Question 1

The infant-industry argument

Accepted Answer

A)   is based on the belief that protecting industries when they are young will pay off later.
B)   is based on the belief that protecting industries producing goods and services for infants is necessary if a country is to have healthy children.
C)   has the support of most economists.
D)   is an argument that is advanced by advocates of free trade.

Question 2

Figure 9-3.The domestic country is China. 
-Refer to Figure 9-3.With no international trade,

Accepted Answer

A)   the equilibrium price is $12 and the equilibrium quantity is 300.
B)   the equilibrium price is $16 and the equilibrium quantity is 200.
C)   the equilibrium price is $16 and the equilibrium quantity is 300.
D)   the equilibrium price is $16 and the equilibrium quantity is 450.

Question 3

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

Accepted Answer

A)   New Zealand consumers paying a higher price for wool.
B)   a decrease in producer surplus in New Zealand.
C)   a decrease in total surplus in New Zealand.
D)   All of the above are correct.

Question 4

When a country that imports a particular good imposes an import quota 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.

Question 5

Figure 9-9 
-Refer to Figure 9-9.Consumer surplus in this market after trade is

Accepted Answer

A)   A.
B)   A + B.
C)   A + B + D.
D)   C.

Question 6

Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton.The world price of tomatoes is $600 per ton.The U.S.is a price-taker in the market for tomatoes.
-Refer to Scenario 9-1.If trade in tomatoes is allowed,the price of tomatoes in the United States

Accepted Answer

A)   will increase,and this will cause consumer surplus to decrease.
B)   will decrease,and this will cause consumer surplus to increase.
C)   will be unaffected,and consumer surplus will be unaffected as well.
D)   could increase or decrease or be unaffected;this cannot be determined.

Question 7

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

Accepted Answer

A)   win political support when a unilateral approach cannot.
B)   result in more restricted trade than under a unilateral approach,when international negotiations fail.
C)   result in drastic reductions in tariffs for many countries.
D)   All of the above are correct.

Question 8

When the nation of Duxembourg allows trade and becomes an importer of software,

Accepted Answer

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 9

According to the principle of comparative advantage,all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

Accepted Answer

A) True 
 B)False

Question 10

When a country abandons a no-trade policy,adopts a free-trade policy,and becomes an exporter of a particular 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.

Question 11

Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues of free trade.

Accepted Answer

A) True 
 B)False

Question 12

Figure 9-11 
-Refer to Figure 9-11.Consumer surplus in this market after trade is

Accepted Answer

A)   A.
B)   C + B.
C)   A + B + D.
D)   B + C + D.

Question 13

When the nation of Brownland first permitted trade with other nations,domestic producers of wheat experienced an increase in producer surplus of $4 million and total surplus in Brownland's wheat market increased by $1 million.We can conclude that

Accepted Answer

A)   Brownland became an exporter of wheat.
B)   consumer surplus in Brownland increased by $3 million.
C)   the opening of trade caused the domestic supply curve for wheat in Brownland to shift to the left.
D)   this example is inconsistent with the economic theory of international trade.

Question 14

The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade policy.If the world price of goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound,then Aviana should export goose meat.

Accepted Answer

A) True 
 B)False

Question 15

Figure 9-19.On the diagram below,Q represents the quantity of textiles and P represents the price of textiles. 
-Refer to Figure 9-19.With free trade,the country for which the figure is drawn will

Accepted Answer

A)   export 30 units of textiles.
B)   export 50 units of textiles.
C)   import 30 units of textiles.
D)   import 50 units of textiles.

Question 16

Figure 9-17 
-Refer to Figure 9-17.When the country moves from no trade to free trade,consumer surplus

Accepted Answer

A)   increases by $300 and producer surplus increases by $150.
B)   increases by $300 and producer surplus decreases by $150.
C)   decreases by $300 and producer surplus increases by $150.
D)   decreases by $300 and producer surplus decreases by $150.

Question 17

A tax on an imported good is called a

Accepted Answer

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

Question 18

The greater the elasticities of supply and demand,the smaller are the gains from trade.

Accepted Answer

A) True 
 B)False

Question 19

Figure 9-16.The figure below illustrates a tariff.On the graph,Q represents quantity and P represents price. 
-Refer to Figure 9-16.The area C + D + E + F represents

Accepted Answer

A)   the decrease in consumer surplus caused by the tariff.
B)   the decrease in total surplus caused by the tariff.
C)   the deadweight loss of the tariff minus government revenue raised by the tariff.
D)   the deadweight loss of the tariff plus government revenue raised by the tariff.

Question 20

Chile is an importer of computer chips,taking the world price of $12 per chip as given.Suppose Chile imposes a $7 tariff on chips.Which of the following outcomes is possible?

Accepted Answer

A)   The price of chips in Chile increases to $19;the quantity of Chilean-produced chips decreases;and the quantity of chips imported by Chile decreases.
B)   The price of chips in Chile increases to $16;the quantity of Chilean-produced chips increases;and the quantity of chips imported by Chile decreases.
C)   The price of chips in Chile increases to $19;the quantity of Chilean-produced chips increases;and the quantity of chips imported by Chile decreases.
D)   The price of chips in Chile increases to $16;the quantity of Chilean-produced chips increases;and the quantity of chips imported by Chile does not change.

Exam 9: Application: International Trade

According to the principle of comparative advantage,all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

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When a country abandons a no-trade policy,adopts a free-trade policy,and becomes an exporter of a particular good,

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Figure 9-17 -Refer to Figure 9-17.When the country moves from no trade to free trade,consumer surplus

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Figure 9-9 -Refer to Figure 9-9.Consumer surplus in this market after trade is

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When the nation of Duxembourg allows trade and becomes an importer of software,

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Figure 9-11 -Refer to Figure 9-11.Consumer surplus in this market after trade is

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Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues of free trade.

Correct AnswerverifiedShow Answer

The greater the elasticities of supply and demand,the smaller are the gains from trade.

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

Correct AnswerverifiedShow Answer

The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade policy.If the world price of goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound,then Aviana should export goose meat.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A tax on an imported good is called a

Correct AnswerverifiedShow Answer

Figure 9-16.The figure below illustrates a tariff.On the graph,Q represents quantity and P represents price. -Refer to Figure 9-16.The area C + D + E + F represents

Correct AnswerverifiedShow Answer

When the nation of Brownland first permitted trade with other nations,domestic producers of wheat experienced an increase in producer surplus of $4 million and total surplus in Brownland's wheat market increased by $1 million.We can conclude that

Correct AnswerverifiedShow Answer

Figure 9-3.The domestic country is China. -Refer to Figure 9-3.With no international trade,

Correct AnswerverifiedShow Answer

Chile is an importer of computer chips,taking the world price of $12 per chip as given.Suppose Chile imposes a $7 tariff on chips.Which of the following outcomes is possible?

Correct AnswerverifiedShow Answer

When a country that imports a particular good imposes an import quota on that good,

Correct AnswerverifiedShow Answer

Scenario 9-1 The before-trade domestic price of tomatoes in the United States is $500 per ton.The world price of tomatoes is $600 per ton.The U.S.is a price-taker in the market for tomatoes. -Refer to Scenario 9-1.If trade in tomatoes is allowed,the price of tomatoes in the United States

Correct AnswerverifiedShow Answer

Figure 9-19.On the diagram below,Q represents the quantity of textiles and P represents the price of textiles. -Refer to Figure 9-19.With free trade,the country for which the figure is drawn will

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The infant-industry argument

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