Question 1

Figure 9-17 
-Refer to Figure 9-17. Without trade, total surplus is

Accepted Answer

A)  $600.
B)  $1,200.
C)  $1,800.
D)  $2,250.E) A) and B)
F) B) and C)

Question 2

A logical starting point from which the study of international trade begins is

Accepted Answer

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.E) All of the above
F) A) and B)

Question 3

A tariff is a tax placed on

Accepted Answer

A)  an exported good and it lowers the domestic price of the good below the world price.
B)  an exported good and it ensures that the domestic price of the good stays the same as the world price.
C)  an imported good and it lowers the domestic price of the good below the world price.
D)  an imported good and it raises the domestic price of the good above the world price.E) C) and D)
F) All of the above

Question 4

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

Accepted Answer

A)  exporting steel and the price per ton in Russia remained at $650.
B)  exporting steel and the price per ton in Russia increased to $1,000.
C)  importing steel and the price per ton in Russia remained at $650.
D)  importing steel and the price per ton in Russia increased to $1,000.E) All of the above
F) B) and C)

Question 5

Suppose the Ivory Coast, a small country, imports wheat at the world price of $4 per bushel. If the Ivory Coast imposes a tariff of $1 per bushel on imported wheat, then, other things equal, the price of wheat in Ivory Coast will increase, but by less than $1.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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.E) A) and C)
F) C) and D)

Question 7

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

Accepted Answer

A) True 
 B)False

Question 8

Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit. 
-Refer to Figure 9-29. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus?

Accepted Answer

Without trade, consu...

Question 9

Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. 
-Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and a tariff, consumer surplus is

Accepted Answer

A)  $625 and producer surplus is $25.
B)  $625 and producer surplus is $225.
C)  $1,225 and producer surplus is $25.
D)  $1,225 and producer surplus is $225.E) B) and C)
F) A) and C)

Question 10

In a December 2007 New York Times column Paul Krugman argued in favor of

Accepted Answer

A)  protectionism based on the national-security argument.
B)  protectionism based on the infant-industry argument.
C)  protectionism based on the unfair-competition argument.
D)  keeping world markets relatively open.E) A) and B)
F) A) and C)

Question 11

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. As a result of trade, total surplus increases by

Accepted Answer

A)  $50.
B)  $100.
C)  $250.
D)  $500.E) None of the above
F) A) and B)

Question 12

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

Accepted Answer

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.E) A) and C)
F) B) and D)

Question 13

Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to

Accepted Answer

A)  cause these factories to pay the U.S. minimum wage.
B)  increase the rate of technological advance in poor countries so that they can afford to pay higher wages.
C)  increase poverty in poor countries and benefit U.S. firms which compete with these imports.
D)  harm U.S. firms which compete with these imports.E) A) and B)
F) B) and C)

Question 14

If Honduras were to subsidize the production of wool blankets and sell them in Sweden at artificially low prices, the Swedish economy would be worse off.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following assertions is not correct about the multilateral approach to free trade?

Accepted Answer

A)  The multilateral approach has the potential to result in freer trade than does the unilateral approach.
B)  The multilateral approach may have a political advantage over the unilateral approach.
C)  The multilateral approach is simpler than the unilateral approach.
D)  NAFTA and GATT both represent multilateral approaches to free trade.E) B) and C)
F) B) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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, by how much do consumer surplus, producer surplus, and producer surplus change?

Accepted Answer

With trade, consumer surplus i...

Question 18

The small-economy assumption is necessary to analyze the gains and losses from international trade.

Accepted Answer

A) True 
 B)False

Question 19

A multilateral approach to free trade has greater potential to increase the gains from trade than a unilateral approach, because the multilateral approach can reduce trade restrictions abroad as well as at home.

Accepted Answer

A) True 
 B)False

Question 20

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,

Accepted Answer

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.E) A) and D)
F) A) and C)

Exam 9: Application: International Trade

A tariff is a tax placed on

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A logical starting point from which the study of international trade begins is

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

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Figure 9-17 -Refer to Figure 9-17. Without trade, total surplus is

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A multilateral approach to free trade has greater potential to increase the gains from trade than a unilateral approach, because the multilateral approach can reduce trade restrictions abroad as well as at home.

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Figure 9-24 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and a tariff, consumer surplus is

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

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The small-economy assumption is necessary to analyze the gains and losses from international trade.

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Suppose the Ivory Coast, a small country, imports wheat at the world price of $4 per bushel. If the Ivory Coast imposes a tariff of $1 per bushel on imported wheat, then, other things equal, the price of wheat in Ivory Coast will increase, but by less than $1.

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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, by how much do consumer surplus, producer surplus, and producer surplus change?

Correct AnswerverifiedWith trade, consumer surplus i...View AnswerShow Answer

Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

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Which of the following assertions is not correct about the multilateral approach to free trade?

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Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to

Correct AnswerverifiedShow Answer

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

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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,

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In a December 2007 New York Times column Paul Krugman argued in favor of

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Figure 9-29 The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit. -Refer to Figure 9-29. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus?

Correct AnswerverifiedWithout trade, consu...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. As a result of trade, total surplus increases by

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If Honduras were to subsidize the production of wool blankets and sell them in Sweden at artificially low prices, the Swedish economy would be worse off.

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With trade, consumer surplus i...
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If a country is exporting a good, this is because the country has an absolute advantage in the production of that good.

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Without trade, consu...
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