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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. 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 A) $30,000. B) $66,000. C) $96,000. D) $120,000. -Refer to Figure 9-22. With free trade, total surplus is


A) $30,000.
B) $66,000.
C) $96,000.
D) $120,000.

E) A) and B)
F) B) and C)

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

A) True
B) False

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


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

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​When a country opens up to trade in a good for which it has a comparative advantage, and the country begins to export the good, we can conclude that


A) ​the domestic price will fall after trade opens up.
B) ​both buyers and sellers in that country will be better off as a consequence of opening up the market to international trade.
C) ​the total surplus for this good will increase as a result of opening up the market to international trade.
D) ​opening the market to international trade will create a deadweight loss.

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

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

A) True
B) False

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After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,


A) the domestic price of coffee will be greater than the world price of coffee.
B) the domestic price of coffee will be lower than the world price of coffee.
C) the domestic price of coffee will equal the world price of coffee.
D) The world price of coffee does not matter; the domestic price of coffee prevails.

E) A) and C)
F) B) and C)

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Deadweight loss measures the decrease in total surplus that results from a tariff or quota.

A) True
B) False

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Figure 9-27 The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit. Figure 9-27 The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-27. With no trade allowed, what are the equilibrium price and equilibrium quantity in this market? -Refer to Figure 9-27. With no trade allowed, what are the equilibrium price and equilibrium quantity in this market?

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The equilibrium pric...

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


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) A) and B)
F) A) and C)

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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. 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 a A) $25 decrease in consumer surplus. B) $20 increase in consumer surplus. C) $25 decrease in producer surplus. D) $20 increase in producer surplus. -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 a


A) $25 decrease in consumer surplus.
B) $20 increase in consumer surplus.
C) $25 decrease in producer surplus.
D) $20 increase in producer surplus.

E) B) and D)
F) All of the above

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Figure 9-20 The figure illustrates the market for rice in Vietnam. Figure 9-20 The figure illustrates the market for rice in Vietnam. -Refer to Figure 9-20. With trade, Vietnam will A) export 1,000 units of rice. B) export 1,500 units of rice. C) import 1,000 units of rice. D) import 1,500 units of rice. -Refer to Figure 9-20. With trade, Vietnam will


A) export 1,000 units of rice.
B) export 1,500 units of rice.
C) import 1,000 units of rice.
D) import 1,500 units of rice.

E) A) and C)
F) All of the above

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Economists feel that national security concerns never provide a legitimate rationale for trade restrictions.

A) True
B) False

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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,


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 D)
F) A) and B)

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


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 D)
F) A) and B)

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When a country that imports a particular good imposes a tariff on that good,


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

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Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. Figure 9-26 The following diagram shows the domestic demand and domestic supply curves in a market. -Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free trade, will the country import or export this good, and how many units will be imported/exported? -Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free trade, will the country import or export this good, and how many units will be imported/exported?

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The countr...

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Figure 9-27 The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit. Figure 9-27 The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-27. If the country allows free trade, will the country import or export this good, and how many units will be imported/exported? -Refer to Figure 9-27. If the country allows free trade, will the country import or export this good, and how many units will be imported/exported?

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With trade...

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Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8 million bottles per year, then we can conclude that


A) the quantity of wine demanded by France, with the tariff, is 18 million bottles per year.
B) the quantity of wine demanded by France, without the tariff, would be 24 million bottles per year.
C) the amount of the deadweight loss is 24 million euros per year.
D) the tariff causes French buyers of wine to pay 2 euros more per bottle than they would pay without the tariff.

E) A) and C)
F) A) and B)

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How does an import quota differ from an equivalent tariff?

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Both the import quota and the tariff rai...

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Figure 9-3. The domestic country is China. Figure 9-3. The domestic country is China. -Refer to Figure 9-3. Relative to a no-trade situation, which of the following comes with trade? A) Consumer surplus increases by $1,800 and producer surplus increases by $1,600. B) Consumer surplus decreases by $1,000 and producer surplus increases by $1,500. C) Consumer surplus decreases by $1,000 and producer surplus increases by $1,750. D) Total surplus increases by $400. -Refer to Figure 9-3. Relative to a no-trade situation, which of the following comes with trade?


A) Consumer surplus increases by $1,800 and producer surplus increases by $1,600.
B) Consumer surplus decreases by $1,000 and producer surplus increases by $1,500.
C) Consumer surplus decreases by $1,000 and producer surplus increases by $1,750.
D) Total surplus increases by $400.

E) A) and B)
F) A) and C)

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