Question 1

Economists view free trade as a way to raise living standards both at home and abroad.

Accepted Answer

A) True 
 B)False

Question 2

Figure 9-12 
-Refer to Figure 9-12. With trade allowed, this country

Accepted Answer

A)   exports 400 units of the good.
B)   exports 800 units of the good.
C)   imports 400 units of the good.
D)   exports 1,600 units of the good.E) B) and D)
F) A) and B)

Question 3

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. Bearing in mind that this country is "small," what would happen if there were a decrease in the price of tricycle helmets within this country, given that tricycles and tricycle helmets are complements?

Accepted Answer

A)   The quantity of tricycles that this country imports would increase.
B)   The quantity of tricycles that this country imports would decrease, but the country would still be an importer of tricycles.
C)   This country would switch from being an importer of tricycles to an exporter of tricycles.
D)   The domestic price without trade would move closer to the world price.E) B) and D)
F) All of the above

Question 4

When a country that imports a particular good imposes a tariff on that good,

Accepted Answer

A)   consumer surplus increases and total surplus increases in the market for that good.
B)   consumer surplus increases and total surplus decreases in the market for that good.
C)   consumer surplus decreases and total surplus increases in the market for that good.
D)   consumer surplus decreases and total surplus decreases in the market for that good.E) A) and D)
F) None of the above

Question 5

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

Accepted Answer

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

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

The world price of cotton is the highest price of cotton observed anywhere in the world.

Accepted Answer

A) True 
 B)False

Question 8

Suppose in the country of Nash that the price of corn is $4 per bushel with no trade allowed. If the world price of corn is $3 per bushel and if Nash allows free trade, will Nash be an importer or an exporter of corn?

Accepted Answer

Nash will ...

Question 9

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

Accepted Answer

A)   Total surplus in the domestic country falls.
B)   Producer surplus in the domestic country increases.
C)   The domestic country experiences a deadweight loss.
D)   Revenue is raised for the domestic government.E) B) and D)
F) B) and C)

Question 10

Figure 9-4. The domestic country is Nicaragua. 
-Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

Accepted Answer

A)   $375.
B)   $2,000.
C)   $2,250.
D)   $8,700.E) None of the above
F) B) and C)

Question 11

Suppose Ecuador imposes a tariff on imported bananas. If the increase in producer surplus is $50 million, the reduction in consumer surplus is $150 million, and the deadweight loss of the tariff is $30 million, then the tariff generates $130 million in revenue for the government.

Accepted Answer

A) True 
 B)False

Question 12

Figure 9-25
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. 
-Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a tariff, total surplus is

Accepted Answer

A)   $1,700.
B)   $1,800.
C)   $1,900.
D)   $2,000.E) None of the above
F) All of the above

Question 13

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

Accepted Answer

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

Question 14

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland. 
-Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Accepted Answer

A)   producer surplus will be smaller than it would be if Isoland banned trade.
B)   consumer surplus will be smaller than it would be if Isoland banned trade.
C)   the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied.
D)   Isoland will be an importer of peaches.E) A) and B)
F) A) and C)

Question 15

Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?

Accepted Answer

A)   Consumer surplus decreases by $100; producer surplus increases by $100; and government revenue from the tariff amounts to $50.
B)   Consumer surplus decreases by $200; producer surplus increases by $100; and government revenue from the tariff amounts to $50.
C)   Consumer surplus increases by $100; producer surplus decreases by $200; and government revenue from the tariff amounts to $50.
D)   Consumer surplus decreases by $50; producer surplus increases by $200; and government revenue from the tariff amounts to $150.E) A) and D)
F) None of the above

Question 16

Figure 9-21
The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit. 
-Refer to Figure 9-21. With free trade, the domestic price and domestic quantity demanded are

Accepted Answer

A)   $30 and 1,200.
B)   $40 and 800.
C)   $30 and 800.
D)   $40 and 1,600.E) None of the above
F) All of the above

Question 17

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

Accepted Answer

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) B) and C)
F) All of the above

Question 18

How does an import quota differ from an equivalent tariff?

Accepted Answer

Both the import quota and the tariff rai...

Question 19

NAFTA is an example of a multilateral approach to achieving free trade.

Accepted Answer

A) True 
 B)False

Question 20

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. Without trade, total surplus amounts to

Accepted Answer

A)   $810.
B)   $1,620.
C)   $3,240.
D)   $6,480.E) C) and D)
F) A) and D)

Exam 9: Application: International Trade

Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches. The domestic country is Isoland. -Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then

Correct AnswerverifiedShow Answer

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. -Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a tariff, total surplus is

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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

Correct AnswerverifiedShow Answer

NAFTA is an example of a multilateral approach to achieving free trade.

Correct AnswerverifiedShow Answer

When a country that imports a particular good imposes a tariff on that good,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

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The world price of cotton is the highest price of cotton observed anywhere in the world.

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Suppose Ecuador imposes a tariff on imported bananas. If the increase in producer surplus is $50 million, the reduction in consumer surplus is $150 million, and the deadweight loss of the tariff is $30 million, then the tariff generates $130 million in revenue for the government.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 9-12 -Refer to Figure 9-12. With trade allowed, this country

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How does an import quota differ from an equivalent tariff?

Correct AnswerverifiedBoth the import quota and the tariff rai...View AnswerShow Answer

Suppose in the country of Nash that the price of corn is $4 per bushel with no trade allowed. If the world price of corn is $3 per bushel and if Nash allows free trade, will Nash be an importer or an exporter of corn?

Correct AnswerverifiedNash will ...View AnswerShow Answer

Economists view free trade as a way to raise living standards both at home and abroad.

Correct AnswerverifiedShow Answer

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. Without trade, total surplus amounts to

Correct AnswerverifiedShow Answer

Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?

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Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. Bearing in mind that this country is "small," what would happen if there were a decrease in the price of tricycle helmets within this country, given that tricycles and tricycle helmets are complements?

Correct AnswerverifiedShow Answer

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Figure 9-21 The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit. -Refer to Figure 9-21. With free trade, the domestic price and domestic quantity demanded are

Correct AnswerverifiedShow Answer

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Both the import quota and the tariff rai...
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Nash will ...
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