Question 1

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

Accepted Answer

A)  that country becomes an exporter of pistachios.
B)  that country has a comparative advantage in producing pistachios.
C)  at the world price, the quantity of pistachios demanded in that country exceeds the quantity of pistachios supplied in that country.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 2

If a country is an exporter of a good, then it must be the case that

Accepted Answer

A)  the world price is less than its domestic price.
B)  consumer surplus is higher than a no trade situation.
C)  the world price is greater than its domestic price.
D)  they used an infant-industry argument to protect its producers.E) A) and B)
F) A) and C)

Question 3

For any country that allows free trade,

Accepted Answer

A)  domestic quantity demanded is equal to domestic quantity supplied at the world price.
B)  domestic quantity demanded is greater than domestic quantity supplied at the world price.
C)  both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported.
D)  the domestic price is equal to the world price.E) C) and D)
F) All of the above

Question 4

The price of a good that prevails in a world market is called the

Accepted Answer

A)  absolute price.
B)  relative price.
C)  comparative price.
D)  world price.E) A) and B)
F) B) and D)

Question 5

If the Korean steel industry subsidizes the steel that it sells to the United States, the

Accepted Answer

A)  United States should protect its domestic steel industry from this unfair competition.
B)  harm done to U.S. steel producers from this unfair competition exceeds the gain to U.S. consumers of cheap Korean steel.
C)  harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel.
D)  United States should subsidize the products it sells to Korea.E) B) and C)
F) A) and D)

Question 6

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

Accepted Answer

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

Question 7

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

Question 8

A country has a comparative advantage in a product if the world price is

Accepted Answer

A)  lower than that country's domestic price without trade.
B)  higher than that country's domestic price without trade.
C)  equal to that country's domestic price without trade.
D)  not subject to manipulation by organizations that govern international trade.E) B) and D)
F) A) and B)

Question 9

Figure 9-11 
-Refer to Figure 9-11. The change in total surplus in this market because of trade is

Accepted Answer

A)  A, and this area represents a loss of total surplus.
B)  B, and this area represents a gain in total surplus.
C)  C, and this area represents a loss of total surplus.
D)  D, and this area represents a gain in total surplus.E) B) and C)
F) A) and C)

Question 10

A tariff

Accepted Answer

A)  lowers the domestic price of the exported good below the world price.
B)  keeps the domestic price of the exported good the same as the world price.
C)  raises the domestic price of the imported good above the world price.
D)  lowers the domestic price of the imported good below the world price.E) A) and B)
F) B) and C)

Question 11

Trade raises the economic well-being of a nation in the sense that

Accepted Answer

A)  the gains of the winners exceed the losses of the losers.
B)  everyone in an economy gains from trade.
C)  since countries can choose what products to trade, they will pick those products that are most beneficial to society.
D)  the nation joins the international community when it begins to engage in trade.E) A) and B)
F) A) and C)

Question 12

Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches.
-Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches

Accepted Answer

A)  will be better off.
B)  will be worse off.
C)  will be unaffected.
D)  will experience a decrease in their collective producer surplus.E) B) and C)
F) None of the above

Question 13

Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8 million bottles per year, then we can conclude that

Accepted Answer

A)  the quantity of wine demanded by France, with the tariff, is 18 million bottles per year.
B)  the quantity of wine demanded by France, without the tariff, would be 24 million bottles per year.
C)  the amount of the deadweight loss is 24 million euros per year.
D)  the tariff causes French buyers of wine to pay 2 euros more per bottle than they would pay without the tariff.E) C) and D)
F) B) and D)

Question 14

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

Question 15

Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for cardboard is

QD=200−2PQ ^ { D } = 200 - 2 PQD=200−2P  ,
where  QDQ ^ { D }QD  represents the domestic quantity of cardboard demanded, in tons, and  PPP  represents the price of a ton of cardboard.For Boxland, the equation of the domestic supply curve for cardboard is

QS=−60+3PQ ^ { S } = - 60 + 3 PQS=−60+3P  ,
where  QsQ ^ { s }Qs  represents the domestic quantity of cardboard supplied, in tons, and  PPP  again represents the price of a ton of cardboard.
-Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then Boxland's gains from international trade in cardboard amount to

Accepted Answer

A)  $145.
B)  $160.
C)  $210.
D)  $320. E) C) and D)
F) A) and B)

Question 16

Figure 9-1
The figure illustrates the market for wool in Scotland. 
-Refer to Figure 9-1. When trade in wool is allowed, consumer surplus in Scotland

Accepted Answer

A)  increases by the area B + D.
B)  increases by the area C + F.
C)  decreases by the area B + D.
D)  decreases by the area D + G.E) B) and C)
F) A) and B)

Question 17

In principle, trade can make a nation better off, because the gains to the winners exceed the losses to the losers.

Accepted Answer

A) True 
 B)False

Question 18

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

Accepted Answer

A) True 
 B)False

Question 19

Suppose Haiti has an absolute advantage over other countries in producing oranges, but other countries have a comparative advantage over Haiti in producing oranges. If trade in oranges is allowed, Haiti

Accepted Answer

A)  will import oranges.
B)  will export oranges.
C)  will either export oranges or export oranges, but it is not clear from the given information.
D)  would have nothing to gain either from exporting or importing oranges.E) A) and B)
F) A) and C)

Question 20

Figure 9-3. The domestic country is China. 
-Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,

Accepted Answer

A)  Chinese producers of pencil sharpeners would become worse off.
B)  Chinese consumers of pencil sharpeners would become better off.
C)  total surplus in the Chinese economy would increase.
D)  All of the above are correct.E) B) and D)
F) C) and D)

Exam 9: Application: International Trade

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

Correct Answer
verified

If a country is an exporter of a good, then it must be the case that

Correct Answer
verified

Figure 9-11 -Refer to Figure 9-11. The change in total surplus in this market because of trade is

Correct Answer
verified

If the Korean steel industry subsidizes the steel that it sells to the United States, the

Correct Answer
verified

The price of a good that prevails in a world market is called the

Correct Answer
verified

For any country that allows free trade,

Correct Answer
verified

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

Correct Answer
verified

A country has a comparative advantage in a product if the world price is

Correct Answer
verified

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

Correct Answer
verified

In principle, trade can make a nation better off, because the gains to the winners exceed the losses to the losers.

Correct Answer
verified

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,

Correct Answer
verified

Trade raises the economic well-being of a nation in the sense that

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The infant-industry argument

Correct Answer
verified

Figure 9-1 The figure illustrates the market for wool in Scotland. -Refer to Figure 9-1. When trade in wool is allowed, consumer surplus in Scotland

Correct Answer
verified

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. -Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches

Correct Answer
verified

Suppose Haiti has an absolute advantage over other countries in producing oranges, but other countries have a comparative advantage over Haiti in producing oranges. If trade in oranges is allowed, Haiti

Correct Answer
verified

A tariff

Correct Answer
verified

Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8 million bottles per year, then we can conclude that

Correct Answer
verified

Exam 9: Application: International Trade

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

Correct AnswerverifiedShow Answer

If a country is an exporter of a good, then it must be the case that

Correct AnswerverifiedShow Answer

Figure 9-11 -Refer to Figure 9-11. The change in total surplus in this market because of trade is

Correct AnswerverifiedShow Answer

If the Korean steel industry subsidizes the steel that it sells to the United States, the

Correct AnswerverifiedShow Answer

The price of a good that prevails in a world market is called the

Correct AnswerverifiedShow Answer

For any country that allows free trade,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country has a comparative advantage in a product if the world price is

Correct AnswerverifiedShow Answer

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off.

Correct AnswerverifiedShow Answer

In principle, trade can make a nation better off, because the gains to the winners exceed the losses to the losers.

Correct AnswerverifiedShow Answer

Figure 9-3. The domestic country is China. -Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,

Correct AnswerverifiedShow Answer

Trade raises the economic well-being of a nation in the sense that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The infant-industry argument

Correct AnswerverifiedShow Answer

Figure 9-1 The figure illustrates the market for wool in Scotland. -Refer to Figure 9-1. When trade in wool is allowed, consumer surplus in Scotland

Correct AnswerverifiedShow Answer

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. -Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches

Correct AnswerverifiedShow Answer

Suppose Haiti has an absolute advantage over other countries in producing oranges, but other countries have a comparative advantage over Haiti in producing oranges. If trade in oranges is allowed, Haiti

Correct AnswerverifiedShow Answer

A tariff

Correct AnswerverifiedShow Answer

Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8 million bottles per year, then we can conclude that

Correct AnswerverifiedShow Answer

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