Question 1

When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer 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.E) A) and B)
F) A) and C)

Question 2

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  domestic producers become better off, and domestic consumers become worse off.
B)  domestic producers become worse off, and domestic consumers become better off.
C)  domestic consumers become better off, but the effect on the well-being of domestic producers is ambiguous.
D)  domestic producers become worse off, but the effect on the well-being of domestic consumers is ambiguous.E) None of the above
F) A) and B)

Question 4

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. 
-Refer to Figure 9-8. In the country for which the figure is drawn, total surplus with international trade in cars

Accepted Answer

A)  is represented by the area A + B + C.
B)  is represented by the area A + B + D.
C)  is smaller than producer surplus without international trade in cars.
D)  is larger than total surplus without international trade in cars.E) B) and C)
F) All of the above

Question 5

How does an import quota differ from an equivalent tariff?

Accepted Answer

Both the import quota and the tariff rai...

Question 6

Figure 9-12 
-Refer to Figure 9-12. Equilibrium price and equilibrium quantity without trade are

Accepted Answer

A)  $27 and 400.
B)  $27 and 800.
C)  $21 and 400.
D)  $21 and 600.E) B) and C)
F) All of the above

Question 7

Figure 9-17 
-Refer to Figure 9-17. With free trade, consumer surplus is

Accepted Answer

A)  $400 and producer surplus is $200.
B)  $400 and producer surplus is $800.
C)  $1,600 and producer surplus is $200.
D)  $1,600 and producer surplus is $800.E) A) and C)
F) None of the above

Question 8

Figure 9-2 
-Refer to Figure 9-2. With free trade, this country will

Accepted Answer

A)  import 40 baskets.
B)  import 70 baskets.
C)  export 35 baskets.
D)  export 65 baskets.E) C) and D)
F) A) and B)

Question 9

A tariff increases the quantity of imports and moves the market farther from its equilibrium without trade.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  domestic producers become better off, and domestic consumers become worse off.
B)  domestic producers become worse off, and domestic consumers become better off.
C)  domestic producers become better off, but the effect on the well-being of domestic consumers is ambiguous.
D)  domestic consumers become worse off, but the effect on the well-being of domestic producers is ambiguous.E) A) and B)
F) All of the above

Question 11

When the nation of Isoland opens up its steel market to international trade, that change

Accepted Answer

A)  creates winners and losers, regardless of whether Isoland ends up exporting or importing steel.
B)  results in a decrease in total surplus, regardless of whether Isoland ends up exporting or importing steel.
C)  creates winners, but no losers, if Isoland ends up exporting steel.
D)  creates losers, but no winners, if Isoland ends up importing steel.E) A) and D)
F) B) and D)

Question 12

Figure 9-6 
-Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals

Accepted Answer

A)  $100.
B)  $200.
C)  $400.
D)  $500.E) None of the above
F) B) and C)

Question 13

Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain imposes a $5 tariff on chips. As a result,

Accepted Answer

A)  Spanish consumers of chips and Spanish producers of chips both gain.
B)  Spanish consumers of chips gain and Spanish producers of chips lose.
C)  Spanish consumers of chips lose and Spanish producers of chips gain.
D)  Spanish consumers of chips and Spanish producers of chips both lose.E) A) and B)
F) B) and C)

Question 14

By comparing the world price of horseradish to Cropland's domestic price of horseradish, we can determine whether Cropland

Accepted Answer

A)  will export horseradish (assuming trade is allowed) .
B)  will import horseradish (assuming trade is allowed) .
C)  has a comparative advantage in producing horseradish.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 15

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 incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new free-trade policy has

Accepted Answer

A)  increased consumer surplus and producer surplus in the incense market.
B)  increased consumer surplus in the steel market and left producer surplus in the rug market unchanged.
C)  decreased consumer surplus in both the steel and rug markets.
D)  decreased consumer surplus in the steel market and increased total surplus in the incense market.E) A) and C)
F) A) and B)

Question 16

Figure 9-1
The figure illustrates the market for wool in Scotland. 
-Refer to Figure 9-1. From the figure it is apparent that

Accepted Answer

A)  Scotland will experience a shortage of wool if trade is not allowed.
B)  Scotland will experience a surplus of wool if trade is not allowed.
C)  Scotland has a comparative advantage in producing wool, relative to the rest of the world.
D)  foreign countries have a comparative advantage in producing wool, relative to Scotland.E) B) and C)
F) All of the above

Question 17

Figure 9-5 
-Refer to Figure 9-5. The increase in total surplus resulting from trade is

Accepted Answer

A)  $60, since producer surplus increases by $180 and consumer surplus falls by $240.
B)  $60, since consumer surplus increases by $180 and producer surplus falls by $240.
C)  $75, since consumer surplus increases by $240 and producer surplus falls by $165.
D)  $75, since consumer surplus increases by $300 and producer surplus falls by $225.E) A) and B)
F) C) and D)

Question 18

Within a country, the domestic price of a product will equal the world price if

Accepted Answer

A)  trade restrictions are imposed on the product.
B)  the country allows free trade.
C)  the country chooses to import, but not export, the product.
D)  the country chooses to export, but not import, the product.E) All of the above
F) B) and C)

Question 19

When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country

Accepted Answer

A)  cannot experience significant gains or losses by trading with other countries.
B)  cannot have a significant comparative advantage over other countries.
C)  cannot affect world prices by trading with other countries.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 20

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

Accepted Answer

A)  producer surplus increases and total surplus increases in the market for that good.
B)  producer surplus increases and total surplus decreases in the market for that good.
C)  producer surplus decreases and total surplus increases in the market for that good.
D)  producer surplus decreases and total surplus decreases in the market for that good.E) B) and C)
F) All of the above

Exam 9: Application: International Trade

Within a country, the domestic price of a product will equal the world price if

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When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country

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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 incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new free-trade policy has

Correct AnswerverifiedShow Answer

When the nation of Isoland opens up its steel market to international trade, that change

Correct AnswerverifiedShow Answer

Figure 9-12 -Refer to Figure 9-12. Equilibrium price and equilibrium quantity without trade are

Correct AnswerverifiedShow Answer

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

By comparing the world price of horseradish to Cropland's domestic price of horseradish, we can determine whether Cropland

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When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

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

Correct AnswerverifiedShow Answer

Figure 9-2 -Refer to Figure 9-2. With free trade, this country will

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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

Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain imposes a $5 tariff on chips. As a result,

Correct AnswerverifiedShow Answer

Figure 9-6 -Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals

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

Correct AnswerverifiedShow Answer

Figure 9-5 -Refer to Figure 9-5. The increase in total surplus resulting from trade is

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Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. -Refer to Figure 9-8. In the country for which the figure is drawn, total surplus with international trade in cars

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Figure 9-17 -Refer to Figure 9-17. With free trade, consumer surplus is

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A tariff increases the quantity of imports and moves the market farther from its equilibrium without trade.

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Figure 9-1 The figure illustrates the market for wool in Scotland. -Refer to Figure 9-1. From the figure it is apparent that

Correct AnswerverifiedShow Answer

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Both the import quota and the tariff rai...
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