Deck 9: Application: International Trade

Question 1

In analyzing the gains and losses from international trade,to say that Moldova is a small country is to say that

A)Moldova can only import goods; it cannot export goods.
B)Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage.
C)only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
D)Moldova is a price taker.

Answer 1

D

Question 2

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

A)domestic producers gain and domestic consumers lose.
B)domestic producers lose and domestic consumers gain.
C)domestic producers and domestic consumers both gain.
D)domestic producers and domestic consumers both lose.

Answer 2

A

Question 3

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

A)export price of cotton.
B)import price of cotton.
C)comparative-advantage price of cotton.
D)world price of cotton.

Answer 3

D

Question 4

Assume,for Canada,that the domestic price of steel without international trade is higher than the world price of steel.This suggests that,in the production of steel,

A)Canada has a comparative advantage over other countries and Canada will import steel.
B)Canada has a comparative advantage over other countries and Canada will export steel.
C)other countries have a comparative advantage over Canada and Canada will import steel.
D)other countries have a comparative advantage over Canada and Canada will export steel.

Question 5

Trade among nations is ultimately based on

A)absolute advantage.
B)strategic advantage.
C)comparative advantage.
D)technical advantage.

Question 6

A country has a comparative advantage in a product if the world price is

A)lower than that country's domestic price without trade.
B)higher than that country's domestic price without trade.
C)equal to that country's domestic price without trade.
D)not subject to manipulation by organizations that govern international trade.

Question 7

Suppose Haiti has a comparative advantage over other countries in producing sugar,but other countries have an absolute advantage over Haiti in producing sugar.If trade in sugar is allowed,Haiti

A)will import sugar.
B)will export sugar.
C)will either export sugar or export sugar, but it is not clear from the given information.
D)would have nothing to gain either from exporting or importing sugar.

Question 8

If a country allows trade and,for a certain good,the domestic price without trade is lower than the world price,

A)the country will be an exporter of the good.
B)the country will be an importer of the good.
C)the country will be neither an exporter nor an importer of the good.
D)Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

Question 9

If a country allows trade and,for a certain good,the domestic price without trade is higher than the world price,

A)the country will be an exporter of the good.
B)the country will be an importer of the good.
C)the country will be neither an exporter nor an importer of the good.
D)Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

Question 10

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

A)cannot experience significant gains or losses by trading with other countries.
B)cannot have a significant comparative advantage over other countries.
C)cannot affect world prices by trading with other countries.
D)All of the above are correct.

Question 11

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

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

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

A)assuming the domestic price before trade will continue to prevail once that country is opened up to trade with other countries.
B)assuming there is no demand for that country's domestically-produced goods by other countries.
C)assuming international trade can benefit producers, but not consumers, in that country.
D)making an assumption that is not necessary to analyze the gains and losses from international trade.

Question 13

Assume,for the U.S.,that the domestic price of beef without international trade is lower than the world price of beef.This suggests that,in the production of beef,

A)the U.S.has a comparative advantage over other countries and the U.S.will export beef.
B)the U.S.has a comparative advantage over other countries and the U.S.will import beef.
C)other countries have a comparative advantage over the U.S.and the U.S.will export beef.
D)other countries have a comparative advantage over the U.S.and the U.S.will import beef.

Question 14

If the world price of textiles is higher than Vietnam's domestic price of textiles without trade,then Vietnam

A)should import textiles.
B)has a comparative advantage in textiles.
C)should produce just enough textiles to meet its domestic demand.
D)should refrain altogether from producing textiles.

Question 15

The price of a good that prevails in a world market is called the

A)absolute price.
B)relative price.
C)comparative price.
D)world price.

Question 16

For any country,if the world price of computers is higher than the domestic price of computers without trade,that country should

A)export computers, since that country has a comparative advantage in computers.
B)import computers, since that country has a comparative advantage in computers.
C)neither export nor import computers, since that country cannot gain from trade.
D)neither export nor import computers, since that country already produces computers at a low cost compared to other countries.

Question 17

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

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 18

Suppose the United States exports cars to France and imports cheese from Switzerland.This situation suggests that

A)the United States has a comparative advantage relative to Switzerland in producing cheese, and France has a comparative advantage relative to the United States in producing cars.
B)the United States has a comparative advantage relative to France in producing cars, and Switzerland has a comparative advantage relative to the United States in producing cheese.
C)the United States has an absolute advantage relative to Switzerland in producing cheese, and France has an absolute advantage relative to the United States in producing cars.
D)the United States has an absolute advantage relative to France in producing cars, and Switzerland has an absolute advantage relative to the United States in producing cheese.

Question 19

A tax on an imported good is called a

A)quota.
B)tariff.
C)supply tax.
D)trade tax.

Question 20

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

A)foreign competitors that could 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 21

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

A)both domestic producers and domestic consumers become better off.
B)domestic producers become better off, and domestic consumers become worse off.
C)domestic producers become worse off, and domestic consumers become better off.
D)both domestic producers and domestic consumers become worse off.

Question 22

When a country allows trade and becomes an exporter of a 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 23

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

A)consumer surplus and producer surplus both increase.
B)consumer surplus and producer surplus both decrease.
C)consumer surplus increases and producer surplus decreases.
D)consumer surplus decreases and producer surplus increases.

Question 24

Assume,for France,that the domestic price of tea without international trade is higher than the world price of tea.This suggests that

A)other countries have a comparative advantage over France in producing tea.
B)France has an absolute advantage over other countries in producing tea.
C)France will export tea if international trade is allowed.
D)French tea buyers will become worse off if international trade is allowed.

Question 25

When the nation of Econoland allows trade and becomes an exporter of televisions,

A)residents of Econoland who produce televisions become worse off; residents of Econoland who buy televisions become better off; and the economic well-being of Econoland rises.
B)residents of Econoland who produce televisions become worse off; residents of Econoland who buy televisions become better off; and the economic well-being of Econoland falls.
C)residents of Econoland who produce televisions become better off; residents of Econoland who buy televisions become worse off; and the economic well-being of Econoland rises.
D)residents of Econoland who produce televisions become better off; residents of Econoland who buy televisions become worse off; and the economic well-being of Econoland falls.

Question 26

When a nation first begins to trade with other countries and the nation becomes an exporter of corn,

A)this is an indication that the world price of corn exceeds the nation's domestic price of corn in the absence of trade.
B)this is an indication that the nation has a comparative advantage in producing corn.
C)the nation's consumers of corn become worse off and the nation's producers of corn become better off.
D)All of the above are correct.

Question 27

When a country allows trade and becomes an exporter of a good,which of the following is not a consequence?

A)The price paid by domestic consumers of the good increases.
B)The price received by domestic producers of the good increases.
C)The losses of domestic consumers of the good exceed the gains of domestic producers of the good.
D)The gains of domestic producers of the good exceed the losses of domestic consumers of the good.

Question 28

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

A)consumer surplus and producer surplus both increase.
B)consumer surplus and producer surplus both decrease.
C)consumer surplus increases and producer surplus decreases.
D)consumer surplus decreases and producer surplus increases.

Question 29

When the nation of Duxembourg allows trade and becomes an importer of software,

A)residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises.
B)residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg falls.
C)residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg rises.
D)residents of Duxembourg who produce software become better off; residents of Duxembourg who buy software become worse off; and the economic well-being of Duxembourg falls.

Question 30

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?

A)The sum of consumer surplus and producer surplus for domestic traders of steel increases.
B)The quantity of steel demanded by domestic consumers increases.
C)Domestic producers of steel receive a higher price for steel.
D)The losses of the losers exceed the gains of the winners.

Question 31

When a nation first begins to trade with other countries and the nation becomes an importer of soybeans,

A)this is an indication that the world price of soybeans exceeds the nation's domestic price of soybeans in the absence of trade.
B)this is an indication that the nation has a comparative advantage in producing soybeans.
C)the nation's producers of soybeans become worse off and the nation's consumers of soybeans become better off.
D)All of the above are correct.

Question 32

When a country allows trade and becomes an importer of steel,

A)the losses of the domestic producers of steel exceed the gains of the domestic consumers of steel.
B)the losses of the domestic consumers of steel exceed the gains of the domestic producers of steel.
C)the gains of the domestic producers of steel exceed the losses of the domestic consumers of steel.
D)the gains of the domestic consumers of steel exceed the losses of the domestic producers of steel.

Question 33

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

A)domestic producers of the good become better off.
B)domestic consumers of the good become worse off.
C)the gains of the winners exceed the losses of the losers.
D)All of the above are correct.

Question 34

Suppose Scotland goes from being an isolated country to being an exporter of wool.As a result,

A)consumer surplus of Scottish consumers of wool increases.
B)producer surplus of Scottish producers of wool increases.
C)total surplus of Scottish wool consumers and producers remains constant.
D)it is reasonable to infer that other countries have a comparative advantage over Scotland in wool production.

Question 35

When a country allows international trade and becomes an importer of a good,

A)domestic producers of the good become better off.
B)domestic consumers of the good become worse off.
C)the gains of the winners exceed the losses of the losers.
D)All of the above are correct.

Question 36

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

A)everyone in the country benefits.
B)the gains of the winners exceed the losses of the losers.
C)the losses of the losers exceed the gains of the winners.
D)everyone in the country loses.

Question 37

When a country allows trade and becomes an importer of bottled water,which of the following is not a consequence?

A)The gains of domestic consumers of bottled water exceed the losses of domestic producers of bottled water.
B)The losses of domestic producers of bottled water exceed the gains of domestic consumers of bottled water.
C)The price paid by domestic consumers of bottled water decreases.
D)The price received by domestic producers of bottled water decreases.

Question 38

Trade raises the economic well-being of a nation in the sense that

A)the gains of the winners exceed the losses of the losers.
B)everyone in an economy gains from trade.
C)since countries can choose what products to trade, they will pick those products that are most beneficial to society.
D)the nation joins the international community when it begins to engage in trade.

Question 39

Which of the following statements is true?

A)Free trade benefits a country when it exports but harms it when it imports.
B)"Voluntary" limits on Canadian exports of hogs are better for the United States than U.S.tariffs placed on Canadian hog exports.
C)Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses, whereas quotas do not impose deadweight losses.
D)Free trade benefits a country both when it exports and when it imports.

Question 40

After a country goes from disallowing trade in sugar with other countries to allowing trade in sugar with other countries,

A)the domestic price of sugar will be greater than the world price of sugar.
B)the domestic price of sugar will be lower than the world price of sugar.
C)the domestic price of sugar will equal the world price of sugar.
D)The world price of sugar does not matter; the domestic price of sugar prevails.

Question 41

Figure 9-2. The domestic country is China.

Refer to Figure 9-2.With trade,China will

A)import 100 pencil sharpeners.
B)import 250 pencil sharpeners.
C)export 150 pencil sharpeners.
D)export 250 pencil sharpeners.

Question 42

Figure 9-2. The domestic country is China.

Refer to Figure 9-2.With trade,producer surplus in China is

A)$800.
B)$1,200.
C)$1,800.
D)$2,700.

Question 43

Figure 9-1

Refer to Figure 9-1.With free trade,this country will

A)import 40 baskets.
B)import 70 baskets.
C)export 35 baskets.
D)export 65 baskets.

Question 44

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

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 45

Suppose a country abandons a no-trade policy in favor of a free-trade policy.If,as a result,the domestic price of beans increases to equal the world price of beans,then

A)that country becomes an exporter of beans.
B)that country has a comparative advantage in producing beans.
C)at the world price, the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country.
D)All of the above are correct.

Question 46

Figure 9-1

Refer to Figure 9-1.The world price for baskets represents

A)the demand for baskets from the rest of the world.
B)the supply of baskets from the rest of the world.
C)the level of inefficiency in the domestic market caused by trade.
D)the gap between domestic quantity demanded and domestic quantity supplied and the resulting shortage.

Question 47

Suppose a country abandons a no-trade policy in favor of a free-trade policy.If,as a result,the domestic price of pistachios decreases to equal the world price of pistachios,then

A)that country becomes an importer of pistachios.
B)that country has a comparative advantage in producing pistachios.
C)at the world price, the quantity of pistachios supplied in that country exceeds the quantity of pistachios demanded in that country.
D)All of the above are correct.

Question 48

Figure 9-1

Refer to Figure 9-1.With free trade,consumer surplus is

A)$45.
B)$80.
C)$210.
D)$245.

Question 49

Figure 9-1

Refer to Figure 9-1.Without trade,producer surplus is

A)$210.
B)$245.
C)$455.
D)$490.

Question 50

For any country that allows free trade,

A)domestic quantity demanded is equal to domestic quantity supplied at the world price.
B)domestic quantity demanded is greater than domestic quantity supplied at the world price.
C)both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported.
D)the domestic price is equal to the world price.

Question 51

Figure 9-1

Refer to Figure 9-1.As a result of trade,total surplus increases by

A)$80.
B)$97.50.
C)$162.50.
D)$495.50.

Question 52

Figure 9-1

Refer to Figure 9-1.With free trade,producer surplus is

A)$80.00.
B)$210.00.
C)$245.50.
D)$472.50.

Question 53

The world price of a pound of T-bone steak is $9.00.Before Guatemala allowed trade in beef,the price of a pound of T-bone steak there was $12.00.Once Guatemala began allowing trade in beef with other countries,Guatemala began

A)exporting T-bone steak and the price per pound in Guatemala remained at $12.00.
B)exporting T-bone steak and the price per pound in Guatemala decreased to $9.00.
C)importing T-bone steak and the price per pound in Guatemala remained at $12.00.
D)importing T-bone steak and the price per pound in Guatemala decreased to $9.00.

Question 54

Figure 9-1

Refer to Figure 9-1.This country

A)has a comparative advantage in baskets.
B)should export baskets.
C)is a price taker in the world economy.
D)All of the above are correct.

Question 55

The world price of a simple electronic calculator is $5.00.Before Singapore allowed trade in calculators,the price of a calculator there was $4.00.Once Singapore began allowing trade in calculators with other countries,Singapore began

A)importing calculators and the price of a calculator in Singapore increased to $5.00.
B)importing calculators and the price of a calculator in Singapore remained at $4.00.
C)exporting calculators and the price of a calculator in Singapore increased to $5.00.
D)exporting calculators and the price of a calculator in Singapore remained at $4.00.

Question 56

Figure 9-1

Refer to Figure 9-1.If this country chooses to trade,the price of baskets in this country will be

A)$10 and 40 baskets will be sold domestically.
B)$10 and 105 baskets will be domestically.
C)$7 and 70 baskets will be sold domestically.
D)$7 and 40 baskets will be sold domestically.

Question 57

Figure 9-2. The domestic country is China.

Refer to Figure 9-2.With no international trade,

A)the equilibrium price is $12 and the equilibrium quantity is 300.
B)the equilibrium price is $16 and the equilibrium quantity is 200.
C)the equilibrium price is $16 and the equilibrium quantity is 300.
D)the equilibrium price is $16 and the equilibrium quantity is 450.

Question 58

Figure 9-1

Refer to Figure 9-1.Without trade,consumer surplus is

A)$210.
B)$245.
C)$455.
D)$490.

Question 59

Figure 9-2. The domestic country is China.

Refer to Figure 9-2.If China were to abandon a no-trade policy in favor of a free-trade policy,

A)Chinese producers of pencil sharpeners would become worse off.
B)Chinese consumers of pencil sharpeners would become better off.
C)total surplus in the Chinese economy would increase.
D)All of the above are correct.

Question 60

Figure 9-1

Refer to Figure 9-1.At the world price and with free trade,

A)the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied.
B)the basket market is in equilibrium.
C)the domestic demand for baskets is perfectly inelastic.
D)both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade.

Question 61

Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1.If trade in tomatoes is allowed,the price of tomatoes in the United States

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 62

Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1.If trade in tomatoes is allowed,U.S.producers of tomatoes

A)will be better off.
B)will be worse off.
C)will be unaffected.
D)will experience a decrease in their collective producer surplus.

Question 63

Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1.If trade in tomatoes is allowed,the price of tomatoes in the United States

A)will increase, and this will cause consumer surplus to decrease.
B)will decrease, and this will cause consumer surplus to increase.
C)will be unaffected, and consumer surplus will be unaffected as well.
D)could increase or decrease or be unaffected; this cannot be determined.

Question 64

Figure 9-3. The domestic country is Jamaica.

Refer to Figure 9-3.With trade,Jamaica

A)imports 150 calculators.
B)imports 250 calculators.
C)exports 100 calculators.
D)exports 250 calculators.

Question 65

Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1.If trade in tomatoes is allowed,the United States

A)will become an importer of tomatoes.
B)will become an exporter of tomatoes.
C)may become either an importer or an exporter of tomatoes, but this cannot be determined.
D)will experience increases in both consumer surplus and producer surplus.

Question 66

Figure 9-3. The domestic country is Jamaica.

Refer to Figure 9-3.The change in total surplus in Jamaica because of trade is

A)$625, and this is an increase in total surplus.
B)$750, and this is an increase in total surplus.
C)$625, and this is a decrease in total surplus.
D)$750, and this is a decrease in total surplus.

Question 67

Figure 9-4

Refer to Figure 9-4.Without trade,consumer surplus amounts to

A)$210.50.
B)$245.50.
C)$367.50.
D)$607.50.

Question 68

Figure 9-2. The domestic country is China.

Refer to Figure 9-2.The increase in total surplus in China when trade becomes allowed is

A)$400.
B)$500.
C)$600.
D)$750.

Question 69

Figure 9-4

Refer to Figure 9-4.Without trade,total surplus amounts to

A)$122.50.
B)$245.
C)$367.50.
D)$612.50.

Question 70

Figure 9-3. The domestic country is Jamaica.

Refer to Figure 9-3.Consumer surplus in Jamaica without trade is

A)$375.
B)$2,000.
C)$2,250.
D)$8,700.

Question 71

Figure 9-4

Refer to Figure 9-4.With trade,the price of wagons in this country is

A)$8, with 70 wagons being produced in this country, 20 of which are exported.
B)$8, with 90 wagons being produced in this country, 50 of which are exported.
C)$5, with 40 wagons being produced in this country and another 30 wagons being imported.
D)$5, with 40 wagons being produced in this country and another 50 wagons being imported.

Question 72

Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1.If trade in tomatoes is allowed,the

A)price paid by American consumers of tomatoes is unchanged relative to the no-trade situation.
B)total well-being of American producers of tomatoes is diminished relative to the no-trade situation.
C)total well-being of American consumers of tomatoes is enhanced relative to the no-trade situation.
D)total well-being of the United States is enhanced relative to the no-trade situation.

Question 73

Figure 9-2. The domestic country is China.

Refer to Figure 9-2.Relative to a no-trade situation,which of the following comes with trade?

A)Consumer surplus increases by $1,800 and producer surplus increases by $1,600.
B)Consumer surplus decreases by $1,000 and producer surplus increases by $1,500.
C)Consumer surplus decreases by $1,000 and producer surplus increases by $1,750.
D)Total surplus increases by $400.

Question 74

Figure 9-4

Refer to Figure 9-4.Without trade,producer surplus amounts to

A)$210.
B)$245.
C)$450.
D)$455.

Question 75

Figure 9-3. The domestic country is Jamaica.

Refer to Figure 9-3.Which of the following statements is accurate?

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 76

Figure 9-4

Refer to Figure 9-4.With trade,consumer surplus is

A)$245.
B)$362.50.
C)$367.50.
D)$607.50.

Question 77

Figure 9-4

Refer to Figure 9-4.The horizontal line at the world price of wagons represents the

A)demand for wagons from the rest of the world.
B)supply of wagons from the rest of the world.
C)level of inefficiency in the domestic market caused by trade.
D)surplus in the domestic wagon market.

Question 78

Figure 9-4

Refer to Figure 9-4.With trade,producer surplus is

A)$80.
B)$150.
C)$210.
D)$245.

Question 79

Figure 9-4

Refer to Figure 9-4.With trade,total surplus is

A)$245.
B)$367.50.
C)$607.50.
D)$687.50.

Question 80

Figure 9-4

Refer to Figure 9-4.With trade,this country

A)exports 20 wagons.
B)exports 50 wagons.
C)imports 30 wagons.
D)imports 50 wagons.