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Exam 9: Application: International Trade

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Question 191

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The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing rice, exporting steel, and neither importing nor exporting TVs. We can conclude that producer surplus in Aquilonia is now

A) higher in the steel market, lower in the rice market, and unchanged in the TV market.
B) higher in the rice and steel markets, and unchanged in the TV market.
C) lower in the rice and TV markets, and higher in the steel market.
D) lower in the rice and steel markets, and the same in the TV market.

E) C) and D)
F) B) and C)

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Question 192

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When a country abandons no-trade policies in favor of free-trade policies and becomes an importer of steel, then the domestic price of steel will increase as a result.

A) True
B) False

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Question 193

Multiple Choice

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

Figure 9-27 The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-27. Suppose the country imposes a $5 per unit tariff. If the country allows trade with a tariff, how much is the deadweight loss caused by the tariff?

If a country is exporting a good, this is because the country has an absolute advantage in the production of that good.​

Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. The area bounded by the points (Q₀, P₀) , (Q₂, P₁) , and (Q₁, P₁) represents

Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-26. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

The world price of a ton of steel is $1,000. Before Russia allowed trade in steel, the price of a ton of steel there was $650. Once Russia allowed trade in steel with other countries, Russia began

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country allows free trade, how much are consumer surplus, producer surplus, and producer surplus with trade?

Figure 9-15 -Refer to Figure 9-15. With the tariff, the quantity of saddles imported is

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese.

Figure 9-13 -Refer to Figure 9-13. Consumer surplus before trade is

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

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

A possible outcome of the multilateral approach to free trade is that such an approach can

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. Total surplus with trade exceeds total surplus without trade by

​If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.

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

Free trade causes job losses in industries in which a country does not have a comparative advantage, but it also causes job gains in industries in which the country has a comparative advantage.