Question 1

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

Accepted Answer

A) True 
 B)False

Question 2

The nation of Cranolia used to prohibit international trade, but now trade is allowed, and Cranolia is exporting furniture. Relative to the previous no-trade situation, buyers of furniture in Cranolia are now better off.

Accepted Answer

A) True 
 B)False

Question 3

Figure 9-10. The figure applies to Mexico and the good is rifles.  
-Refer to Figure 9-10. When trade takes place, the quantity Q2 - Q1 is

Accepted Answer

A)  the number of rifles bought and sold in Mexico. 
B)  the number of rifles produced in Mexico. 
C)  the number of rifles exported by Mexico. 
D)  the number of rifles imported by Mexico. 
A)  the number of rifles bought and sold in Mexico. 
B)  the number of rifles produced in Mexico. 
C)  the number of rifles exported by Mexico. 
D)  the number of rifles imported by Mexico.

Question 4

Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues of free trade.

Accepted Answer

A) True 
 B)False

Question 5

Figure 9-5
The figure illustrates the market for tricycles in a country.  
-Refer to Figure 9-5. With trade, producer surplus is

Accepted Answer

A)  $500. 
B)  $1,000. 
C)  $1,500. 
D)  $2,000. 
A)  $500. 
B)  $1,000. 
C)  $1,500. 
D)  $2,000.

Question 6

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, the country imports

Accepted Answer

A)  300 units of the good. 
B)  600 units of the good. 
C)  900 units of the good. 
D)  1,200 units of the good. 
A)  300 units of the good. 
B)  600 units of the good. 
C)  900 units of the good. 
D)  1,200 units of the good.

Question 7

Figure 9-19. On the diagram below, Q represents the quantity of textiles and P represents the price of textiles.  
-Refer to Figure 9-19. With free trade, the country for which the figure is drawn will

Accepted Answer

A)  export 30 units of textiles. 
B)  export 50 units of textiles. 
C)  import 30 units of textiles. 
D)  import 50 units of textiles. 
A)  export 30 units of textiles. 
B)  export 50 units of textiles. 
C)  import 30 units of textiles. 
D)  import 50 units of textiles.

Question 8

Figure 9-15  
-Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity demanded are

Accepted Answer

A)  P1 and Q1. 
B)  P1 and Q4. 
C)  P2 and Q2. 
D)  P2 and Q3. 
A)  P1 and Q1. 
B)  P1 and Q4. 
C)  P2 and Q2. 
D)  P2 and Q3.

Question 9

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

Accepted Answer

A)  national-security argument. 
B)  infant-industry argument. 
C)  unfair competition argument. 
D)  protection-as-a-bargaining chip-argument. 
A)  national-security argument. 
B)  infant-industry argument. 
C)  unfair competition argument. 
D)  protection-as-a-bargaining chip-argument.

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. Suppose the government imposes a tariff of $20 per unit. Relative to the free-trade outcome, the imposition of the tariff

Accepted Answer

A)  decreases imports of the good by 300 units and increases domestic production of the good by 300 units. 
B)  decreases imports of the good by 300 units and increases domestic production of the good by 600 units. 
C)  decreases imports of the good by 600 units and increases domestic production of the good by 300 units. 
D)  decreases imports of the good by 600 units and increases domestic production of the good by 600 units. 
A)  decreases imports of the good by 300 units and increases domestic production of the good by 300 units. 
B)  decreases imports of the good by 300 units and increases domestic production of the good by 600 units. 
C)  decreases imports of the good by 600 units and increases domestic production of the good by 300 units. 
D)  decreases imports of the good by 600 units and increases domestic production of the good by 600 units.

Question 11

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 a

Accepted Answer

A)  $25 decrease in consumer surplus. 
B)  $20 increase in consumer surplus. 
C)  $25 decrease in producer surplus. 
D)  $20 increase in producer surplus. 
A)  $25 decrease in consumer surplus. 
B)  $20 increase in consumer surplus. 
C)  $25 decrease in producer surplus. 
D)  $20 increase in producer surplus.

Question 12

If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be

Accepted Answer

A)  better off no matter how Honduras responds. 
B)  better off if Honduras gives in, and will be no worse off if it doesn't. 
C)  worse off if Honduras doesn't give in to the threat. 
D)  worse off no matter how Honduras responds. 
A)  better off no matter how Honduras responds. 
B)  better off if Honduras gives in, and will be no worse off if it doesn't. 
C)  worse off if Honduras doesn't give in to the threat. 
D)  worse off no matter how Honduras responds.

Question 13

The greater the elasticities of supply and demand, the smaller are the gains from trade.

Accepted Answer

A) True 
 B)False

Question 14

Figure 9-2
The figure illustrates the market for calculators in a country.  
-Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will be

Accepted Answer

A)  $15 and 80 calculators will be sold domestically. 
B)  $15 and 130 calculators will be sold domestically. 
C)  $20 and 80 calculators will be sold domestically. 
D)  $20 and 130 calculators will be sold domestically. 
A)  $15 and 80 calculators will be sold domestically. 
B)  $15 and 130 calculators will be sold domestically. 
C)  $20 and 80 calculators will be sold domestically. 
D)  $20 and 130 calculators will be sold domestically.

Question 15

In a December 2007 New York Times column Paul Krugman argued in favor of

Accepted Answer

A)  protectionism based on the national-security argument. 
B)  protectionism based on the infant-industry argument. 
C)  protectionism based on the unfair-competition argument. 
D)  keeping world markets relatively open. 
A)  protectionism based on the national-security argument. 
B)  protectionism based on the infant-industry argument. 
C)  protectionism based on the unfair-competition argument. 
D)  keeping world markets relatively open.

Question 16

Figure 9-7. The figure applies to the nation of Wales and the good is cheese.  
-Refer to Figure 9-7. Which of the following is a valid equation for Welsh producer surplus with trade?

Accepted Answer

A)  Producer surplus with trade = 1/2)P0Q0. 
B)  Producer surplus with trade = 1/2)P1Q1. 
C)  Producer surplus with trade = 1/2)P1Q2. 
D)  None of the above is correct. 
A)  Producer surplus with trade = 1/2)P0Q0. 
B)  Producer surplus with trade = 1/2)P1Q1. 
C)  Producer surplus with trade = 1/2)P1Q2. 
D)  None of the above is correct.

Question 17

Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?

Accepted Answer

A)  Consumer surplus decreases by $100; producer surplus increases by $100; and government revenue from the tariff amounts to $50. 
B)  Consumer surplus decreases by $200; producer surplus increases by $100; and government revenue from the tariff amounts to $50. 
C)  Consumer surplus increases by $100; producer surplus decreases by $200; and government revenue from the tariff amounts to $50. 
D)  Consumer surplus decreases by $50; producer surplus increases by $200; and government revenue from the tariff amounts to $150. 
A)  Consumer surplus decreases by $100; producer surplus increases by $100; and government revenue from the tariff amounts to $50. 
B)  Consumer surplus decreases by $200; producer surplus increases by $100; and government revenue from the tariff amounts to $50. 
C)  Consumer surplus increases by $100; producer surplus decreases by $200; and government revenue from the tariff amounts to $50. 
D)  Consumer surplus decreases by $50; producer surplus increases by $200; and government revenue from the tariff amounts to $150.

Question 18

The history of the textile industry raises important questions for economic policy.

Accepted Answer

A) True 
 B)False

Question 19

Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Accepted Answer

A)  Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will export coffee. 
B)  Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will import coffee. 
C)  other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will export coffee. 
D)  other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will import coffee. 
A)  Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will export coffee. 
B)  Guatemala has a comparative advantage over other countries in the production of coffee, and Guatemala will import coffee. 
C)  other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will export coffee. 
D)  other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will import coffee.

Question 20

Scenario 9-3
Suppose domestic demand and domestic supply in a market are given by the following equations:  
-Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

Accepted Answer

With trade, consumer surplus i

Exam 9: Application: International Trade

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

The nation of Cranolia used to prohibit international trade, but now trade is allowed, and Cranolia is exporting furniture. Relative to the previous no-trade situation, buyers of furniture in Cranolia are now better off.

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. When trade takes place, the quantity Q2 - Q1 is

Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues of free trade.

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, producer surplus is

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, the country imports

Figure 9-19. On the diagram below, Q represents the quantity of textiles and P represents the price of textiles. -Refer to Figure 9-19. With free trade, the country for which the figure is drawn will

Figure 9-15 -Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity demanded are

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be

The greater the elasticities of supply and demand, the smaller are the gains from trade.

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will be

In a December 2007 New York Times column Paul Krugman argued in favor of

Figure 9-7. The figure applies to the nation of Wales and the good is cheese. -Refer to Figure 9-7. Which of the following is a valid equation for Welsh producer surplus with trade?

Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?

The history of the textile industry raises important questions for economic policy.

Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, by how much do consumer surplus, producer surplus, and producer surplus change?

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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