Deck 17: International Trade

Question 1

For which of the following nations does international trade account for the largest percentage of GDP?  

A) Japan 
B) The Netherlands 
C) Germany 
D) Canada

Answer 1

 The Netherlands 

Question 2

Which of the following describes some of the effects of international trade?  

A) International trade allows a country to concentrate on the goods and services that it produces most efficiently. 
B) International trade allows a country to increase its political involvement on a global scale. 
C) Increased international trade would improve Canada's high-tech exports but NOT its agricultural exports. 
D) Increased international trade would increase Canada's exports and decrease its imports.

Answer 2

 International trade allows a country to concentrate on the goods and services that it produces most efficiently. 

Question 3

For each wristwatch Denmark produces, it gives up the opportunity to make 50 kilograms of cheese.Germany can produce one wristwatch for every 100 kilograms of cheese it produces.Which statement describes the related opportunity costs in the two countries?  

A) The opportunity cost of producing wristwatches is higher in Denmark than in Germany. 
B) The opportunity cost of producing cheese is higher in Denmark than in Germany. 
C) The opportunity cost of producing cheese in Denmark is identical to that in Germany. 
D) In both countries, the opportunity cost of one wristwatch is 150 kilograms of cheese.

Answer 3

 The opportunity cost of producing cheese is higher in Denmark than in Germany. 

Question 4

$$\begin{array} { | c | c | c | c | } \hline { \text { Poland } } & & { \text { Canada } } \\\hline \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } & \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } \\\hline 20 & 0 & 100 & 0 \\\hline 18 & 80 & 90 & 100 \\\hline 16 & 160 & 80 & 200 \\\hline 14 & 240 & 70 & 300 \\\hline 12 & 320 & 60 & 400 \\\hline 10 & 400 & 50 & 500 \\\hline 8 & 480 & 40 & 600 \\\hline 6 & 560 & 30 & 700 \\\hline 4 & 640 & 20 & 800 \\\hline 2 & 720 & 10 & 900 \\\hline 0 & 800 & 0 & 1000 \\\hline\end{array}$$

-Refer to the graph in the exhibit.What is the opportunity cost of 1 tonne of wheat in Poland a! ?

A) 10 t-shirts-b! 
B) 20 t-shirts-c! 
C) 30 t-shirts-d! 
D) 40 t-shirts

Question 5

$$\begin{array} { | c | c | c | c | } \hline { \text { Poland } } & & { \text { Canada } } \\\hline \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } & \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } \\\hline 20 & 0 & 100 & 0 \\\hline 18 & 80 & 90 & 100 \\\hline 16 & 160 & 80 & 200 \\\hline 14 & 240 & 70 & 300 \\\hline 12 & 320 & 60 & 400 \\\hline 10 & 400 & 50 & 500 \\\hline 8 & 480 & 40 & 600 \\\hline 6 & 560 & 30 & 700 \\\hline 4 & 640 & 20 & 800 \\\hline 2 & 720 & 10 & 900 \\\hline 0 & 800 & 0 & 1000 \\\hline\end{array}$$

-Refer to the graph in the exhibit.What is the opportunity cost of 1 tonne of wheat in Canada?  

A) 1/10 of a t-shirt 
B) 1/3 of a t-shirt 
C) 1/2 of a t-shirt 
D) 10 t-shirts

Question 6

What does the term autarky refer to?  

A) the equilibrium that is attained after trade begins between two countries 
B) the gains received from trade 
C) national self-sufficiency 
D) political isolationism

Question 7

$$\begin{array} { | c | c | c | c | } \hline { \text { Poland } } & & { \text { Canada } } \\\hline \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } & \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } \\\hline 20 & 0 & 100 & 0 \\\hline 18 & 80 & 90 & 100 \\\hline 16 & 160 & 80 & 200 \\\hline 14 & 240 & 70 & 300 \\\hline 12 & 320 & 60 & 400 \\\hline 10 & 400 & 50 & 500 \\\hline 8 & 480 & 40 & 600 \\\hline 6 & 560 & 30 & 700 \\\hline 4 & 640 & 20 & 800 \\\hline 2 & 720 & 10 & 900 \\\hline 0 & 800 & 0 & 1000 \\\hline\end{array}$$

-Refer to the graph in the exhibit.What is the opportunity cost of one t-shirt in Canada?  

A) 1/10 of a tonne of wheat 
B) 1/2 of a tonne of wheat 
C) 3/4 of a tonne of wheat 
D) 10 tonnes of wheat

Question 8

In 2011, what percent of Canada's GDP comprised exports?  

A) 10 percent 
B) 20 percent 
C) 26 percent 
D) 33 percent

Question 9

In terms of exports, who are Canada's two major trading partners?  

A) Germany and Mexico 
B) the United States and Mexico 
C) the United States and China 
D) the United States and the United Kingdom

Question 10

Which of the following was a major export from Canada in 2011?  

A) diamonds 
B) bauxite 
C) coffee 
D) oil and gas

Question 11

What portion of Canada's GDP was comprised of imports in 2011?  

A) about 10 percent 
B) about 20 percent 
C) about 26 percent 
D) about 33 percent

Question 12

$$\begin{array} { | c | c | c | c | } \hline { \text { Poland } } & & { \text { Canada } } \\\hline \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } & \begin{array} { c } \text { tonnes of } \\\text { wheat per day }\end{array} & \text { t-shirts per day } \\\hline 20 & 0 & 100 & 0 \\\hline 18 & 80 & 90 & 100 \\\hline 16 & 160 & 80 & 200 \\\hline 14 & 240 & 70 & 300 \\\hline 12 & 320 & 60 & 400 \\\hline 10 & 400 & 50 & 500 \\\hline 8 & 480 & 40 & 600 \\\hline 6 & 560 & 30 & 700 \\\hline 4 & 640 & 20 & 800 \\\hline 2 & 720 & 10 & 900 \\\hline 0 & 800 & 0 & 1000 \\\hline\end{array}$$

-Refer to the graph in the exhibit.What is the opportunity cost of 1 t-shirt in Poland?  

A) 1/40 of a tonne of wheat 
B) 3/4 of a tonne of wheat 
C) 1 tonne of wheat 
D) 2 tonnes of wheat

Question 13

In terms of imports to Canada, who are Canada's two major trading partners?  

A) Germany and Mexico 
B) the United States and Mexico 
C) the United States and China 
D) the United States and the United Kingdom

Question 14

What was the largest category of exports from Canada in 2011?  

A) motor vehicles and parts 
B) services 
C) energy products 
D) consumer goods

Question 15

In determining comparative advantage, how is cost measured?  

A) in terms of foreign currency 
B) in terms of domestic currency 
C) in terms of gold only 
D) in terms of opportunities forgone

Question 16

For each wristwatch Denmark produces, it gives up the opportunity to make 50 kilograms of cheese.Germany can produce one wristwatch for every 100 kilograms of cheese it produces.Which of the following describes the comparative advantage between the two countries?  

A) Germany has the comparative advantage in wristwatches and cheese. 
B) Germany has the comparative advantage in wristwatches. 
C) Denmark has the comparative advantage in wristwatches. 
D) Denmark has the comparative advantage in cheese.

Question 17

In New Zealand one worker can produce 40 walking sticks per hour or 10 boomerangs per hour.What is the opportunity cost of producing one walking stick?  

A) 1/4 of a boomerang 
B) 4 boomerangs 
C) 10 boomerangs 
D) 40 boomerangs

Question 18

Which country is Canada's largest trading partner?  

A) the United States 
B) Japan 
C) Great Britain 
D) Mexico

Question 19

Suppose that workers in Switzerland can produce only two goods: yo-yos or sweatshirts.The Swiss currency is the Swiss franc.How is the opportunity cost of yo-yos measured?  

A) in francs per yo-yo 
B) in francs per sweatshirt 
C) in number of yo-yos 
D) in number of sweatshirts

Question 20

What was the largest category of imports to Canada in 2011?  

A) services 
B) consumer goods 
C) petroleum and related products 
D) motor vehicles and parts

Question 21

What is one reason international specialization would NOT occur?  

A) because some countries have educated, trained workers, while other countries have unskilled workers 
B) because tastes and preferences tend to be different in different countries 
C) because economies of scale can allow larger producers to operate at lower average cost 
D) because the world price of a good is determined by the world supply and demand for it

Question 22

How is comparative advantage determined?  

A) by the amount of resources needed to produce a good 
B) by the money cost of producing any good 
C) by the opportunity cost of producing any good 
D) by absolute advantage and production possibilities combined

Question 23

Which of the following is NOT a reason for mutually beneficial trade to occur between two countries?  

A) The opportunity cost of producing two goods differs between the two trading partners. 
B) One country is more productive than the other. 
C) One country is more efficient than the other. 
D) One country has an absolute advantage over the other.

Question 24

Under what circumstances would world output be maximized?  

A) if each country attempts to be self-sufficient 
B) if each country specializes in producing those goods in which it has a comparative advantage 
C) if each country specializes in producing those goods in which it has an absolute advantage 
D) if each country reduces its consumption possibilities

Question 25

What is the basis for international trade?  

A) established trade patterns 
B) shipping and transportation costs 
C) absolute advantage 
D) comparative advantage

Question 26

What is one reason that international specialization in production would occur?  

A) because of differing national tastes 
B) because of diseconomies of scale 
C) because the world price for a good is high 
D) because resources are plentiful in all nations

Question 27

How are differences in resource endowments represented?  

A) by differences in consumption patterns across nations 
B) by differences in production patterns across nations 
C) by differences in the quantity, but NOT the quality, of resources available in different nations 
D) by differences in the quality and the quantity of resources available in different nations

Question 28

Which country should produce a particular good in order to maximize worldwide gains from trade?  

A) the country that has the lowest opportunity cost of producing it 
B) the country that can produce that good using the fewest resources 
C) the country that has the most desire for that good 
D) the country that has produced that good in the past

Question 29

Relative to its trading partners, which goods are the most economically feasible for a country to export?  

A) only those goods for which the country has an absolute advantage 
B) only those goods for which the country has the highest opportunity cost 
C) only those goods for which the country has the strongest demand 
D) only those goods for which the country has the lowest opportunity cost

Question 30

How is a nation's consumption possibilities frontier related to its production possibilities frontier?  

A) A nation's consumption possibilities frontier is always the same as its production possibilities frontier. 
B) A nation's consumption possibilities frontier is never the same as its production possibilities frontier. 
C) A nation's consumption possibilities frontier is the same as its production possibilities frontier but only if international trade does NOT occur. 
D) A nation's consumption possibilities frontier is usually lower than its production possibilities frontier.

Question 31

What is the source of gains from trade?  

A) tariffs 
B) national self-sufficiency 
C) absolute advantage 
D) comparative advantage

Question 32

Which of the following is one reason that international specialization in production would occur?  

A) because of a high tariff imposed by a national government 
B) because of a low tariff imposed by a national government 
C) because of diminishing returns due to a variable factor of production 
D) because of the different resource endowments throughout the world

Question 33

What is the term for the rate at which two countries trade one good for another?  

A) the foreign exchange rate 
B) the terms of trade 
C) the export line 
D) the import line

Question 34

Which statement best describes the relationship between a nation's consumption and its production possibilities?  

A) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities. 
B) International trade requires that a country's production possibilities exceed its consumption possibilities. 
C) A country's production possibilities always equal its consumption possibilities. 
D) A country's consumption possibilities can never equal its production possibilities because of leakages in the system.

Question 35

What is the basis of the benefits of specialization?  

A) comparative advantage 
B) absolute advantage 
C) size of country 
D) identical production costs between two countries

Question 36

Which of the following factors is the most significant in determining the pattern of international trade?  

A) absolute advantage 
B) comparative advantage 
C) military strength 
D) one trading partner's geographic size relative to another trading partner's geographic size

Question 37

When is international trade most likely to occur?  

A) whenever one of the trading nations is self-sufficient 
B) whenever one of the trading nations gains from trade 
C) whenever all of the trading nations gains from trade 
D) whenever labour is cheaper abroad

Question 38

What does absolute advantage mean?  

A) It means autarky. 
B) It means that two countries of the same size have the same opportunity cost of producing two particular goods. 
C) It means that one country can produce more of two goods than another country can. 
D) It means that one country can produce less of two goods than another country can.

Question 39

Which of the following statement characterizes autarky?  

A) A country's consumption possibilities are the same as its production possibilities. 
B) Equilibrium is attained with the maximum gains from specialization and trade. 
C) Equilibrium is attained with the maximum amount of international trade. 
D) A nation is governed by an individual who has absolute authority.

Question 40

If production is subject to economies of scale, how might trading patterns be characterized?  

A) Countries can gain from trade if each nation specializes. 
B) One country will develop an absolute advantage in the production of all goods. 
C) One country will develop a comparative advantage in the production of all goods. 
D) Countries will NOT be able to gain from trade.

Question 41

Exhibit 19-2

Refer to the graph in the exhibit.Suppose the world price of corn is $2, and no trade restrictions are in place.How many bushels of corn will Canada produce, consume, and export/import?  

A) Canada will produce 3,000, consume 7,000, and import 4,000 bushels of corn. 
B) Canada will produce 3,000, consume 7,000, and export 4,000 bushels of corn. 
C) Canada will produce 7,000, consume 3,000, and export 4,000 bushels of corn. 
D) Canada will produce 7,000, consume 3,000, and import 4,000 bushels of corn.

Question 42

Exhibit 19-4

Refer to the graph in the exhibit.Suppose the country illustrated is initially trading without restrictions at a world price of $1.00.If the tariff is $0.50 per unit, what area represents resulting net welfare loss?  

A) area b + d 
B) area c + i + e + f 
C) area i 
D) area i + f

Question 43

Exhibit 19-4

Refer to the graph in the exhibit.Suppose the tariff is $0.50 per unit and the world price is $1.00.How many units will be imported/exported?  

A) Twenty-five units will be exported. 
B) Twenty-five units will be imported. 
C) Fifty units will be exported. 
D) Fifty units will be imported.

Question 44

If no trade restrictions exist, under what conditions will a country import a particular good?  

A) if domestic quantity supplied equals domestic quantity demanded at the world price 
B) if there is excess domestic quantity demanded at the world price 
C) if world quantity supplied is less than world quantity demanded 
D) if world quantity supplied is greater than world quantity demanded

Question 45

What is a tariff?  

A) a tax on financial transactions 
B) a tax on either imports or exports 
C) a penalty imposed on importers of capital 
D) an agreement between countries to limit trade

Question 46

Under what circumstances will a country import a good?  

A) only if there is excess domestic quantity supplied at the world price 
B) only if domestic quantity supplied is greater than world quantity supplied 
C) only if domestic quantity demanded is less than world quantity demanded 
D) only if excess quantity demanded is positive at the world price

Question 47

Tina imports sesame oil from Ethiopia and sells to a market that has a downward-sloping demand curve.The demand curve indicates that some consumers are willing to pay $1.50 or more per kilogram for the first few kilograms, but every consumer gets to buy at the market-clearing price of $0.50 per kilogram.What is the term for the difference between the highest amount of money that consumers would pay and the actual amount they pay?  

A) exporter surplus 
B) trade balance 
C) producer surplus 
D) consumer surplus

Question 48

Exhibit 19-2

Refer to the graph in the exhibit.Suppose the world price of corn is $6, and no trade restrictions are in place.What would happen in Canada's corn market?
 

A) Canada will have an excess demand for corn. 
B) Canada will be a net importer of corn. 
C) Canada will NOT produce any corn. 
D) Canada will consume only a portion of what is produced.

Question 49

$$\begin{array} { c c | c c } \hline{ \text { Demand } } && { \text { Supply } } \\\hline \mathrm { Q } & \mathrm { P } & \mathrm { Q } & \mathrm { P } \\\hline 12,000 & \$ 0 & 6,000 & \$ 0 \\10,000 & 1 & 7,000 & 1 \\8,000 & 2 & 8,000 & 2 \\6,000 & 3 & 9,000 & 3 \\4,000 & 4 & 10,000 & 4 \\\hline\end{array}$$

-Refer to the table in the exhibit, which illustrates the domestic supply and demand for tulips in The Netherlands.Suppose the world price of tulips is $4, and no trade restrictions are in place.Which of the following describes what would happen in The Netherlands' tulip market?  

A) The Netherlands would export all of its tulips. 
B) The Netherlands would produce no tulips. 
C) The Netherlands would import all of the tulips it consumes. 
D) The Netherlands would consume only some of the tulips it produces.

Question 50

Exhibit 19-4

Refer to the graph in the exhibit.At a world price of $1.00, how many units will be imported/exported?  

A) Twenty units will be exported. 
B) Twenty units will be imported. 
C) Fifty units will be exported. 
D) Fifty units will be imported.

Question 51

Exhibit 19-4

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $1.00.If the tariff is $0.50 per unit, what area represents the resulting gain in producer surplus?  

A) area c 
B) area h 
C) area c + g 
D) area c + h

Question 52

$$\begin{array} { c c | c c } \hline{ \text { Demand } } && { \text { Supply } } \\\hline \mathrm { Q } & \mathrm { P } & \mathrm { Q } & \mathrm { P } \\\hline 12,000 & \$ 0 & 6,000 & \$ 0 \\10,000 & 1 & 7,000 & 1 \\8,000 & 2 & 8,000 & 2 \\6,000 & 3 & 9,000 & 3 \\4,000 & 4 & 10,000 & 4 \\\hline\end{array}$$

-Refer to the table in the exhibit, which illustrates the domestic supply and demand for tulips in The Netherlands.Suppose the world price of tulips is $1, and no trade restrictions are in place.What would happen in The Netherlands' tulip market?  

A) The Netherlands would export all the tulips it produces. 
B) The Netherlands would produce no tulips. 
C) The Netherlands would import all of the tulips it consumes. 
D) The Netherlands would consume all of the tulips it produces.

Question 53

Exhibit 19-4

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $1.00.If the tariff is $0.50 per unit, what area represents the resulting government revenue?  

A) area d + e 
B) area e 
C) area e + g 
D) area i + e + f

Question 54

Exhibit 19-4

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $1.00.If the tariff is $0.50 per unit, what area represents the resulting loss of consumer surplus?  

A) area a 
B) area b + d 
C) area c 
D) area c + i + e + f

Question 55

Exhibit 19-2

Refer to the graph in the exhibit.Suppose the world price of corn is $2, and no trade restrictions are in place.What would happen in Canada's corn market?  

A) Canada will have an excess supply of corn. 
B) Canada will be a net exporter of corn. 
C) Canada will NOT produce any corn. 
D) Canada will consume all of the corn it produces.

Question 56

What is the term for a tariff that is a lump-sum tax per unit on imports?  

A) a specific tariff 
B) an effective tariff 
C) an effective tariff .
D) an ad valorem tariff

Question 57

Exhibit 19-2

Refer to the graph in the exhibit.Suppose the world price of corn is $6, and no trade restrictions are in place.How many bushels of corn will Canada produce, consume, and export/import?  

A) Canada will produce 7,000, consume 3,000, and import 4,000 bushels of corn. 
B) Canada will produce 7,000, consume 3,000, and export 4,000 bushels of corn. 
C) Canada will produce 3,000, consume 7,000, and import 4,000 bushels of corn. 
D) Canada will produce 3,000, consume 7,000, and export 4,000 bushels of corn.

Question 58

Robert exports processed turkey and has an upward-sloping supply curve.The supply curve indicates that Robert faces a marginal cost of $0.25 or less per kilogram for supplying the first few kilograms.But every producer in this market sells turkey at the market-clearing price of $0.50 per kilogram.What is the term for the difference between the actual amount of money that Robert receives and the amount of money he would accept to supply the market clearing quantity?  

A) consumer surplus 
B) importer surplus 
C) producer surplus 
D) trade deficit

Question 59

What is the term for a tax on imports that is equal to a percentage of the cost of those imports?  

A) a specific tariff 
B) an ad valorem tariff 
C) a tax on luxury goods only 
D) an effective tariff

Question 60

$$\begin{array} { c c | c c } \hline{ \text { Demand } } && { \text { Supply } } \\\hline \mathrm { Q } & \mathrm { P } & \mathrm { Q } & \mathrm { P } \\\hline 12,000 & \$ 0 & 6,000 & \$ 0 \\10,000 & 1 & 7,000 & 1 \\8,000 & 2 & 8,000 & 2 \\6,000 & 3 & 9,000 & 3 \\4,000 & 4 & 10,000 & 4 \\\hline\end{array}$$

-Refer to the table in the exhibit, which illustrates the domestic supply and demand for tulips in The Netherlands.Suppose the world price of tulips is $4, and no trade restrictions are in place.How many tulips will The Netherlands produce, consume, and export/import?  

A) The Netherlands will produce 10,000, consume 4,000, and import 6,000 tulips. 
B) The Netherlands will produce 10,000, consume 4,000, and export 6,000 tulips. 
C) The Netherlands will produce 4,000, consume 10,000, and import 6,000 tulips. 
D) The Netherlands will produce 4,000, consume 10,000 and export 6,000 tulips.

Question 61

Exhibit 19-8

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the welfare loss resulting from higher domestic production costs?  

A) area a 
B) area b 
C) area b + d 
D) area c + d

Question 62

Exhibit 19-5

Refer to the graph in the exhibit.Suppose the world price of a baseball is $3, and Canada imposes a tariff of $1 per baseball.How much tariff revenue will the Canadian government collect?  

A) $4,000 
B) $16,000 
C) $20,000 
D) $24,000

Question 63

Exhibit 19-5

Refer to the graph in the exhibit.Suppose the world price of a baseball is $3, and Canada imposes a tariff of $1 per baseball.How many baseballs will be purchased in Canada?  

A) 6,000 
B) 8,000 
C) 10,000 
D) 12,000

Question 64

Exhibit 19-5

Refer to the graph in the exhibit.Suppose the world price of a baseball is $3, and Canada imposes a tariff of $1 per baseball.How many baseballs will Canada import?  

A) 4,000 
B) 6,000 
C) 8,000 
D) 10,000

Question 65

Which of the following best describes the effects of imposing tariffs and quotas?  

A) Tariffs raise the price of a good, but quotas do NOT. 
B) Tariffs reduce consumer and producer surplus, whereas quotas reduce domestic consumer surplus and increase domestic producer surplus. 
C) Both tariffs and quotas increase the quantity demanded. 
D) The revenue resulting from a tariff goes to the government, whereas the revenue resulting from a quota goes to whoever is awarded the right to sell the product.

Question 66

Exhibit 19-7

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.How much will domestic production increase?  

A) It will increase from 100 to 125 units per month. 
B) It will increase from 100 to 150 units per month. 
C) It will increase from 100 to 175 units per month. 
D) It will increase from 100 to 200 units per month.

Question 67

Exhibit 19-8

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the decrease in consumer surplus?  

A) area c + d 
B) area c + d + e 
C) area b + c + d + e 
D) area a + b + c + d + e

Question 68

What is the difference between the effect of an import quota when quota rights are given away and the effect of a tariff?  

A) The tariff results in a higher domestic price, but the quota does NOT. 
B) The quota decreases the amount of goods imported, but the tariff does NOT. 
C) Under a quota, part of the decrease in consumer surplus is redistributed to foreign producers, but under a tariff it is redistributed to the domestic government. 
D) Under a tariff, part of the decrease in consumer surplus is redistributed to foreign producers, but under a quota it is redistributed to the domestic government.

Question 69

Exhibit 19-5

Refer to the graph in the exhibit.Suppose the world price of a baseball is $3, and Canada imposes a tariff of $1 per baseball.Which area represents Canada's net loss as a result of the tariff?  

A) area b + c 
B) area b + c + e 
C) area b + f 
D) area c + e

Question 70

Exhibit 19-8

Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the gain to those firms awarded the right to import the 50 units and sell them at the new domestic price?  

A) area b 
B) area c 
C) area d 
D) area c + d

Question 71

What is the world price of a good?  

A) the price paid for a good by consumers in all nations 
B) the price at which a good is traded internationally 
C) the price paid for a good in Canadian dollars 
D) the price paid for a good in foreign currency

Question 72

Exhibit 19-5

Refer to the graph in the exhibit.The world price of a baseball is $3.With free trade, how many baseballs will Canada import?  

A) 4,000 
B) 6,000 
C) 8,000 
D) 10,000

Question 73

Exhibit 19-6

Refer to the graph in the exhibit.Suppose that the world price is $2.00 per unit.What is the smallest import quota that would NOT affect the level of imports in this country?  

A) 0 units per month 
B) 50 units per month 
C) 100 units per month 
D) 150 units per month

Question 74

What is the defining characteristic of an effective import quota?  

A) It reduces imports to zero. 
B) It increases exports. 
C) It reduces the price of an imported good below the world price. 
D) It limits imports to less than what would be imported under free trade.

Question 75

Suppose a country imposes tariffs on all imported goods.Which of the following best describes the purchasing choices of consumers in the importing country?  

A) Consumers will purchase more domestically produced goods and fewer foreign goods, resulting in the consumption of fewer total goods than without the tariff. 
B) Consumers will purchase more domestically produced goods and fewer foreign goods, resulting in the consumption of more total goods than without the tariff. 
C) Consumers will purchase more domestically produced goods and more foreign goods, resulting in the consumption of fewer total goods than without the tariff. 
D) Consumers will purchase fewer domestically produced goods and fewer foreign goods, resulting in the consumption of more total goods than without the tariff.

Question 76

What is the difference between a specific tariff and an ad valorem tariff?  

A) A specific tariff is a set amount of money per unit of a product, while an ad valorem tariff is a set percentage of product price. 
B) A specific tariff is a set percentage of product price, while an ad valorem tariff is a set amount of money per unit of a product. 
C) A specific tariff names a particular good to which the tariff applies, while an ad valorem tariff applies to large classes of products. 
D) A specific tariff applies only to imports, while an ad valorem tariff applies only to exports.

Question 77

Exhibit 19-5

Refer to the graph in the exhibit, which shows domestic supply and demand for baseballs in Canada.The world price of a baseball is $3.With free trade, how many baseballs will be purchased in Canada?  

A) 4,000 
B) 8,000 
C) 10,000 
D) 12,000

Question 78

What is an import quota?  

A) a tax on imports 
B) a legal limit on the amount of a specific good that can be imported into a particular country 
C) a tax on import quantities above the legal limit 
D) a way to increase tariff revenues

Question 79

How does a tariff on an imported good affect domestic producers?  

A) Domestic producers are better off because they sell more goods at the same price. 
B) Domestic producers are better off because they sell more goods at a higher price. 
C) Domestic producers are better off because they sell the same quantity of goods at a higher price. 
D) Domestic producers are neither better off nor worse off because imports do NOT change domestic production.

Question 80

Exhibit 19-5

Refer to the graph in the exhibit.Suppose the world price of a baseball is $3, and Canada imposes a tariff of $1 per baseball.Which area represents the amount of tariff revenue the Canadian government collects?  

A) area b 
B) area c 
C) area e 
D) area f