Question 1

If a country allows trade and the domestic price of a good is lower than the world price:

Accepted Answer

A)  the country will become an exporter of the good.
B)  the country will become an importer of the good
C)  the country will neither export nor import the good
D)  additional information about demand is needed to determine whether the country will export or import the goodE) A) and B)
F) B) and C)

Question 2

Graph 9-7 
-According to Graph 9-7, how many units of this product would be exported after trade is allowed?

Accepted Answer

A)  400
B)  800
C)  2400
D)  2800E) All of the above
F) A) and D)

Question 3

Graph 9-8 
-According to Graph 9-8, consumer surplus after trade would be:

Accepted Answer

A)  $3600
B)  $5400
C)  $7200
D)  $8100E) A) and C)
F) All of the above

Question 4

A tariff and an import quota will both:

Accepted Answer

A)  increase the quantity of imports and raise domestic price
B)  increase the quantity of imports and lower domestic price
C)  reduce the quantity of imports and raise domestic price
D)  reduce the quantity of imports and lower domestic priceE) B) and C)
F) All of the above

Question 5

Comparative advantage refers to:

Accepted Answer

A)  a situation where the relative price of a domestic good is the same in two countries
B)  one country's ability to control domestic and world prices
C)  the situation where one country can produce a good relatively more cheaply than another country
D)  a situation where there is increased competition due to tradeE) A) and B)
F) A) and C)

Question 6

Graph 9-9 
-In Graph 9-9, the domestic price and quantity demanded after the tariff would be:

Accepted Answer

A)  P₁, Q₁
B)  P₁, Q₄
C)  P₂, Q₂
D)  P₂, Q₃E) B) and C)
F) A) and D)

Question 7

If the cost of producing wool in New Zealand is higher than in China but New Zealand exports wool to China, it is likely that:

Accepted Answer

A)  New Zealand has a comparative advantage in producing cameras and China has a comparative advantage in producing wool.
B)  New Zealand has an absolute advantage in producing wool and China has a comparative advantage in producing cameras.
C)  New Zealand and China would both be better off if they each produced wool and cameras.
D)  New Zealand subsidises the production of wool.E) B) and C)
F) C) and D)

Question 8

Graph 9-7 
-According to Graph 9-7, producer surplus before trade would be:

Accepted Answer

A)  $8000
B)  $9600
C)  $16 000
D)  $19 200E) B) and C)
F) B) and D)

Question 9

Suppose a country becomes more open to trade and imports increase.This means that:

Accepted Answer

A)  everyone in the country benefits from trade
B)  the losses of the losers is less than the gains of the winners
C)  the losses of the losers exceed the gains of the winners
D)  everyone in the country loses from the tradeE) None of the above
F) A) and B)

Question 10

If a tariff is placed on clocks, the price of both domestic and imported clocks will rise by the amount of the tariff.

Accepted Answer

A) True 
 B)False

Question 11

Policymakers in Australia are increasingly considering trade restrictions in order to protect domestic producers from foreign competitors.

Accepted Answer

A) True 
 B)False

Question 12

Import quotas and tariffs both cause the quantity of imports to fall.

Accepted Answer

A) True 
 B)False

Question 13

Benefits from free trade include increased variety of goods and increased competition.

Accepted Answer

A) True 
 B)False  True

Question 14

Free trade causes job losses in industries in which a country does not have a comparative advantage but it also causes job gains in industries in which the country has a comparative advantage.

Accepted Answer

A) True 
 B)False  True

Question 15

The Closer Economic Relations agreement between New Zealand and Australia is designed to ensure both Australia and New Zealand can exercise their own comparative advantage.

Accepted Answer

A) True 
 B)False

Question 16

When Ford and General Motors import automobile parts from Mexico at prices below those they must pay in the US:

Accepted Answer

A)  workers who assemble Ford and General Motors vehicles become worse off
B)  US consumers, taken as a group, become worse off
C)  Mexican consumers, taken as a group, become worse off
D)  American companies that manufacture automobile parts become worse offE) B) and C)
F) B) and D)

Question 17

When resources devoted to lobbying are included in the analysis of restrictions to international trade:

Accepted Answer

A)  deadweight losses may increase.
B)  deadweight losses from fall
C)  the welfare of domestic consumers will increase
D)  domestic prices will equal world pricesE) None of the above
F) B) and C)

Question 18

An import quota increases domestic producer surplus and the surplus of import licence holders, reduces domestic consumer surplus, and creates deadweight loss.

Accepted Answer

A) True 
 B)False

Question 19

Graph 9-7 
-According to Graph 9-7, producer surplus after trade would be:

Accepted Answer

A)  $21 600
B)  $25 200
C)  $43 200
D)  $50 400E) C) and D)
F) B) and C) B

Question 20

A tariff is a:

Accepted Answer

A)  tax imposed on imported goods
B)  tax imposed on exported goods
C)  a quantitative limit on imported goods
D)  policy to encourage more tradeE) B) and C)
F) A) and D)

Exam 9: Application: International Trade

If a country allows trade and the domestic price of a good is lower than the world price:

Correct AnswerverifiedShow Answer

Graph 9-7 -According to Graph 9-7, how many units of this product would be exported after trade is allowed?

Correct AnswerverifiedShow Answer

Graph 9-8 -According to Graph 9-8, consumer surplus after trade would be:

Correct AnswerverifiedShow Answer

A tariff and an import quota will both:

Correct AnswerverifiedShow Answer

Comparative advantage refers to:

Correct AnswerverifiedShow Answer

Graph 9-9 -In Graph 9-9, the domestic price and quantity demanded after the tariff would be:

Correct AnswerverifiedShow Answer

If the cost of producing wool in New Zealand is higher than in China but New Zealand exports wool to China, it is likely that:

Correct AnswerverifiedShow Answer

Graph 9-7 -According to Graph 9-7, producer surplus before trade would be:

Correct AnswerverifiedShow Answer

Suppose a country becomes more open to trade and imports increase.This means that:

Correct AnswerverifiedShow Answer

If a tariff is placed on clocks, the price of both domestic and imported clocks will rise by the amount of the tariff.

Correct AnswerverifiedShow Answer

Policymakers in Australia are increasingly considering trade restrictions in order to protect domestic producers from foreign competitors.

Correct AnswerverifiedShow Answer

Import quotas and tariffs both cause the quantity of imports to fall.

Correct AnswerverifiedShow Answer

Benefits from free trade include increased variety of goods and increased competition.

Correct AnswerverifiedTrue

Free trade causes job losses in industries in which a country does not have a comparative advantage but it also causes job gains in industries in which the country has a comparative advantage.

Correct AnswerverifiedTrue

The Closer Economic Relations agreement between New Zealand and Australia is designed to ensure both Australia and New Zealand can exercise their own comparative advantage.

Correct AnswerverifiedShow Answer

When Ford and General Motors import automobile parts from Mexico at prices below those they must pay in the US:

Correct AnswerverifiedShow Answer

When resources devoted to lobbying are included in the analysis of restrictions to international trade:

Correct AnswerverifiedShow Answer

An import quota increases domestic producer surplus and the surplus of import licence holders, reduces domestic consumer surplus, and creates deadweight loss.

Correct AnswerverifiedShow Answer

Graph 9-7 -According to Graph 9-7, producer surplus after trade would be:

Correct AnswerverifiedB

A tariff is a:

Correct AnswerverifiedShow Answer

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