Question 1

A logical starting point from which the study of international trade begins is

Accepted Answer

A)  the recognition that not all markets are competitive.
B)  the recognition that government intervention in markets sometimes enhances the economic welfare of the society.
C)  the principle of absolute advantage.
D)  the principle of comparative advantage.E) A) and D)
F) A) and C)

Question 2

A common argument in favor of restricting trade

Accepted Answer

A)  concerns the strategy of bargaining.
B)  is that efforts should be made to get new industries started.
C)  emphasizes the belief that all countries should play by the same rules.
D)  All of the above are correct.E) A) and B)
F) B) and C)

Question 3

In a December 2007 New York Times column, Paul Krugman noted that

Accepted Answer

A)  it is difficult to find instances of trade between high-wage countries in the modern era.
B)  it is difficult to find instances of trade between high-wage countries and low-wage countries in the modern era.
C)  the United States now imports more oil and other raw materials from other advanced countries than from the third world.
D)  the United States now imports more manufactured goods from the third world than from other advanced countries.E) B) and C)
F) All of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 deadweight loss created by the tariff is represented by the area

Accepted Answer

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

Question 6

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

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

Question 7

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) B) and C)

Question 8

The before-trade price of fish in Germany is $8.00 per pound. The world price of fish is $6.00 per pound. Germany is a price-taker in the fish market. If Germany allows trade in fish, then Germany will become an

Accepted Answer

A)  importer of fish and the price of fish in Germany will be $6.00.
B)  importer of fish and the price of fish in Germany will be $8.00.
C)  exporter of fish and the price of fish in Germany will be $6.00.
D)  exporter of fish and the price of fish in Germany will be $8.00.E) B) and C)
F) All of the above

Question 9

If a country allows free trade and imports cars, then it is the case that the gains to domestic producers outweigh the losses to domestic consumers.

Accepted Answer

A) True 
 B)False

Question 10

Suppose Guatemala has an absolute advantage over other countries in producing sugar, but other countries have a comparative advantage over Guatemala in producing sugar. If trade in sugar is allowed, Guatemala

Accepted Answer

A)  will import sugar.
B)  will export sugar.
C)  will either export sugar or export sugar, but it is not clear from the given information.
D)  would have nothing to gain either from exporting or importing sugar.E) B) and D)
F) A) and B)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results from a tariff is represented on the supply-and-demand graph by

Accepted Answer

A)  the area of one triangle.
B)  the area of one rectangle.
C)  the combined areas of two different triangles.
D)  the combined areas of two different rectangles.E) A) and D)
F) A) and C)

Question 13

Which of the following is the most accurate statement?

Accepted Answer

A)  Protection is necessary in order for young industries to grow up and be successful.
B)  Protection is not necessary for an industry to grow.
C)  Protection is necessary because if young industries are not protected, they may suffer losses.
D)  Protection may not always be necessary for infant industries, but it has proven to be useful in most cases.E) B) and D)
F) All of the above

Question 14

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

Accepted Answer

A)  domestic producers of the good become better off.
B)  domestic consumers of the good become worse off.
C)  the gains of the winners exceed the losses of the losers.
D)  All of the above are correct.E) B) and C)
F) A) and C)

Question 15

Economists view free trade as a way to raise living standards both at home and abroad.

Accepted Answer

A) True 
 B)False

Question 16

Figure 9-6 
-Refer to Figure 9-6. When the tariff is imposed, domestic consumers

Accepted Answer

A)  lose by $500.
B)  lose by $900.
C)  gain by $500.
D)  gain by $900.E) A) and B)
F) None of the above

Question 17

Figure 9-1
The figure illustrates the market for wool in Scotland. 
-Refer to Figure 9-1. When trade is allowed,

Accepted Answer

A)  Scotland producers of wool become better off and Scotland consumers of wool become worse off.
B)  Scotland consumers of wool become better off and Scotland producers of wool become worse off.
C)  both Scotland producers and consumers of wool become better off.
D)  both Scotland producers and consumers of wool become worse off.E) B) and D)
F) None of the above

Question 18

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

Accepted Answer

A)  national-security argument.
B)  infant-industry argument.
C)  unfair competition argument.
D)  protection-as-a-bargaining chip-argument.E) B) and C)
F) A) and C)

Question 19

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

Accepted Answer

A)  the country will be an exporter of the good.
B)  the country will be an importer of the good.
C)  the country will be neither an exporter nor an importer of the good.
D)  Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.E) C) and D)
F) A) and B)

Question 20

Chile allows trade with the rest of the world. We know that Chile has a comparative advantage in producing lemons if we know that

Accepted Answer

A)  Chile imports lemons.
B)  the world price of lemons is higher than the price of lemons that would prevail in Chile if trade with other countries were not allowed.
C)  consumer surplus in Chile would exceed producer surplus in Chile if trade with other countries were not allowed.
D)  All of the above are correct.E) A) and B)
F) B) and C)

Exam 9: Application: International Trade

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

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Chile allows trade with the rest of the world. We know that Chile has a comparative advantage in producing lemons if we know that

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Figure 9-6 -Refer to Figure 9-6. When the tariff is imposed, domestic consumers

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Economists view free trade as a way to raise living standards both at home and abroad.

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

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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 deadweight loss created by the tariff is represented by the area

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If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results from a tariff is represented on the supply-and-demand graph by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A common argument in favor of restricting trade

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Suppose Guatemala has an absolute advantage over other countries in producing sugar, but other countries have a comparative advantage over Guatemala in producing sugar. If trade in sugar is allowed, Guatemala

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

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In a December 2007 New York Times column, Paul Krugman noted that

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

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If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

Correct AnswerverifiedShow Answer

If a country allows free trade and imports cars, then it is the case that the gains to domestic producers outweigh the losses to domestic consumers.

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The before-trade price of fish in Germany is $8.00 per pound. The world price of fish is $6.00 per pound. Germany is a price-taker in the fish market. If Germany allows trade in fish, then Germany will become an

Correct AnswerverifiedShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

A logical starting point from which the study of international trade begins is

Correct AnswerverifiedShow Answer

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

Correct AnswerverifiedShow Answer

Figure 9-1 The figure illustrates the market for wool in Scotland. -Refer to Figure 9-1. When trade is allowed,

Correct AnswerverifiedShow Answer

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