Deck 9: Application: International Trade

Question 1

A tax on an imported good is called a

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

Answer 1

B

Question 2

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.

Answer 2

B

Question 3

What is the fundamental basis for trade among nations?

A) shortages or surpluses in nations that do not trade
B) misguided economic policies
C) absolute advantage
D) comparative advantage

Answer 3

D

Question 4

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

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

Question 5

Which of the following tools and concepts is useful in the analysis of international trade?

A) total surplus
B) domestic supply
C) equilibrium price
D) All of the above are correct.

Question 6

The principle of comparative advantage asserts that

A) not all countries can benefit from trade with other countries.
B) the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good.
C) countries can become better off by exporting goods, but they cannot become better off by importing goods.
D) countries can become better off by specializing in what they do best.

Question 7

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 8

Which of the following is not an important question for economic policy raised by the experience of the textile industry?

A) How does international trade affect consumer well-being?
B) Who gains and who loses from free trade among countries?
C) How do the gains from trade compare to the losses?
D) Which argument for restricting free trade is politically feasible?

Question 9

If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina

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

Question 10

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that

A) Wheatland has a comparative advantage, relative to other countries, in producing corn.
B) other countries have a comparative advantage, relative to Wheatland, in producing fish.
C) the price of fish in Wheatland exceeds the world price of fish.
D) if Wheatland were to allow trade, it would import corn.

Question 11

The market for soybeans in Canada consists solely of domestic buyers of soybeans and domestic sellers of soybeans if

A) consumer surplus equals producer surplus in the Canadian soybean market.
B) total surplus exceeds consumer surplus in the Canadian soybean market.
C) Canada permits international trade in soybeans.
D) Canada forbids international trade in soybeans.

Question 12

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 13

A tariff is a

A) limit on how much of a good can be exported.
B) limit on how much of a good can be imported.
C) tax on an exported good.
D) tax on an imported good.

Question 14

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 15

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

A) foreign competitors that can 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 16

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

A) if Canada were to allow trade, it would export hockey sticks.
B) Canada has an absolute advantage, relative to other countries, in producing hockey sticks.
C) Canada has a comparative advantage, relative to other countries, in producing baseball bats.
D) All of the above are correct.

Question 17

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

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

Question 18

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 19

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

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

Question 20

Patterns of trade among nations are primarily determined by

A) cultural considerations.
B) political considerations.
C) comparative advantage.
D) differences in the income elasticity of demand among nations.

Question 21

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 22

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

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

Question 23

By comparing the world price of pecans to India's domestic price of pecans, we can determine whether India

A) will export pecans assuming trade is allowed).
B) will import pecans assuming trade is allowed).
C) has a comparative advantage in producing pecans.
D) All of the above are correct.

Question 24

Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that

A) Ireland has a comparative advantage relative to the United States in producing pineapples, and China has a comparative advantage relative to Ireland in producing beer.
B) Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantage relative to Ireland in producing pineapples.
C) Ireland has an absolute advantage relative to the United States in producing pineapples, and China has an absolute advantage relative to Ireland in producing beer.
D) Ireland has an absolute advantage relative to China in producing beer, and the United States has an absolute advantage relative to Ireland in producing pineapples.

Question 25

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

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

Question 26

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

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

Question 27

Trade among nations is ultimately based on

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

Question 28

Suppose Japan exports cars to Russia and imports wine from France. This situation suggests

A) Japan has a comparative advantage relative to France in producing wine, and Russia has a comparative advantage to Japan in producing cars.
B) Japan has a comparative advantage relative to Russia in producing cars, and France has a comparative advantage relative to Japan in producing wine.
C) Japan has an absolute advantage relative to Russia in producing cars, and France has an absolute advantage relative to Japan in producing wine.
D) Japan has an absolute advantage relative to France in producing wine, and Russia has an absolute advantage relative to Japan in producing cars.

Question 29

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

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

Question 30

If a country is an exporter of a good, then it must be the case that

A) the world price is less than its domestic price.
B) consumer surplus is higher than a no trade situation.
C) the world price is greater than its domestic price.
D) they used an infant-industry argument to protect its producers.

Question 31

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

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

Question 32

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

A) will import sugar.
B) will export sugar.
C) will either import 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 33

Suppose Japan exports televisions to the United States and imports sugar from Argentina. This situation suggests

A) Japan has a comparative advantage relative to the United States in producing televisions, and Argentina has a comparative advantage relative to Japan in producing sugar.
B) Japan has a comparative advantage relative to the United States in producing sugar, and Argentina has a comparative advantage relative to Japan in producing televisions.
C) Japan has an absolute advantage relative to the United States in producing televisions, and Argentina has an absolute advantage relative to Japan in producing sugar.
D) Japan has an absolute advantage relative to Argentina in producing sugar, and the United States has an absolute advantage relative to Japan in producing televisions.

Question 34

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

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

Question 35

If the world price of coffee is lower than Colombia's domestic price of coffee without trade, then Colombia

A) should import coffee.
B) has a comparative advantage in coffee.
C) should produce just enough coffee to satisfy domestic demand.
D) should produce no coffee domestically.

Question 36

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

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

Question 37

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

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

Question 38

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia

A) should import coffee.
B) has a comparative advantage in coffee and should export coffee.
C) should produce just enough coffee to satisfy domestic demand.
D) should produce no coffee domestically.

Question 39

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

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

Question 40

Assume the nation of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine whether

A) consumer surplus exceeds producer surplus in Teeveeland.
B) Teeveeland has an absolute advantage in producing televisions.
C) Teeveeland has a comparative advantage in producing televisions.
D) All of the above are correct.

Question 41

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 42

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 domestically­produced 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 43

The nation of Farmland forbids international trade. In Farmland, you can exchange 1 pound of beef for 2 pounds of pepper. In other countries, you can exchange 1 pound of beef for 4 pounds of pepper. These facts indicate that

A) Farmland has a comparative advantage, relative to other countries, in producing beef.
B) other countries have an absolute advantage, relative to Farmland, in producing beef.
C) the price of beef in Farmland exceeds the world price of beef.
D) if Farmland were to allow trade, it would export pepper.

Question 44

When a nation first begins to trade with other countries and the nation becomes an exporter 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 consumers of soybeans become worse off and the nation's producers of soybeans become better off.
D) All of the above are correct.

Question 45

When a nation first begins to trade with other countries and the nation becomes an importer 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 better off and the nation's producers of corn become worse off.
D) All of the above are correct.

Question 46

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so

A) because it is impossible to analyze the gains and losses from international trade without making this assumption.
B) because then we can assume that world prices of goods are unaffected by that country's participation in international trade.
C) in order to rule out the possibility of tariffs or quotas.
D) All of the above are correct.

Question 47

The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that

A) other countries have an absolute advantage, relative to Isolani, in producing cars.
B) Isolani has a comparative advantage, relative to other countries, in producing cars.
C) if Isolani were to allow trade, it would import motorcycles.
D) the world price of motorcycles exceeds the price of motorcycles in Isolani.

Question 48

When, in our analysis of the gains and losses from 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 49

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 50

When the nation of Worldova allows trade and becomes an exporter of silk,

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

Question 51

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

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

Question 52

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.

Question 53

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 54

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

A) producer surplus increases and total surplus increases in the market for that good.
B) producer surplus increases and total surplus decreases in the market for that good.
C) producer surplus decreases and total surplus increases in the market for that good.
D) producer surplus decreases and total surplus decreases in the market for that good.

Question 55

Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that

A) Spain imports olive oil.
B) the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed.
C) consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed.
D) All of the above are correct.

Question 56

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 57

Costa Rica allows trade with the rest of the world. We can determine whether Costa Rica has a comparative advantage in producing pharmaceuticals if we

A) know whether Costa Rica imports or exports pharmaceuticals.
B) compare the world price of pharmaceuticals to the price of pharmaceuticals that would prevail in Costa Rica if trade with the rest of the world were not allowed.
C) compare the quantity of pharmaceuticals consumed in Costa Rica with the quantity of pharmaceuticals that would be consumed in Costa Rica if trade with the rest of the world were not allowed.
D) All of the above are correct.

Question 58

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

A) both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question.
B) the gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question.
C) trade results in an increase in total surplus.
D) trade puts downward pressure on the prices of all goods.

Question 59

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.

Question 60

Suppose Russia exports sunflower seeds to Ireland and imports coffee from Brazil. This situation suggests

A) Russia has a comparative advantage over Brazil in producing coffee, and Ireland has a comparative advantage over Russia in producing sunflower seeds.
B) Russia has a comparative advantage over Ireland in producing sunflower seeds, and Brazil has a comparative advantage over Russia in producing coffee.
C) Russia has an absolute advantage over Ireland in producing sunflower seeds, and Brazil has an absolute advantage over Russia in producing coffee.
D) Russia has an absolute advantage over Brazil in producing coffee, and Ireland has an absolute advantage over Russia in producing sunflower seeds.

Question 61

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. When trade is allowed,

A) Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off.
B) Guatemalan consumers of coffee become better off and Guatemalan producers of coffee become worse off.
C) both Guatemalan producers and consumers of coffee become better off.
D) both Guatemalan producers and consumers of coffee become worse off.

Question 62

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 63

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. From the figure it is apparent that

A) Guatemala will experience a shortage of coffee if trade is not allowed.
B) Guatemala will experience a surplus of coffee if trade is not allowed.
C) Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.
D) foreign countries have a comparative advantage in producing coffee, relative to Guatemala.

Question 64

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. From the figure it is apparent that

A) Guatemala will export coffee if trade is allowed.
B) Guatemala will import coffee if trade is allowed.
C) Guatemala has nothing to gain either by importing or exporting coffee.
D) the world price will fall if Guatemala begins to allow its citizens to trade with other countries.

Question 65

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to

A) 750.
B) 1,100.
C) 1,514.
D) 1,650.

Question 66

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in

A) Guatemalan consumers paying a higher price for coffee.
B) a decrease in producer surplus in Guatemala.
C) a decrease in total surplus in Guatemala.
D) All of the above are correct.

Question 67

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala

A) increases by the area B + D.
B) increases by the area C + F.
C) decreases by the area B + D.
D) decreases by the area D + G.

Question 68

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 69

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is

A) $30.
B) $90.
C) $110.
D) $140.

Question 70

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 71

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

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

Question 72

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 73

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. With trade, Guatemala will

A) export 22 units of coffee.
B) export 10 units of coffee.
C) import 30 units of coffee.
D) import 12 units of coffee.

Question 74

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 75

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. With trade, total surplus in the Guatemalan coffee market amounts to

A) 1,250.
B) 1,468.
C) 1,870.
D) 1,980.

Question 76

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 77

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

A) A + B + C.
B) A + B + C + D + F.
C) A + B + C + D + F + G.
D) A + B + C + D + F + G + H.

Question 78

Figure 9-1
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala

A) increases by the area B + D.
B) increases by the area B + D + G.
C) decreases by the area C + F.
D) decreases by the area G.

Question 79

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 80

Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result,

A) consumer surplus increases for consumers of coats in Iceland.
B) producer surplus increases for producers of coats in Iceland.
C) total surplus remains unchanged in the coat market in Iceland.
D) it is reasonable to infer that other countries have a comparative advantage over Iceland in coat production.