B)  import 100 calculators. 
C)  export 50 calculators. 
D)  export 100 calculators. 
A)  import 50 calculators. 
B)  import 100 calculators. 
C)  export 50 calculators. 
D)  export 100 calculators.

Question 14

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia

Accepted Answer

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

Question 15

Within a country, the domestic price of a product will equal the world price if

Accepted Answer

A)  trade restrictions are imposed on the product. 
B)  the country allows free trade. 
C)  the country chooses to import, but not export, the product. 
D)  the country chooses to export, but not import, the product. 
A)  trade restrictions are imposed on the product. 
B)  the country allows free trade. 
C)  the country chooses to import, but not export, the product. 
D)  the country chooses to export, but not import, the product.

Question 16

An important factor in the decline of the U.S. textile industry over the past 100 or so years is

Accepted Answer

A)  foreign competitors that can produce quality textile goods at low cost. 
B)  lower prices of goods that are substitutes for clothing. 
C)  a decrease in Americans' demand for clothing, due to increased incomes and the fact that clothing is an inferior good. 
D)  the fact that the minimum wage in the U.S. has failed to keep pace with the cost of living. 
A)  foreign competitors that can produce quality textile goods at low cost. 
B)  lower prices of goods that are substitutes for clothing. 
C)  a decrease in Americans' demand for clothing, due to increased incomes and the fact that clothing is an inferior good. 
D)  the fact that the minimum wage in the U.S. has failed to keep pace with the cost of living.

Question 17

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.

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

Accepted Answer

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

Question 20

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars.  
-Refer to Figure 9-8. When the country for which the figure is drawn allows international trade in cars,

Accepted Answer

A)  consumer surplus increases by the area B. 
B)  producer surplus decreases by the area B + D. 
C)  total surplus increases by the area D. 
D)  All of the above are correct. 
A)  consumer surplus increases by the area B. 
B)  producer surplus decreases by the area B + D. 
C)  total surplus increases by the area D. 
D)  All of the above are correct.

Exam 9: Application: International Trade

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

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. Consumer surplus with free trade is

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. With trade and without a tariff,

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.

Since World War II, GATT has been responsible for reducing the average tariff among member countries from about

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is

When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation in the sense that

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

Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is called

Figure 9-23 The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit. -Refer to Figure 9-23. Consumer surplus with free trade is

A logical starting point from which the study of international trade begins is

Which of the following is the most accurate statement?

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, this country will

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia

Within a country, the domestic price of a product will equal the world price if

An important factor in the decline of the U.S. textile industry over the past 100 or so years is

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

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

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. -Refer to Figure 9-8. When the country for which the figure is drawn allows international trade in cars,

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

Filters