Deck 7: Global Markets in Action

Question 1

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

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

Answer 1

increase; decrease; increase

Question 2

The United States has a comparative advantage in producing cotton if the U.S. price of cotton before international trade is ________ the world price

A) less than
B) equal to
C) greater than
D) not comparable to

Answer 2

less than

Question 3

Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the exports?

A) domestic consumers
B) domestic producers
C) workers in the industry
D) foreign consumers

Answer 3

domestic consumers

Question 4

The United States has a comparative advantage in producing airplanes if

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

Question 5

The fundamental force that drives international trade is

A) absolute advantage.
B) importation duties and tariffs.
C) export licenses.
D) comparative advantage.

Question 6

Compared to the situation before international trade, after the United States imports a good production in the United States ________ and consumption in the United States ________.

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

Question 7

Which of the following statements about U.S. international trade in 2011 is correct?

A) The value of U.S. exports exceeded the value of U.S. imports.
B) The value of U.S. exports was about 33 percent of the value of total U.S. production.
C) The United States imported only goods.
D) The United States was the world's largest trader.

Question 8

Who benefits from imports?

A) domestic consumers
B) domestic producers
C) foreign consumers
D) Both answers A and B are correct.

Question 9

Prior to international trade, the price of good X is lower in country A than in country B. This means that we know that

A) country B has an absolute advantage in the production of product X.
B) country B has a comparative advantage in the production of product X.
C) country A has an absolute advantage in the production of product X.
D) country A has a comparative advantage in the production of product X.

Question 10

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

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

Question 11

The United States has a comparative advantage and specialize in the production of airplanes. Compared to the situation with no trade, which of the following will occur?

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

Question 12

International trade arises from

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

Question 13

Compared to the situation before international trade, after the United States exports a good production in the United States ________ and consumption in the United States ________.

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

Question 14

With international trade, a country will export tires. Prior to international trade, the quantity of tires produced in the country ________ the quantity of tires consumed in the country.

A) must be more than
B) must be less than
C) might be more than, less than, or equal to
D) must equal

Question 15

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

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

Question 16

Comparative advantage implies that a country will

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

Question 17

When the principle of comparative advantage is used to guide trade, then a country specializes in producing only

A) goods with the highest opportunity cost.
B) goods with the lowest opportunity costs.
C) goods for which production takes fewer worker-hour than another country.
D) goods for which production costs are more than average total costs.

Question 18

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

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

Question 19

Which of the following is correct?

A) Both imports and exports include goods and services.
B) Imports includes both goods and services but exports includes only goods.
C) Imports includes only goods but exports includes both goods and services.
D) Both exports and imports include goods and neither includes services.

Question 20

A country opens up to trade and imports clothing. In the clothing market, surplus has been redistributed from

A) producers to consumers
B) consumers to producers
C) government to consumers
D) producers to government

Question 21

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

A) a price below $8
B) at exactly $8
C) a price above $8
D) It is impossible to say.

Question 22

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

-In the figure above, with international trade U.S. companies buy ________ helicopters per year.

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

Question 23

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

-In the figure above, international trade ________ consumer surplus in the United States by ________.

A) decreases; $2.88 billion
B) decreases; $1.92 billion
C) increases; $2.88 billion
D) increases; $4.8 billion

Question 24

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

-In the figure above, with international trade ________ helicopters per year are produced in the United States.

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

Question 25

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

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

Question 26

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.

-In the figure above, international trade ________ total surplus in the United States by ________.

A) increases; $128 million
B) decreases; $192 million
C) increases; $320 million
D) decreases; $256 million

Question 27

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.

-In the figure above, international trade ________ consumer surplus in the United States by ________.

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

Question 28

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

-In the figure above, international trade ________ total surplus in the United States by ________.

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

Question 29

Suppose the world price of a good is $4. Based on the table below, the country would

A) import 20 units.
B) export 20 units.
C) import 10 units.
D) export 10 units.

Question 30

U.S. producer surplus ________ when the United States imports a good and U.S. producer surplus ________ when the United States exports a good.

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

Question 31

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.

-In the figure above, international trade ________ producer surplus in the United States by ________ .

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

Question 32

When the United States exports a good, U.S. consumer surplus ________ and U.S. total surplus ________.

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

Question 33

In a market open to international trade, at the world price the quantity demanded is 150 and quantity supplied is 200. This country will

A) export 50 units.
B) import 50 units.
C) export 200 units.
D) import 150 units.

Question 34

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

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

Question 35

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.

-In the figure above, with international trade American consumers buy ________ million shirts per year.

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

Question 36

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.

-In the figure above, with international trade ________ million shirts per year are produced in the United States.

A) 48
B) 32
C) 16
D) 20

Question 37

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

-In the figure above, the United States ________ helicopters per year.

A) exports 480
B) exports 720
C) imports 480
D) imports 240

Question 38

A country opens up to trade and exports computer chips. In the computer chip market, surplus has been redistributed from

A) consumers to producers.
B) producers to consumers.
C) producers to government.
D) government to consumers.

Question 39

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

-In the figure above, international trade ________ producer surplus in the United States by ________.

A) decreases; $2.88 billion
B) decreases; $1.92 billion
C) increases; $4.8 billion
D) increases; $3.6 billion

Question 40

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.

-In the figure above, with international trade the United States ________ million shirts per year.

A) imports 32
B) imports 48
C) exports 16
D) exports 32

Question 41

A tariff on imported peanuts ________ the quantity of peanuts imported and ________ the domestic price of peanuts.

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

Question 42

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

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

Question 43

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

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

Question 44

When the United States exports a good, the amount of the ________ in U.S. consumer surplus is ________ the amount of the ________ in U.S. producer surplus.

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

Question 45

If the United States imposes a tariff on imported steel, the tariff will

A) raise the U.S. price of imported steel.
B) decrease the U.S. production of steel.
C) increase the total U.S. consumption of steel.
D) decrease employment in the U.S. steel industry.

Question 46

A major purpose of tariffs is to

A) encourage imports.
B) encourage exports.
C) discourage imports.
D) discourage exports.

Question 47

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

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

Question 48

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

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

Question 49

Tariffs and import quotas differ in that

A) one is a form of trade restriction, while the other is not.
B) one is a tax, while the other is a limit.
C) one is imposed by the government, while the other is imposed by the private sector.
D) one is legal, while the other is not.

Question 50

Lowering the tariff on imported ethanol

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

Question 51

Tariffs and import quotas both result in

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

Question 52

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

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

Question 53

If the United States imposes a tariff on $1 per imported shirt, the tariff will

A) raise the price of a shirt to U.S. consumers.
B) benefit U.S. shirt producers.
C) decrease imports of shirts into the United States.
D) all of the above

Question 54

If the United States imposes a tariff on imported cars, the

A) U.S. demand curve shifts rightward.
B) U.S. demand curve shifts leftward.
C) U.S. supply curve shifts rightward.
D) the price in the United States rises but neither the U.S. demand curve nor the U.S. supply curve shift.

Question 55

A tariff

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

Question 56

A tariff is a

A) tax on an exported good or service.
B) tax on an imported good or service.
C) subsidy on an exported good.
D) subsidy on an imported good.

Question 57

A tariff imposed by the United States on Japanese cars ________ the price of cars in the United States and ________ the quantity of Japanese cars imported into the United States.

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

Question 58

Suppose the country of Mooland imposes a tariff on imported beef from the country of Aqualand. As a result of the tariff, the

A) price of beef in Mooland falls.
B) quantity of beef exported by Mooland increases.
C) quantity of beef imported by Mooland decreases.
D) quantity of beef imported by Mooland increases.

Question 59

A tariff is

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

Question 60

Which of the following statements concerning tariffs is NOT true?

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

Question 61

Consider a market in which there is an import tariff. Which of the following is true?

A) The lost consumer surplus equals the gain in producer surplus plus the government revenue plus the deadweight loss.
B) The lost consumer surplus equals the gain in producer surplus.
C) The lost consumer surplus equals the gain in producer surplus plus the government revenue.
D) The lost consumer surplus plus the deadweight loss equal the gain in producer surplus plus the government revenue.

Question 62

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, U.S. consumers' ________ from the tariff is ________.

A) loss; $176 million
B) gain; $64 million
C) loss; $80 million
D) gain; $128 million

Question 63

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, with the tariff the United States imports ________ million shirts per year.

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

Question 64

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, with the tariff American consumers ________ million shirts per year.

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

Question 65

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, the tariff ________ U.S. imports of shirts by ________ million shirts per year.

A) decreases; 16
B) decreases; 8
C) increases; 8
D) increases; 4

Question 66

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, the tariff ________ the domestic production of shirts in the United States by ________ per year.

A) increases; 8 million
B) decreases; 16 million
C) increases; 4 million
D) decreases; 8 million

Question 67

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, the deadweight loss from the tariff is ________.

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

Question 68

The Smoot-Hawley Act was enacted in

A) 1980.
B) 2000.
C) 1930.
D) 2010.

Question 69

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, U.S. producers' ________ from the tariff is ________.

A) loss; $32 million
B) loss; $64 million
C) gain; $80 million
D) gain; $128 million

Question 70

Average tariff levels in the United States in the last decade are

A) about equal to the average since 1930.
B) above the average since 1930.
C) positive, but below the average since 1930.
D) zero, as there are no longer any tariffs in the United States.

Question 71

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

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

Question 72

During the Great Depression in the 1930s, the average tariff level in the United States peaked at about

A) zero.
B) 6 percent.
C) 20 percent.
D) 100 percent.

Question 73

Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from

A) consumers to producers and government.
B) consumers to producers.
C) consumers to government.
D) government to producers.

Question 74

A U.S. tariff on textiles would ________ U.S. clothing prices and ________ jobs in the U.S. textile industry.

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

Question 75

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

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

Question 76

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.

-In the figure above, the U.S. government's revenue from the tariff is ________.

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

Question 77

A U.S. tariff imposed on items that can be produced more cheaply abroad

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

Question 78

The United States imports cars from Japan. If the United States imposes a tariff on cars imported from Japan,

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

Question 79

A tariff is imposed on a good. This will ________ the domestic producer surplus, ________ the domestic consumer surplus, and ________ total surplus in the home country.

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

Question 80

Tariffs

A) generate revenue for consumers.
B) generate revenue for the government.
C) encourage domestic consumers to buy more imports.
D) encourage domestic producers to produce less.