Exam 9: Application: International Trade

Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free trade, will the country import or export this good, and how many units will be imported/exported?

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 Boxland's gains from international trade in cardboard amount to

"Trade raises the economic well­being of a nation in the sense that the gains of the winners exceed the losses of the losers." This statement is correct for a nation that exports manufactured goods, but it is not correct for a nation that imports manufactured goods.

Figure 9-15 -Refer to Figure 9-15. Consumer surplus with trade and without a tariff is

The price of sugar that prevails in international markets is called the

What is the fundamental basis for trade among nations?

For Country A, the world price of soybeans exceeds the domestic equilibrium price of soybeans. As a result, international trade allows buyers of soybeans in Country A to experience greater consumer surplus than they otherwise would experience.

The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade policy. If the world price of goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound, then Aviana should export goose meat.

The "unfair­competition" argument might be cited by an American who believes that

When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country

Figure 9-13 -Refer to Figure 9-13. Consumer surplus after trade is

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that

The infant-industry argument

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

Suppose the world price of coffee is $2 per pound and Brazil's domestic price of coffee without trade is $3 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

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 $45. Then, relative to the no-trade situation, international trade in cardboard produces which of the following results for Boxland?

Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.

Figure 9-15 -Refer to Figure 9-15. With trade and without a tariff, the price and domestic quantity demanded are

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. Relative to a no-trade situation, which of the following comes with trade?

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. -Refer to Figure 9-25. With free trade, total surplus is