Question 1

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

Question 2

Economists view the fact that Florida grows oranges,Texas pumps oil,and California makes wine as

Accepted Answer

A)  confirmation of the virtues of free trade.
B)  confirmation of the infant-industry argument.
C)  confirmation that free trade agreements are not necessary.
D)  confirmation that specialization in absolute advantage works.E) A) and B)
F) A) and C)

Question 3

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) None of the above
F) B) and C)

Question 4

A quota is

Accepted Answer

A)  a tax placed on imports.
B)  a limit on the quantity of imports.
C)  a tax on exports to other countries.
D)  an excess of exports over imports.E) None of the above
F) A) and B)

Question 5

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

Question 6

Some goods can be produced at low cost only if they are produced in large quantities.This phenomenon is called

Accepted Answer

A)  marginal cost of production.
B)  marginal benefit of size.
C)  economies of scale.
D)  economies of production.E) A) and D)
F) A) and C)

Question 7

If a country's domestic price of a good is lower than the world price,then that country has a comparative advantage in producing that good.

Accepted Answer

A) True 
 B)False

Question 8

If a tariff is placed on watches,the price of both domestic and imported watches will rise by the amount of the tariff.

Accepted Answer

A) True 
 B)False

Question 9

The principle of comparative advantage asserts that

Accepted Answer

A)  not all countries can benefit from trade with other countries.
B)  the world price of a good will prevail in all countries,regardless of whether those countries allow international trade in that good.
C)  countries can become better off by exporting goods,but they cannot become better off by importing goods.
D)  countries can become better off by specializing in what they do best.E) None of the above
F) All of the above

Question 10

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) A) and B)
F) B) and D)

Question 11

Figure 9-15

-Refer to Figure 9-15.For the saddle market,area E represents

Accepted Answer

A)  government's revenue from the tariff.
B)  producer surplus after the tariff becomes effective.
C)  the decrease in consumer surplus,relative to the free-trade situation,as a result of the tariff.
D)  the decrease in total surplus,relative to the free-trade situation,as a result of the tariff.E) A) and B)
F) B) and D)

Question 12

Free trade allows firms to realize economies of scale,resulting in higher costs of production.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.

Accepted Answer

A) True 
 B)False

Question 15

The history of the textile industry raises important questions for economic policy.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 tariff

Accepted Answer

A)  decreases producer surplus by the area C,decreases consumer surplus by the area C + D + E,and decreases total surplus by the area D + F.
B)  increases producer surplus by the area C,decreases consumer surplus by the area C + D + E + F,and decreases total surplus by the area D + F.
C)  creates government revenue represented by the area B + E and decreases total surplus by the area D + E + F.
D)  increases producer surplus by the area C + G and creates government revenue represented by the area D + E + F.E) All of the above
F) B) and C)

Question 18

In analyzing the gains and losses from international trade,to say that Moldova is a small country is to say that

Accepted Answer

A)  Moldova can only import goods; it cannot export goods.
B)  Moldova's choice of which goods to export and which goods to import is not based on the principle of comparative advantage.
C)  only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
D)  Moldova is a price taker.E) A) and C)
F) A) and B)

Question 19

Domestic producers of a good become better off,and domestic consumers of a good become worse off,when a country begins allowing international trade in that good and

Accepted Answer

A)  the country becomes an importer of the good as a result.
B)  the world price exceeds the domestic price of the good that prevailed before international trade was allowed.
C)  other countries have a comparative advantage,relative to the country in question,in producing the good.
D)  total surplus does not change as a result.E) C) and D)
F) All of the above

Question 20

Domestic producers of a good become worse off,and domestic consumers of a good become better off,when a country begins allowing international trade in that good and

Accepted Answer

A)  the country becomes an importer of the good as a result.
B)  the world price exceeds the domestic price of the good that prevailed before international trade was allowed.
C)  the country in question has a comparative advantage,relative to other countries,in producing the good.
D)  total surplus does not change as a result.E) B) and C)
F) A) and D)

Exam 9: Application: International Trade

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

The principle of comparative advantage asserts that

Correct AnswerverifiedShow Answer

Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

Economists view the fact that Florida grows oranges,Texas pumps oil,and California makes wine as

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In analyzing the gains and losses from international trade,to say that Moldova is a small country is to say that

Correct AnswerverifiedShow Answer

Free trade allows firms to realize economies of scale,resulting in higher costs of production.

Correct AnswerverifiedShow Answer

If a tariff is placed on watches,the price of both domestic and imported watches will rise by the amount of the tariff.

Correct AnswerverifiedShow Answer

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

Domestic producers of a good become better off,and domestic consumers of a good become worse off,when a country begins allowing international trade in that good and

Correct AnswerverifiedShow Answer

A quota is

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 tariff

Correct AnswerverifiedShow Answer

If a country's domestic price of a good is lower than the world price,then that country has a comparative advantage in producing that good.

Correct AnswerverifiedShow Answer

Figure 9-15 -Refer to Figure 9-15.For the saddle market,area E represents

Correct AnswerverifiedShow Answer

Domestic producers of a good become worse off,and domestic consumers of a good become better off,when a country begins allowing international trade in that good and

Correct AnswerverifiedShow Answer

Some goods can be produced at low cost only if they are produced in large quantities.This phenomenon is called

Correct AnswerverifiedShow Answer

The history of the textile industry raises important questions for economic policy.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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