Question 1

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

Question 2

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. Suppose the government imposes a tariff of $20 per unit. With trade and a tariff, consumer surplus is

Accepted Answer

A)  $75,000 and producer surplus is $27,000.
B)  $63,000 and producer surplus is $12,000.
C)  $75,000 and producer surplus is $12,000.
D)  $63,000 and producer surplus is $27,000.E) B) and D)
F) B) and C)

Question 3

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 4

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Accepted Answer

A)  other countries have a comparative advantage over Colombia in producing coffee.
B)  Colombia has an absolute advantage over other countries in producing coffee.
C)  Colombia will export coffee if international trade is allowed.
D)  Colombian coffee buyers will become worse off if international trade is allowed.E) B) and D)
F) B) and C)

Question 5

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala

Accepted Answer

A)  increases by the area B + D.
B)  increases by the area B + D + G.
C)  decreases by the area C + F.
D)  decreases by the area G.E) None of the above
F) All of the above

Question 6

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 7

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) A) and D)
F) A) and C)

Question 8

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) A) and C)
F) A) and D)

Question 9

When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation in the sense that

Accepted Answer

A)  both producers of automobiles and consumers of automobiles in that nation became better off as a result.
B)  the gains to automobile producers in that nation exceeded the losses of the automobile consumers in that nation.
C)  the gains to automobile consumers in that nation exceeded the losses of the automobile producers in that nation.
D)  even though total surplus in that nation decreased, it was still true that consumer surplus and producer surplus increased.E) C) and D)
F) B) and D)

Question 10

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, this country will

Accepted Answer

A)  import 50 calculators.
B)  import 100 calculators.
C)  export 50 calculators.
D)  export 100 calculators.E) C) and D)
F) None of the above

Question 11

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

Accepted Answer

A)  the losses of the domestic producers of coal exceed the gains of the domestic consumers of coal.
B)  the losses of the domestic consumers of coal exceed the gains of the domestic producers of coal.
C)  the gains of the domestic producers of coal exceed the losses of the domestic consumers of coal.
D)  the gains of the domestic consumers of coal exceed the losses of the domestic producers of coal.E) A) and B)
F) B) and D)

Question 12

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1. With trade, Guatemala will

Accepted Answer

A)  export 22 units of coffee.
B)  export 10 units of coffee.
C)  import 30 units of coffee.
D)  import 12 units of coffee.E) None of the above
F) A) and D)

Question 13

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 14

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. Without trade, the equilibrium price of roses is

Accepted Answer

A)  $4 and the equilibrium quantity is 300.
B)  $3 and the equilibrium quantity is 200.
C)  $3 and the equilibrium quantity is 400.
D)  $2 and the equilibrium quantity is 500.E) A) and C)
F) B) and D)

Question 15

Figure 9-23
The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit. 
-Refer to Figure 9-23. With free trade allowed, this country

Accepted Answer

A)  exports 5 units of the good.
B)  imports 5 units of the good.
C)  exports 13 units of the good.
D)  imports 13 units of the good.E) B) and C)
F) A) and D)

Question 16

Figure 9-10. The figure applies to Mexico and the good is rifles. 0 and Q0. B) P1 and Q1. C) P2 and Q2. D) P1 and Q0." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 9-10. The price and quantity of rifles in Mexico before trade is

Accepted Answer

A)  P0 and Q0.
B)  P1 and Q1.
C)  P2 and Q2.
D)  P1 and Q0.E) A) and B)
F) A) and C)

Question 17

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

Question 18

Figure 9-12 
-Refer to Figure 9-12. With trade allowed, this country

Accepted Answer

A)  exports 400 units of the good.
B)  exports 800 units of the good.
C)  imports 400 units of the good.
D)  exports 1,600 units of the good.E) B) and D)
F) A) and D)

Question 19

Which of the following is not an important question for economic policy raised by the experience of the textile industry?

Accepted Answer

A)  How does international trade affect consumer well-being?
B)  Who gains and who loses from free trade among countries?
C)  How do the gains from trade compare to the losses?
D)  Which argument for restricting free trade is politically feasible?E) None of the above
F) A) and B)

Question 20

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) B) and D)

Exam 9: Application: International Trade

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

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

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

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Figure 9-12 -Refer to Figure 9-12. With trade allowed, this country

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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. Suppose the government imposes a tariff of $20 per unit. With trade and a tariff, consumer surplus is

Correct AnswerverifiedShow Answer

Which of the following is not an important question for economic policy raised by the experience of the textile industry?

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

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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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Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. With trade, Guatemala will

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

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Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. Without trade, the equilibrium price of roses is

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

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Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, this country will

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Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala

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

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Figure 9-23 The following diagram shows the domestic demand and domestic supply for a market. Assume that the world price in this market is $120 per unit. -Refer to Figure 9-23. With free trade allowed, this country

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When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation in the sense that

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Figure 9-10. The figure applies to Mexico and the good is rifles. -Refer to Figure 9-10. The price and quantity of rifles in Mexico before trade is

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Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

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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.

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