Deck 16: International Trade Policy

Question 1

Comparative advantage is based on

A)comparing physical endowments,such as mineral resources,of two countries.
B)two countries producing the same good.
C)differences in opportunity costs between two countries.
D)one country being able to out-produce another country in some good.
E)comparing the capital accumulations of two countries.

Answer 1

C

Question 2

If a nation imports a good that can be domestically produced,what happens to the quantity consumed of the good and why?

A)The quantity consumed decreases because the market price increases.
B)The quantity consumed increases because the market price decreases.
C)The quantity consumed remains constant because the price is unchanged.
D)The quantity consumed increases because the market price increases.
E)The quantity consumed decreases because the market price decreases.

Answer 2

B

Question 3

If the world price of a good is below the no-trade domestic price,a country

A)will benefit from exporting the good.
B)has a comparative advantage in the production of that good.
C)will not engage in trade for that good.
D)will benefit from importing the good.
E)cannot benefit from trade.

Answer 3

D

Question 4

If Australia imports medicines,then the quantity of medicines produced in Australia will ________ and the quantity of medicines purchased by consumers in Australia will ________.

A)not change;increase
B)decrease;decrease
C)increase;increase
D)decrease;increase
E)increase;decrease

Question 5

If you buy a DVD player produced in Japan,a

A)good was imported by Japan and by Australia.
B)good was exported by Japan and imported by Australia.
C)good was exported by Japan and by Australia.
D)service was exported by Japan and imported by Australia.
E)service was imported by Japan and exported by Australia.

Question 6

Australia imports motor vehicles because

A)foreign economies have an absolute advantage in their production.
B)Australia has a lower opportunity cost of production.
C)foreign nations have a lower opportunity cost of production.
D)it is a dangerous job to produce them.
E)Australia must import goods and services from other countries so that they can develop economically.

Question 7

A country exports the goods

A)in which it has a comparative disadvantage.
B)that the economy can produce the most of.
C)that it cannot sell domestically.
D)that the economy can produce at the relatively lowest opportunity cost.
E)for which its domestic prices are very high compared to world prices.

Question 8

The fundamental force that generates international trade is

A)the sea rule.
B)the existence of tariffs.
C)comparative advantage.
D)absolute advantage.
E)the need for more goods and services.

Question 9

The country with a comparative advantage in the production of a good has a

A)horizontal production possibilities frontier.
B)vertical production possibilities frontier.
C)linear production possibilities frontier.
D)lower opportunity cost of production.
E)higher opportunity cost of production.

Question 10

A country will export a good if it

A)is impossible to import the good.
B)can sell the good to a foreigner at a lower price than the no-trade price.
C)can dump the good on the world market.
D)has a high opportunity cost of production.
E)can sell the good to a foreigner at a higher price than the no-trade price.

Question 11

If Australia starts to import a good that had previously been produced in Australia,the market price of the good in Australia

A)remains constant.
B)falls.
C)There is not enough information to answer the question because we need to know if the market price in Australia had been above or below the world market price before trade began.
D)rises.
E)either remains constant or rises,depending on whether the supply of the good stays the same or increases.

Question 12

If a nation can produce a good or service at the lowest opportunity cost,then it

A)does not want to export the good because the low cost means it makes only a low profit.
B)will definitely import the good because it can beat other countries' prices.
C)is best for the nation to not trade the good internationally.
D)might export or import the good,depending on whether or not it has a comparative advantage in the production of the good.
E)can sell the product at a lower price than other nations.

Question 13

A nation has a comparative advantage in a good when it has a

A)lower absolute cost of producing the good.
B)higher absolute cost of producing the good.
C)lower opportunity cost of producing the good.
D)higher opportunity cost of producing the good.
E)tariff in place protecting the producers of the good.

Question 14

Goods and services that Australia sells to other nations are called

A)bartered goods.
B)exchanges.
C)imports.
D)world goods.
E)exports.

Question 15

Goods and services that Australia buys from other nations are called

A)exchanges.
B)imports.
C)exports.
D)bartered goods.
E)world goods.

Question 16

How can a domestic producer determine whether or not it has a comparative advantage in the production of a good or service?

A)It cannot.
B)By comparing the price it receives to the prices of other domestic producers.
C)By comparing the total domestic quantity to the total world quantity.
D)By comparing the price it receives to the world price.
E)By comparing the quantity it produces to the quantity produced in the world.

Question 17

Suevania opens its doors to trade with Barvania.Barvania has a comparative advantage in the production of machinery.Hence,once trade occurs Suevania's consumers will buy ________ machinery and pay ________ before.

A)more;a higher price than
B)less;a lower price than
C)more;a lower price than
D)the same amount of;the same price as
E)less;a higher price than

Question 18

The fundamental force that drives trade between nations is

A)the government.
B)the prices of imports.
C)legal treaties.
D)absolute advantage.
E)comparative advantage.

Question 19

Most t-shirts bought by Australians are made in Asia.As a result of free trade,the production of t-shirts in Australia

A)has increased.
B)has stayed the same.
C)has been taken over by the government.
D)has decreased.
E)might change,but more information about what else Australia imports is needed to determine if Australian production increased,decreased or did not change.

Question 20

Of the following,________ account(s)for the largest share of imports into Australia.

A)motor vehicles
B)tourism and personal travel
C)semiconductors
D)petroleum
E)fuels

Question 21

The above figure shows the Australian market for thongs.When there is no international trade,the Australian price is ________ per thong and the Australian quantity is ________ thongs.

A)$12;700,000
B)$14;500,000
C)$14;300,000
D)$14;700,000
E)$12;300,000

Question 22

The figure above shows the Australian demand and supply curves for cherries.In the absence of international trade,cherry farmers would receive ________ per kilogram of cherries.

A)$2.50
B)$0.50
C)$2.00
D)$1.50
E)$1.00

Question 23

A country with a comparative advantage in the production of a good will ________ production of the good and ________.

A)decrease;export the good
B)increase;export the good
C)increase;import the good
D)not change;import the good
E)decrease;import the good

Question 24

The table above has the domestic demand and domestic supply schedules for a good.According to the table,the no-trade price of the good is

A)$8.
B)$4.
C)$6.
D)$10.
E)$2.

Question 25

A nation will export a good if its

A)no-trade,domestic price is less than the world price
B)no-trade,domestic price is equal to the world price.
C)no-trade,domestic price is greater than the world price.
D)no-trade,domestic quantity is greater than the world quantity.
E)no-trade,domestic quantity is less than the world quantity.

Question 26

The figure above shows the Australian demand and supply curves for cherries.At a world price of $2 per kilogram,the production of cherries in Australia will equal

A)0 kilograms.
B)400,000 kilograms.
C)200,000 kilograms.
D)600,000 kilograms.
E)800,000 kilograms.

Question 27

With no international trade,the Australian price of wheat is lower than the world price of wheat.This indicates that Australia ________ a comparative advantage in the production of wheat and with international trade,Australia will ________ wheat.

A)has;import
B)has;not trade
C)has;export
D)might have;export
E)does not have;export

Question 28

When a country exports a good because the world price is higher than the no-trade domestic price,domestic purchases of the good ________ and domestic production of the good ________.

A)increase;increases
B)increase;decreases
C)decrease;increases
D)do not change;increases
E)decrease;decreases

Question 29

The figure above shows the Australian demand and supply curves for cherries.Suppose the world price of cherries is $2 per kilogram.At this price,Australian consumption of cherries will equal

A)0 kilograms.
B)200,000 kilograms.
C)800,000 kilograms.
D)600,000 kilograms.
E)400,000 kilograms.

Question 30

According to the above table,the country will import the good if the world price is less than ________ and will export the good if the world price is more than ________.

A)$6;$6
B)$10;$10
C)$8;$4
D)$4;$8
E)$4;$4

Question 31

The figure above shows the Australian demand and supply curves for cherries.In the absence of international trade,how many kilograms of cherries would Australian farmers produce?

A)600,000 kilograms
B)0 kilograms
C)800,000 kilograms
D)400,000 kilograms
E)200,000 kilograms

Question 32

The above figure shows the Australian market for thongs.With international trade,Australia imports ________ thongs.

A)400,000
B)500,000
C)300,000
D)700,000
E)0 because Australia exports thongs

Question 33

The table above has the domestic demand and domestic supply schedules for a good.If the world price of the good is $10 then,according to the table,

A)the country exports 6 units a day.
B)the country imports 6 units a day.
C)the country imports 16 units a day.
D)the country exports 22 units a day.
E)domestic production is higher before trade than after trade.

Question 34

A country exports a good if

A)the world price of the good is above the country's no-trade equilibrium price.
B)it cannot import the good.
C)the quantity demanded of the good in the country is greater than the quantity supplied at the world price.
D)it has a high opportunity cost of production.
E)the world price of the good is below the country's no-trade equilibrium price.

Question 35

The above figure shows the Australian market for thongs.With no international trade,the price in Australia for thongs is ________.With international trade,the price in Australia for thongs is ________.

A)$12;$14
B)$500;$300
C)$14;$12
D)$500;$700
E)$700;$300

Question 36

The above figure shows the Australian market for thongs.With international trade,Australian consumers buy ________ thongs and Australian producers produce ________ thongs.

A)500,000;300,000
B)300,000;700,000
C)700,000;300,000
D)700,000;500,000
E)500,000;500,000

Question 37

As a result of importing a good,domestic consumers ________ the quantity consumed and the price of the good ________.

A)decrease;falls
B)increase;does not change
C)decrease;rises
D)increase;rises
E)increase;falls

Question 38

The figure above shows the Australian demand and supply curves for cherries.At a world price of $2 per kilogram,the total exports of cherries from Australia to other nations equals

A)800,000 kilograms.
B)600,000 kilograms.
C)0 kilograms.
D)400,000 kilograms.
E)200,000 kilograms.

Question 39

As a result of importing a good,domestic producers ________ the quantity produced and the price of the good ________.

A)decrease;falls
B)decrease;does not change
C)increase;falls
D)increase;rises
E)decrease;rises

Question 40

The above figure shows the Australian market for thongs.With international trade,the equilibrium price in Australia is ________ and Australia ________ thongs.

A)$14;imports
B)$14;does not trade
C)$12;imports
D)$12;exports
E)$12;does not trade

Question 41

International trade benefits

A)both the exporter and the importer.
B)only the exporter.
C)the exporter at all times and sometimes also the importer.
D)neither the exporter nor the importer.
E)only the importer.

Question 42

A tariff is

A)the world price of a good or service.
B)a licensing regulation that limits imports.
C)price dumping by a firm engaging in international trade.
D)the domestic price charged by an exporting firm.
E)a tax on an imported good imposed by the importing country.

Question 43

When a nation exports a good or service,employment in that industry

A)decreases.
B)stays the same.
C)increases.
D)might change,but more information about what else the country exports is needed to determine if employment increases,decreases or does not change.
E)might change,but more information about what the country imports is needed to determine if employment increases,decreases or does not change.

Question 44

A tariff is a tax

A)on an imported good.
B)imposed on all traded goods.
C)on an exported good.
D)imposed on people's income.
E)imposed on the difference between the value of the goods a firm imports and the value of the goods it exports.

Question 45

After a nation starts importing a good from overseas,the domestic price of the good

A)falls.
B)stays the same.
C)rises.
D)might change,but more information about what the country exports is needed to determine if the price rises,falls or does not change.
E)might change,but more information about what else the country imports is needed to determine if the price rises,falls or does not change.

Question 46

When a nation exports a good or service in which it has a comparative advantage,employment in that industry

A)decreases.
B)stays the same.
C)increases.
D)might change,but more information about what else the country exports is needed to determine if employment increases,decreases or does not change.
E)might change,but more information about what the country imports is needed to determine if employment increases,decreases or does not change.

Question 47

When a nation exports a good or service in which it has a comparative advantage,production of the good or service

A)decreases.
B)stays the same.
C)increases.
D)might change,but more information about what the country imports is needed to determine if production increases,decreases or does not change.
E)might change,but more information about what else the country exports is needed to determine if production increases,decreases or does not change.

Question 48

After a tariff is imposed on a good,the price of the good

A)rises.
B)falls.
C)might rise,fall or not change depending on whether the government did or did not simultaneously impose a quota.
D)does not change.
E)rises only if the domestic demand for the good does not change.

Question 49

Since the 1990s,the average Australian tariff rate has been

A)between 6 per cent and 15 per cent.
B)between 26 per cent and 35 per cent.
C)larger than 36 per cent.
D)between 16 per cent and 25 per cent.
E)5 per cent or less.

Question 50

Suppose the world price of widgets is $5 each.If a widget-importing country imposed a $2 per widget tariff,what price would that country's consumers pay for widgets?

A)$10
B)$3
C)$7
D)$5
E)A price that is greater than $5 and less than $7

Question 51

When a nation starts importing a good or service,the domestic production of the good or service

A)decreases.
B)stays the same.
C)increases.
D)might change,but more information about what the country exports is needed to determine if production increases,decreases or does not change.
E)might change,but more information about what else the country imports is needed to determine if production increases,decreases or does not change.

Question 52

Looking at the average tariff rate in Australia since 1930,we see that

A)tariff levels have remained high,at over 50 per cent throughout the period.
B)tariffs have trended downward for most of the period.
C)while we talk about free trade,tariff levels have risen over the last 30 years.
D)at first tariffs declined,but have recently risen.
E)tariffs were made illegal in Australia in 1955.

Question 53

After a tariff is imposed,consumers must pay a price equal to the

A)domestic equilibrium price when there is no trade.
B)world market price less the tariff.
C)world market price.
D)domestic equilibrium price when there is no trade plus the tariff.
E)world market price plus the tariff.

Question 54

A tariff is

A)a tax imposed on exports.
B)any non-subsidy used to increase trade.
C)a tax imposed on imports.
D)a subsidy granted to imports.
E)any non-tax action used to restrict trade.

Question 55

A tax on a good that is imposed by the importing country is called a

A)quantitative restriction.
B)tariff.
C)licensing regulation.
D)nontariff barrier.
E)trade constraint.

Question 56

The figure above shows the Australian demand and supply curves for cherries.At a world price of $2 per kilogram,the total imports of cherries to Australian from other nations equals

A)600,000 kilograms.
B)800,000 kilograms.
C)400,000 kilograms.
D)200,000 kilograms.
E)0 kilograms.

Question 57

Who gains from international trade?

A)Only the exporting nation.
B)Only the importing nation.
C)Both the importing and the exporting nations.
D)Neither the importing nor the exporting nations.
E)The gains depend on which nation gets to keep the total revenue from the sale.

Question 58

When a nation starts importing a good or service,domestic employment in that industry

A)decreases.
B)stays the same.
C)increases.
D)might change,but more information about what else the country imports is needed to determine if employment increases,decreases or does not change.
E)might change,but more information about what the country exports is needed to determine if employment increases,decreases or does not change.

Question 59

Which of the following chains of events occurs when a tariff is imposed on a good?

A)Domestic prices fall,decreasing the domestic quantity supplied and increasing the quantity demanded.
B)Domestic prices rise,shifting the demand curve leftward and the domestic supply curve rightward.
C)Domestic prices rise,shifting the domestic supply curve rightward.
D)Domestic prices rise,decreasing the quantity demanded and increasing the domestic quantity supplied.
E)Domestic prices fall,shifting the demand curve rightward,and consumers buy more of the good.

Question 60

As a result of Australian tariffs imposed on cars imported from Japan,the quantity of cars imported has

A)increased a lot.
B)not changed.
C)changed,but whether it has increased or decreased is ambiguous.
D)increased a little.
E)decreased.

Question 61

If the government decides to impose a new tariff on orange juice from Brazil,the tariff would lead to ________ the tariff revenue collected by the Commonwealth government.

A)no change in
B)an elimination of
C)making illegal
D)a decrease in
E)an increase in

Question 62

The above figure shows the Australian market for replacement mobile phone batteries.When there is no international trade,the equilibrium price is ________ per battery and when there is international trade the equilibrium price is ________ per battery.

A)$16;$14
B)$14;$10
C)$10;$14
D)$12;$14
E)$12;$16

Question 63

If Australia imposes a tariff on foreign chocolate,how are Australian producers of chocolate affected?

A)They are harmed because foreign exporters of chocolate increase their supply in response to the higher price.
B)They are unaffected because the tariff applies to foreign producers,not to Australian producers.
C)The price at which they sell their chocolate falls.
D)The quantity of chocolate they sell decreases because Australian consumption of chocolate decreases.
E)The quantity of chocolate they produce increases.

Question 64

The imposition of a tariff will typically ________ government revenue and ________ domestic production of the good.

A)increase;decrease
B)increase;increase
C)decrease;decrease
D)decrease;increase
E)increase;not change

Question 65

The above figure shows the Australian market for replacement mobile phone batteries.With free trade,Australian production is equal to ________ batteries per year.When a $2 tariff is in place,Australian production is equal to ________ batteries per year.

A)100,000;300,000
B)300,000;100,000
C)100,000;500,000
D)900,000;700,000
E)300,000;500,000

Question 66

The above figure shows the Australian market for replacement mobile phone batteries.With free trade,Australia imports ________ batteries and once the tariff illustrated in the figure is imposed,Australia imports ______ batteries.

A)800,000;400,000
B)300,000;100,000
C)900,000;100,000
D)900,000;700,000
E)700,000;300,000

Question 67

Of the following,which group is hurt by a tariff?

A)The foreign government
B)Domestic producers of the good
C)Domestic consumers of the good
D)Foreign consumers of the good
E)The domestic government

Question 68

If Australia imposes a tariff on foreign chocolate,how are foreign producers of chocolate affected?

A)The tariff has no effect on foreign producers because Australian consumers must pay the higher price.
B)They earn more profit because their chocolate sells for a higher price.
C)They export less to Australia.
D)Their supply increases because they have to pay the tariff.
E)Their supply is unaffected because the quota must be met by Australian producers.

Question 69

Imposing a tariff on a good leads to a ________ in the price of the product and ________ in imports.

A)fall;a decrease
B)fall;an increase
C)rise;a decrease
D)rise;an increase
E)rise;no change

Question 70

The above figure shows the Australian market for replacement mobile phone batteries.With free international trade,Australia

A)imports 800,000 batteries.
B)imports 500,000 batteries.
C)exports 700,000 batteries.
D)imports 400,000 batteries.
E)exports 300,000 batteries.

Question 71

The above figure shows the Australian market for replacement mobile phone batteries.The Australian government collects tariff revenue of ________ on each battery imported.

A)$6
B)$4
C)$14
D)$12
E)$2

Question 72

If Australia imposes a tariff on foreign chocolate,how are Australian buyers of chocolate affected?

A)The price they pay for chocolate falls,but they consume less chocolate because less is imported.
B)The quantity they consume is unchanged.
C)The price they pay for chocolate falls,and they consume more chocolate.
D)The price they pay for chocolate rises.
E)Their demand for chocolate increases because Australian production of chocolate increases.

Question 73

If Australia imposes a tariff on a good,then

A)domestic consumption of the good decreases.
B)the government makes less revenue than it would have gained if it had imposed a quota.
C)foreign production of the good increases.
D)domestic production of the good decreases.
E)foreign consumption of the good decreases.

Question 74

The above figure shows the Australian market for replacement mobile phone batteries.Suppose the Australian government imposes the tariff illustrated in the figure.The tariff is equal to ________,and the price Australian consumers pay ______ compared to the price paid when there was free trade.

A)$2;increases
B)$12;increases
C)$14;increases
D)$14;decreases
E)$2;decreases

Question 75

If wool growers in Tasmania lobby the Commonwealth government to impose an import quota on New Zealand wool,who gains from such a quota?

A)New Zealand growers
B)Australian consumers
C)The Commonwealth government
D)Australian growers
E)No one

Question 76

When Australia imposes a tariff on an imported good,the

A)quantity of the good purchased in Australia decreases.
B)quantity of the good produced in Australia decreases.
C)outcome becomes more efficient.
D)price of the good in Australia falls.
E)amount imported increases.

Question 77

Country A imports 1,000 cars per month.After imposing a $50 per car tariff,imports fall to 800 cars per month.How much does Country A's government collect in tariff revenue?

A)$10,000
B)$50,000
C)$60,000
D)$40,000
E)$90,000

Question 78

Of the following,who gains because of tariffs and why?

A)Foreign producers because they earn more total revenue.
B)Domestic buyers because they pay a lower price.
C)Domestic buyers because they can be sure of buying high-quality products.
D)Domestic producers of protected goods because they can sell at a higher price.
E)Foreign governments because they gain more revenue.

Question 79

Of the following,who is harmed by a tariff?

A)Domestic buyers of the good or service
B)The overall domestic economy
C)The foreign exporter of the good or service
D)Domestic producers of the good or service
E)Both answers A and B are correct.

Question 80

If a tariff is imposed on imports of t-shirts into Australia,Australian consumers ________ and Australian producers ________.

A)gain;gain
B)gain;are unaffected
C)lose;lose
D)lose;gain
E)gain;lose