Question 1

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 2

The General Agreement on Tariffs and Trade (GATT)  was initiated in response to

Accepted Answer

A)   in increase in exports of low-priced goods from developing countries to developed countries.
B)   the replacement of manufacturing jobs with service jobs in developed countries.
C)   economic dislocations caused by the North American Free Trade Agreement (NAFT
A)   in the 1990s.
D)   high tariffs imposed during the Great Depression of the 1930s.E) A) and D)
F) A) and C)

Question 3

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. At the world price and with free trade,

Accepted Answer

A)   the domestic quantity of calculators demanded is greater than the domestic quantity of calculators supplied.
B)   the calculator market is in equilibrium.
C)   the domestic demand for calculators is perfectly inelastic.
D)   both domestic producers of calculators and domestic consumers of calculators are better off than they were without free trade.E) B) and D)
F) B) and C)

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) C) and D)

Question 5

Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit. 
-Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much is the deadweight loss caused by the tariff?

Accepted Answer

The deadwe...

Question 6

Assume, for Japan, that the domestic price of automobiles without international trade is lower than the world price of automobiles. This suggests that, in the production of automobiles,

Accepted Answer

A)   Japan has a comparative advantage over other countries and Japan will import automobiles.
B)   Japan has a comparative advantage over other countries and Japan will export automobiles.
C)   other countries have a comparative advantage over Japan and Japan will import automobiles.
D)   other countries have a comparative advantage over Japan and Japan will export automobiles.E) All of the above
F) B) and D)

Question 7

Figure 9-20
The figure illustrates the market for rice in Vietnam. 
-Refer to Figure 9-20. From the figure it is apparent that

Accepted Answer

A)   Vietnam has a comparative advantage in producing rice, relative to the rest of the world.
B)   foreign countries have a comparative advantage in producing rice, relative to Vietnam.
C)   Vietnam has an absolute advantage in producing rice, relative to the rest of the world.
D)   foreign countries have an absolute advantage in producing rice, relative to Vietnam.E) B) and D)
F) A) and B)

Question 8

The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese.

Accepted Answer

A) True 
 B)False

Question 9

An import quota

Accepted Answer

A)   is preferable to a tariff since an import quota does not create a deadweight loss.
B)   is a tax on imported goods.
C)   reduces the welfare of domestic consumers.
D)   reduces the welfare of domestic producers.E) A) and B)
F) C) and D)

Question 10

The nation of Farmland forbids international trade. In Farmland, you can exchange 1 pound of beef for 2 pounds of pepper. In other countries, you can exchange 1 pound of beef for 4 pounds of pepper. These facts indicate that

Accepted Answer

A)   Farmland has a comparative advantage, relative to other countries, in producing beef.
B)   other countries have an absolute advantage, relative to Farmland, in producing beef.
C)   the price of beef in Farmland exceeds the world price of beef.
D)   if Farmland were to allow trade, it would export pepper.E) A) and D)
F) B) and C)

Question 11

Figure 9-12 
-Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are

Accepted Answer

A)   1,200 and 800.
B)   1,600 and 800.
C)   800 and 1,200.
D)   800 and 1,600.E) B) and C)
F) All of the above

Question 12

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 C)
F) A) and B)

Question 13

Assume, for Vietnam, that the domestic price of textiles without international trade is lower than the world price of textiles. This suggests that, in the production of textiles,

Accepted Answer

A)   Vietnam has a comparative advantage over other countries and Vietnam will import textiles.
B)   Vietnam has a comparative advantage over other countries and Vietnam will export textiles.
C)   other countries have a comparative advantage over Vietnam and Vietnam will import textiles.
D)   other countries have a comparative advantage over Vietnam and Vietnam will export textiles.E) A) and C)
F) A) and B)

Question 14

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?

Accepted Answer

A)   The price of paper in Republica decreased as a result of the policy change.
B)   Republica began exporting paper as a result of the policy change.
C)   The domestic demand curve for paper shifted to the right as a result of the policy change.
D)   The domestic quantity of paper demanded increased as a result of the policy change.E) A) and C)
F) A) and B)

Question 15

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. With trade and a tariff, total surplus is

Accepted Answer

A)   $750.
B)   $900.
C)   $950.
D)   $1,550.E) A) and C)
F) B) and D)

Question 16

A tariff is a

Accepted Answer

A)   limit on how much of a good can be exported.
B)   limit on how much of a good can be imported.
C)   tax on an exported good.
D)   tax on an imported good.E) A) and B)
F) None of the above

Question 17

Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that

Accepted Answer

A)   Ireland has a comparative advantage relative to the United States in producing pineapples, and China has a comparative advantage relative to Ireland in producing beer.
B)   Ireland has a comparative advantage relative to China in producing beer, and the United States has a comparative advantage relative to Ireland in producing pineapples.
C)   Ireland has an absolute advantage relative to the United States in producing pineapples, and China has an absolute advantage relative to Ireland in producing beer.
D)   Ireland has an absolute advantage relative to China in producing beer, and the United States has an absolute advantage relative to Ireland in producing pineapples.E) A) and D)
F) B) and D)

Question 18

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. Suppose Isoland changes from a no-trade policy to a policy that allows international trade. If the world price of peaches is $5, then the policy change results in

Accepted Answer

A)   a decrease in consumer surplus.
B)   an increase in producer surplus.
C)   an increase in total surplus.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 19

Most economists support the infant-industry argument because it is so easy to implement in practice.

Accepted Answer

A) True 
 B)False

Question 20

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

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) B) and D)

Exam 9: Application: International Trade

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

Correct Answer
verified

A tariff is a

Correct Answer
verified

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. With trade and a tariff, total surplus is

Correct Answer
verified

Figure 9-12 -Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are

Correct Answer
verified

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 Answer
verified

Most economists support the infant-industry argument because it is so easy to implement in practice.

Correct Answer
verified

Assume, for Japan, that the domestic price of automobiles without international trade is lower than the world price of automobiles. This suggests that, in the production of automobiles,

Correct Answer
verified

The nation of Farmland forbids international trade. In Farmland, you can exchange 1 pound of beef for 2 pounds of pepper. In other countries, you can exchange 1 pound of beef for 4 pounds of pepper. These facts indicate that

Correct Answer
verified

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 Answer
verified

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Correct Answer
verified

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. At the world price and with free trade,

Correct Answer
verified

Correct Answer
verified

The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese.

Correct Answer
verified

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?

Correct Answer
verified

Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that

Correct Answer
verified

An import quota

Correct Answer
verified

Correct Answer
verified
The deadwe...
View Answer

Figure 9-20 The figure illustrates the market for rice in Vietnam. -Refer to Figure 9-20. From the figure it is apparent that

Correct Answer
verified

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

Correct Answer
verified

Assume, for Vietnam, that the domestic price of textiles without international trade is lower than the world price of textiles. This suggests that, in the production of textiles,

Correct Answer
verified

Exam 9: Application: International Trade

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

Correct AnswerverifiedShow Answer

A tariff is a

Correct AnswerverifiedShow Answer

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. With trade and a tariff, total surplus is

Correct AnswerverifiedShow Answer

Figure 9-12 -Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are

Correct AnswerverifiedShow 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

Most economists support the infant-industry argument because it is so easy to implement in practice.

Correct AnswerverifiedShow Answer

Assume, for Japan, that the domestic price of automobiles without international trade is lower than the world price of automobiles. This suggests that, in the production of automobiles,

Correct AnswerverifiedShow Answer

The nation of Farmland forbids international trade. In Farmland, you can exchange 1 pound of beef for 2 pounds of pepper. In other countries, you can exchange 1 pound of beef for 4 pounds of pepper. These facts indicate 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.

Correct AnswerverifiedShow Answer

The General Agreement on Tariffs and Trade (GATT) was initiated in response to

Correct AnswerverifiedShow Answer

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. At the world price and with free trade,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese.

Correct AnswerverifiedShow Answer

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?

Correct AnswerverifiedShow Answer

Suppose Ireland exports beer to China and imports pineapples from the United States. This situation suggests that

Correct AnswerverifiedShow Answer

An import quota

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

Figure 9-20 The figure illustrates the market for rice in Vietnam. -Refer to Figure 9-20. From the figure it is apparent that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume, for Vietnam, that the domestic price of textiles without international trade is lower than the world price of textiles. This suggests that, in the production of textiles,

Correct AnswerverifiedShow Answer

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The deadwe...
View Answer

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