Deck 7: Global Markets in Action

Question 1

Which of the following statements concerning tariffs is NOT true?

A) A tariff creates revenue for the government.
B) A tariff decreases international trade.
C) A tariff results in a deadweight loss.
D) A tariff leaves the price of imports unchanged.

Answer 1

A tariff leaves the price of imports unchanged.

Question 2

International trade arises from

A) importation duties.
B) absolute advantage.
C) the advantage of execution.
D) comparative advantage.

Answer 2

comparative advantage.

Question 3

An Australian tariff imposed on items that can be produced more cheaply abroad

A) benefits Australians by making these goods cheaper.
B) creates a deadweight loss.
C) makes the goods more expensive in foreign markets.
D) makes the world market more efficient.

Answer 3

creates a deadweight loss.

Question 4

Which of the statements about the gains from international trade is correct?

A) Everyone gains from international trade.
B) Some people gain from international trade and some lose, though overall the losses exceed the gains.
C) Some people gain from international trade and some lose, though overall the gains exceed the losses.
D) Everyone loses from international trade.

Question 5

The figure above shows the market for shirts in Australia, where D is the Australian demand curve and S is the Australian supply curve. The world price is $20 per shirt. Australia imposes a tariff on imported shirts of $4 per shirt.
In the figure above, with the tariff Australia imports _______ million shirts per year.

A) 16
B) 8
C) 32
D) 24

Question 6

Tariffs _______ a deadweight loss and import quotas _______ a deadweight loss.

A) do not create; do not create
B) create; do not create
C) do not create; create
D) create; create

Question 7

If Australia imposes a tariff on imported medicine, the tariff will

A) increase the total Australian consumption of medicine.
B) raise the Australian price of imported medicine.
C) decrease employment in the Australian medicine industry.
D) decrease the Australian production of medicine.

Question 8

In developing countries, there is more reliance on _______ as opposed to _______ for government revenue.

A) tax collection; tariffs
B) tariffs; tax collection
C) tariffs; quotas
D) quotas; tariffs

Question 9

Australia imports cars from Japan. If Australia imposes a tariff on cars imported from Japan,

A) Australian car manufacturers gain revenue equal to the revenue lost by Japanese car manufacturers.
B) Australian consumers lose and Australian producers gain.
C) Australian consumers lose and Japanese producers gain.
D) Australian tariff revenue equals the loss of Australian consumer surplus.

Question 10

Compared to the situation before international trade, after Australia exports a good production in Australia _______ and consumption in Australia _______.

A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases

Question 11

Which of the following reasons explains why rich countries persistently restrict textile imports from poor countries?

A) The trade restrictions make workers in poor countries better off.
B) The trade restrictions make textile consumers better off.
C) Rich countries have a strong need for the revenue from these trade restrictions.
D) The trade restrictions benefit an organised visible special interest in rich countries.

Question 12

A country opens up to trade and becomes an exporter of wheat. In the wheat market, consumer surplus will _______, producer surplus will _______, and total surplus will _______.

A) decrease; increase; increase
B) remain unchanged; increase; increase
C) increase; decrease; increase
D) decrease; increase; decrease

Question 13

A tax that is imposed by the importing country when an imported good crosses its international boundary is called

A) an import quota.
B) an export subsidy.
C) dumping.
D) a tariff.

Question 14

Usually the imposition of trade barriers affecting a particular good benefits _______ people domestically, each of whom gains a _______.

A) many; lot
B) many; little
C) a few; little
D) a few; lot

Question 15

Usually the removal of trade barriers affecting a particular good benefits _______ people domestically, each of whom gains a _______.

A) many; lot
B) a few; lot
C) a few; little
D) many; little

Question 16

A tariff is a tax that is imposed by the _______ country when an _______ good crosses its international boundary.

A) importing; imported
B) exporting; exported
C) importing; exported
D) exporting; imported

Question 17

Of the groups listed below, which is most likely to lobby for protection?

A) Workers in import- competing industries
B) Consumers of imported goods
C) Workers in exporting industries
D) Producers in exporting industries

Question 18

A tariff is

A) a tax on an imported good.
B) an agreement to restrict the volume of exports.
C) a quantitative restriction of imports.
D) a licensing regulation that limits imports.

Question 19

An import quota on sugar

A) decreases the imports of sugar and raises its price.
B) increases the imports of sugar and raises its price.
C) increases the imports of sugar and lowers its price.
D) increases the demand for sugar and raises its price.

Question 20

When Australia exports a good, Australian consumer surplus _______ and Australian total surplus _______ .

A) decreases; increases
B) decreases; decreases
C) increases; decreases
D) increases; increases

Question 21

One reason that international trade is restricted is that

A) protectionism benefits consumers.
B) the individual gain to parties who benefit from the protection is much larger than the individual loss to parties who lose.
C) the government completely pays the losers from international trade for their losses.
D) the government cannot measure the cost of protectionism.

Question 22

Which of the following is an effective counter argument to the claim that protectionism saves domestic jobs?

A) The cost of saving domestic jobs through protectionism may be high.
B) Imports create jobs in this country for people selling and servicing imported items.
C) Protectionism eliminates domestic jobs in export industries.
D) All of the above.

Question 23

Some observers opposing free trade argue that when we buy shoes from China, Australian workers lose their jobs. The fact of the matter is that

A) free trade creates jobs in export industries.
B) most jobs lost because of free trade pay less than the poverty level.
C) the jobs lost are really in China.
D) no Australian worker has actually lost a job because of free trade.

Question 24

An import quota protects domestic producers by

A) encouraging competition among domestic producers.
B) setting a limit on the amount of imports.
C) placing a prohibitive tax on imports.
D) increasing the total supply of the product.

Question 25

Tariffs and import quotas both result in

A) the domestic government gaining revenue.
B) higher levels of domestic consumption.
C) lower levels of imports.
D) lower levels of domestic production.

Question 26

If Australia imposes a tariff of $1 per imported shirt, the tariff will

A) benefit Australian shirt producers.
B) decrease imports of shirts into Australia.
C) raise the price of a shirt to Australian consumers.
D) All of the above

Question 27

Australia has a comparative advantage in producing coal if

A) it can produce it at a lower dollar cost than can other nations.
B) it has a larger quantity of skilled workers than do other nations.
C) it can produce a larger quantity than can other nations.
D) it can produce it at a lower opportunity cost than can other nations.

Question 28

Which of the following statements is true?

A) Unlike other types of international trade, offshoring does not bring any gains from trade.
B) International trade leads to job losses in both import- competing industries and exporting industries.
C) International trade raises wages in developing countries.
D) International trade with rich industrial countries forces people in developing countries to work for lower wages.

Question 29

Australia has a comparative advantage and specialises in the production of coal. Compared to the situation with no trade, which of the following will occur?

A) There will be no change in the price of coal in Australia.
B) The world price of coal will increase.
C) The quantity of coal demanded in Australia will increase.
D) More coal will be produced in Australia.

Question 30

It is possible for Australia to compete against cheap foreign labour because expensive domestic workers

A) pay Australian taxes.
B) are more productive.
C) belong to unions.
D) receive subsidies.

Question 31

Comparative advantage implies that a country will

A) import those goods in which the country has a comparative advantage.
B) export those goods in which the country has a comparative advantage.
C) export goods produced by domestic industries with low wages relative to its trading partners.
D) find it difficult to conclude free trade agreements with other nations.

Question 32

_______ occurs when a foreign firm sells its exports at a lower price than it costs to produce the goods.

A) Learning- by- doing
B) Comparative advantage
C) Dumping
D) A tariff

Question 33

When considering rent seeking, which of the following is true?

A) Only the pro- free trade group is concerned about the government's revenue from tariffs.
B) The pro- free trade group generally will lobby more than the anti- free trade group.
C) Usually only the anti- free trade group is concerned about what is best for society at large.
D) The anti- free trade group generally will lobby more than the pro- free trade group.

Question 34

The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realised when

A) trade occurs and resources are reallocated within the two countries.
B) the two countries continue to produce the same quantities of wheat and coffee.
C) the demand curves in both countries shift inward.
D) each country has an absolute advantage in one of the two commodities.

Question 35

Import quotas _______ the price of imported goods and _______ the quantity consumed in the nation imposing the quota.

A) raise; decrease
B) raise; increase
C) lower; increase
D) lower; decrease

Question 36

Tariffs _______ the domestic price of the good and import quotas _______ the domestic price of the good.

A) raise; lower
B) lower; raise
C) lower; lower
D) raise; raise

Question 37

If a country imposes a tariff on an imported good, the tariff _______ the price in the importing country and _______ the quantity of imports.

A) raises; decreases
B) raises; increases
C) lowers; does not change
D) raises; does not change

Question 38

If a government imposes a quota on imports of a popular toy, the price of the toy in the country will _______ and the quantity purchased in the country will _______.

A) fall; increase
B) rise; increase
C) rise; decrease
D) fall; decrease

Question 39

When Australia imposes a tariff on a good, the amount of the _______ in Australian consumer surplus is _______ the amount of the _______ in Australian producer surplus .

A) decrease; larger than; decrease
B) decrease; equal to; increase
C) decrease; larger than; increase
D) increase; smaller than; increase

Question 40

During the Great Depression in the 1930s, the average tariff rate in Australia peaked at about

A) 20 per cent.
B) 65 per cent.
C) 100 per cent.
D) zero.

Question 41

Which of the following is a true statement?

A) Only exporters benefit from trade.
B) Free trade harms domestic producers of goods that face import competition.
C) All producers benefit from trade but not all consumers benefit.
D) Everyone benefits from free trade.

Question 42

The figure above shows the market for shirts in Australia, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
In the figure above, international trade _______ consumer surplus in Australia by _______.

A) increases; $192 million
B) decreases; $192 million
C) increases; $320 million
D) decreases; $320 million

Question 43

An assumption behind the infant- industry argument for tariff protection is that

A) the market needs additional competition to satisfy consumer demand.
B) the domestic industry will eventually gain a comparative advantage in producing the good.
C) the domestic industry will be facing an upward adjustment in its average cost.
D) foreign competitors are selling output below average cost.

Question 44

The figure above shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
In the figure above, international trade _______ total surplus in the United States by _______.

A) decreases; $2.56 billion
B) increases; $1.92 billion
C) increases; $4.8 billion
D) decreases; $3.6 billion

Question 45

The figure above shows the market for shirts in Australia, where D is the Australian demand curve and S is the Australian supply curve. The world price is $20 per shirt. Australia imposes a tariff on imported shirts of $4 per shirt.
In the figure above, the Australian government's revenue from the tariff is _______.

A) $64 million
B) $48 million
C) $128 million
D) $32 million

Question 46

Suppose that the country of Pacifica sold its cars in Atlantica for less than it costs to produce the cars. Pacifica could be accused of

A) engaging in learning- by- doing.
B) dumping.
C) increasing its gains from trade.
D) avoiding import quotas.

Question 47

When a foreign firm sells its exports at a lower price than its cost of production, the firm is

A) imposing an economies of scale cost.
B) competing in an infant industry.
C) dumping.
D) avoiding a tariff.

Question 48

During the first 6 months of 2008, the European Union (EU) initiated an anti- dumping case against China for imports of taper candles. What is dumping?

A) When China sells its candles to the EU at a lower price than other producers
B) When China does not pay the tariff on the candles
C) When China sells its candles to the EU at a lower price than China's cost of production
D) When China tries to sell more candles to the EU than is allowed by the import quota

Question 49

The figure above shows the market for shirts in Australia, where D is the Australian demand curve and S is the Australian supply curve. The world price is $20 per shirt. Australia imposes a tariff on imported shirts of $4 per shirt.
In the figure above, the deadweight loss from the tariff is _______.

A) $80 million
B) $32 million
C) Zero
D) $16 million

Question 50

The average tariff rate imposed by Australia on imported goods

A) peaked in 1990.
B) peaked in 1980.
C) has generally increased over the past 60 years.
D) has generally decreased over the past 60 years.

Question 51

Reducing a tariff will _______ the domestic production of the good and _______ the total domestic consumption of the good.

A) increase; decrease
B) decrease; decrease
C) increase; increase
D) decrease; increase

Question 52

A country specialises in the production of goods for which it has a comparative advantage, so

A) some producers and consumers win, some lose, but overall the gains exceed the losses.
B) all producers win.
C) producers win, consumers lose, but overall the gains exceed the losses.
D) all consumers win.

Question 53

A tariff will benefit

A) foreign producers by allowing them to sell at a higher price in markets with tariffs.
B) domestic producers by maintaining a higher than free- trade price.
C) consumers who are able to better afford domestically produced goods.
D) All of the above answers are correct.

Question 54

Which of the following are reasons most economists consider valid for trade protection?
I. Protection penalises countries that have weak environmental standards.
II. Protection limits dumping of low- wage jobs into the domestic economy.
III. Protection prevents low- wage jobs in foreign countries from lowering wages in Australia.

A) II and III
B) I and II
C) I, II and III
D) None of the above

Question 55

Based on the table below, at what world price would the country export the good?

A) A price above $8
B) A price below $8
C) At only $8
D) It is impossible to say.

Question 56

A tariff is imposed on a good. The tariff will _______ the domestic quantity supplied,_______ the domestic quantity demanded, and _______ price in the home country.

A) increase; decrease; increase
B) increase; increase; increase
C) increase; decrease; decrease
D) increase; not affect; not affect

Question 57

The activities in which Australian workers are relatively more productive

A) pay higher wages.
B) are those in which Australia has a comparative advantage.
C) are at risk of disappearing from Australia if there was free trade.
D) Both answers A and B are correct.

Question 58

An import quota is

A) a restriction that specifies the maximum amount of a good that may be imported.
B) a tariff that is a fixed percentage of the price of a good.
C) a tariff that is a fixed dollar amount per unit of a good.
D) an agreed upon price for a good to be imported at a specified future date.

Question 59

Most economists agree that valid reasons for protecting trade include which of the following?
I. The preventing rich countries from exploiting developing countries argument.
II. The saving jobs argument.
III. The protection of high wages argument.

A) I only
B) I and III
C) I and II
D) None of the reasons are valid.

Question 60

A tariff

A) is a tax imposed on imported goods.
B) encourages worldwide specialisation according to the principle of comparative advantage.
C) is a tax imposed on exported goods.
D) has no effect on prices paid by domestic consumers even though it increases the revenue collected by domestic producers.

Question 61

Who benefits from an import quota on a good?

A) Foreign governments
B) Domestic consumers of the good
C) Foreign producers of the good
D) Domestic producers of the good

Question 62

Lowering the tariff on imported ethanol

A) increases the domestic price of ethanol.
B) increases the imports of ethanol.
C) increases domestic employment in the ethanol industry.
D) has no effect unless the nation's trading partner also lowers its tariff on ethanol.

Question 63

An Australian tariff on textiles would _______ Australian clothing prices and _______ jobs in the Australian textile industry.

A) reduce; decrease
B) raise; decrease
C) reduce; increase
D) raise; increase

Question 64

In poorer countries, free trade _______ the demand for labour in these countries and _______ the wages paid in these countries.

A) increases; raises
B) decreases; lowers
C) decreases; raises
D) increases; lowers

Question 65

An import quota is a

A) government- imposed restriction on the quantity of a specific good that can be imported.
B) market- imposed balancing factor that keeps prices of imports and exports in equilibrium.
C) tariff imposed on goods that are dumped in the country.
D) law that prevents ecologically damaging goods from being imported into a country.

Question 66

A difference between a quota and a tariff is that

A) the government collects revenue from a tariff but does not collect revenue from a quota.
B) a tariff generates a higher price than does a quota.
C) a tariff generates a greater reduction in exports than does a quota.
D) a quota increases the profits of domestic producers more than a tariff.

Question 67

The figure above shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
In the figure above, with international trade, _______ helicopters per year are produced in the United States.

A) 360
B) 240
C) 480
D) 720

Question 68

Dumping occurs when a foreign firm

A) sells inferior output to foreigners.
B) disposes of waste materials in other countries.
C) sells its exports at a lower price than its cost of production.
D) pollutes international waters.

Question 69

Who benefits from a tariff on a good?

A) Foreign governments
B) Domestic producers of the good
C) Foreign producers of the good
D) Domestic consumers of the good

Question 70

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will _______, producer surplus will _______, and total surplus will _______.

A) decrease; increase; increase
B) increase; decrease; decrease
C) increase; decrease; increase
D) decrease; decrease; decrease

Question 71

Increasing a tariff will _______ the domestic quantity consumed of the good, while _______ the domestic production of the good.

A) decrease; decreasing
B) increase; decreasing
C) increase; increasing
D) decrease; increasing

Question 72

Japan was accused of dumping in the steel industry within the United States when it

A) prohibited imports of U.S. steel into Japan.
B) negotiated an illegal agreement to raise prices with U.S. steel industries.
C) sold steel in the United States at a price below its cost of production.
D) negotiated a illegal trade deal with Canada.

Question 73

When Australia exports a good, the amount of the _______ in Australian consumer surplus is _______
The amount of the _______ in Australian producer surplus.

A) decrease; equal to; decrease
B) increase; smaller than; increase
C) decrease; smaller than; increase
D) increase; larger than; decrease

Question 74

When a firms "dumps" some of its products in another country, it

A) sells its goods abroad at a price lower than it costs to produce the goods.
B) is specialising according to comparative advantage.
C) increases the total level of employment in the receiving country.
D) creates an environmental hazard in the receiving country.

Question 75

A tariff is

A) a government- imposed barrier that sets a fixed limit on the amount of a good that can be imported into a nation.
B) a tax on a good imported into a nation.
C) an agreement between governments to limit exports from a nation.
D) a government- imposed limit on the amount of a good that can be exported from a nation.

Question 76

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade, then in this market

A) imports will increase, price will fall, and quantity supplied will fall.
B) imports will increase, price will decrease, and the supply curve will shift to the left.
C) quantity demanded will decrease, quantity supplied will decrease, and price will decrease.
D) exports will increase, price will be unchanged, and quantity supplied will increase.

Question 77

The figure above shows the market for shirts in Australia, where D is the Australian demand curve and S is the Australian supply curve. The world price is $20 per shirt. Australia imposes a tariff on imported shirts of $4 per shirt.
In the figure above, with the tariff Australian consumers purchase _______ million shirts per year.

A) 32
B) 16
C) 48
D) 40

Question 78

A tariff hurts

A) the government by decreasing its revenue.
B) consumers who pay more for the imported good.
C) domestic producers who can't compete with cheaper imports.
D) All of the above answers are correct.

Question 79

The figure above shows the market for shirts in Australia, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
In the figure above, with international trade Australian consumers buy _______ million shirts per year.

A) 32
B) 48
C) 24
D) 16

Question 80

The winners from a Japanese tariff on imported cars are
I. Japanese car producers
II. Japanese car consumers
III. The Japanese government

A) Only II
B) Only I and III
C) Only I
D) I, II and III