Question 1

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 2

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

Accepted Answer

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

Question 3

When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experienced a decrease in producer surplus of $5 million and total surplus in Mooseland's sugar market increased by $2 million. We can conclude that

Accepted Answer

A)  Mooseland became an exporter of sugar.
B)  the overall economic well-being of participants in the sugar market in Mooseland fell because of trade.
C)  consumer surplus in Mooseland increased by $7 million.
D)  the opening of trade caused the domestic demand curve for sugar in Mooseland to shift to the right.E) A) and D)
F) All of the above

Question 4

Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. 
-Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The deadweight loss caused by the tariff is

Accepted Answer

A)  $25.
B)  $50.
C)  $75.
D)  $100.E) C) and D)
F) All of the above

Question 5

Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. 
-Refer to Figure 9-24. With free trade, total surplus is

Accepted Answer

A)  $500.
B)  $800.
C)  $1,000.
D)  $1,300.E) A) and C)
F) A) and D)

Question 6

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. Without trade, consumer surplus is

Accepted Answer

A)  $423.
B)  $845.
C)  $1,690.
D)  $3,380.E) A) and B)
F) B) and C)

Question 7

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

Accepted Answer

A)  Guatemala will export coffee if trade is allowed.
B)  Guatemala will import coffee if trade is allowed.
C)  Guatemala has nothing to gain either by importing or exporting coffee.
D)  the world price will fall if Guatemala begins to allow its citizens to trade with other countries.E) C) and D)
F) B) and D)

Question 8

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 9

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 10

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, domestic production and domestic consumption, respectively, are

Accepted Answer

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

Question 11

Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade

Accepted Answer

A)  can realize economies of scale more fully.
B)  have greater market power.
C)  experience larger producer surplus.
D)  All of the above are correct.E) C) and D)
F) A) and C)

Question 12

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

Question 13

Suppose the world price of coffee is $3 per pound and Brazil's domestic price of coffee without trade is $2 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

Accepted Answer

Brazil wil...

Question 14

Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Accepted Answer

A unilateral approach is when a country ...

Question 15

Figure 9-17 
-Refer to Figure 9-17. With free trade, the country imports

Accepted Answer

A)  16 units of the good.
B)  24 units of the good.
C)  60 units of the good.
D)  64 units of the good.E) A) and B)
F) None of the above

Question 16

Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

Accepted Answer

A)  if Canada were to allow trade, it would export hockey sticks.
B)  Canada has an absolute advantage, relative to other countries, in producing hockey sticks.
C)  Canada has a comparative advantage, relative to other countries, in producing baseball bats.
D)  All of the above are correct.E) A) and B)
F) A) and D)

Question 17

Refer to Figure 9-16. The tariff

Accepted Answer

A)  decreases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F.
B)  decreases producer surplus by the area C + D and decreases consumer surplus by the area D + E + F.
C)  increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F.
D)  increases producer surplus by the area B + C and decrease consumer surplus by the area D + E + F.E) C) and D)
F) B) and C)

Question 18

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

Question 19

Figure 9-22
The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. 
-Refer to Figure 9-22. With free trade, total surplus is

Accepted Answer

A)  $30,000.
B)  $66,000.
C)  $96,000.
D)  $120,000.E) B) and C)
F) All of the above

Question 20

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 if the world price of peaches is $3, then

Accepted Answer

A)  Isoland has a comparative advantage, relative to other countries, in producing peaches.
B)  Isoland will export peaches.
C)  producer surplus with trade exceeds producer surplus without trade.
D)  consumer surplus with trade exceeds consumer surplus without trade.E) B) and C)
F) C) and D)

Exam 9: Application: International Trade

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, domestic production and domestic consumption, respectively, are

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Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an advantage over the other?

Correct AnswerverifiedA unilateral approach is when a country ...View AnswerShow Answer

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 if the world price of peaches is $3, then

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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 rice, exporting steel, and neither importing nor exporting TVs. We can conclude that producer surplus in Aquilonia is now

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Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. In the absence of trade, total surplus in Guatemala is represented by the area

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Figure 9-24 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The deadweight loss caused by the tariff is

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Suppose the world price of coffee is $3 per pound and Brazil's domestic price of coffee without trade is $2 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of coffee?

Correct AnswerverifiedBrazil wil...View AnswerShow Answer

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

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.

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Suppose the nation of Canada forbids international trade. In Canada, you can obtain a hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey stick by trading 8 baseball bats. These facts indicate that

Correct AnswerverifiedShow Answer

Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage in free trade

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 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. -Refer to Figure 9-22. With free trade, total surplus is

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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?

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Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. Without trade, consumer surplus is

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Figure 9-17 -Refer to Figure 9-17. With free trade, the country imports

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Figure 9-24 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-24. With free trade, total surplus is

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When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experienced a decrease in producer surplus of $5 million and total surplus in Mooseland's sugar market increased by $2 million. We can conclude that

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Refer to Figure 9-16. The tariff

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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.

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A unilateral approach is when a country ...
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Brazil wil...
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