Question 1

By comparing the world price of pecans to India's domestic price of pecans, we can determine whether India

Accepted Answer

A)   will export pecans (assuming trade is allowed) .
B)   will import pecans (assuming trade is allowed) .
C)   has a comparative advantage in producing pecans.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 2

Figure 9-17 
-Refer to Figure 9-17. When the country moves from free trade to trade and a tariff, consumer surplus

Accepted Answer

A)   decreases by $576 and producer surplus does not change.
B)   decreases by $576 and producer surplus increases by $192.
C)   decreases by $792 and producer surplus does not change.
D)   decreases by $792 and producer surplus increases by $192.E) A) and C)
F) A) and B)

Question 3

Suppose Ecuador imposes a tariff on imported bananas. If the increase in producer surplus is $50 million, the reduction in consumer surplus is $150 million, and the deadweight loss of the tariff is $30 million, then the tariff generates $130 million in revenue for the government.

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

Question 5

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

Accepted Answer

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

Question 6

Figure 9-19. On the diagram below, Q represents the quantity of textiles and P represents the price of textiles. 
-Refer to Figure 9-19. With free trade, consumer surplus in the textile market amounts to

Accepted Answer

A)   $210.
B)   $320.
C)   $405.
D)   $910.E) C) and D)
F) None of the above

Question 7

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia

Accepted Answer

A)   should import coffee.
B)   has a comparative advantage in coffee and should export coffee.
C)   should produce just enough coffee to satisfy domestic demand.
D)   should produce no coffee domestically.E) B) and D)
F) B) and C)

Question 8

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. The horizontal line at the world price of tricycles represents the

Accepted Answer

A)   demand for tricycles from the rest of the world.
B)   supply of tricycles from the rest of the world.
C)   level of inefficiency in the domestic market caused by trade.
D)   surplus in the domestic tricycle market.E) C) and D)
F) B) and D)

Question 9

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

Accepted Answer

A) True 
 B)False

Question 10

Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. 
-Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,

Accepted Answer

A)   consumer surplus changes from the area A + B + D to the area A.
B)   producer surplus changes from the area C to the area B + C + D.
C)   total surplus decreases by the area D.
D)   All of the above are correct.E) B) and D)
F) C) and D)

Question 11

Figure 9-4. The domestic country is Nicaragua. 
-Refer to Figure 9-4. With trade, Nicaragua

Accepted Answer

A)   imports 150 calculators.
B)   imports 250 calculators.
C)   exports 100 calculators.
D)   exports 250 calculators.E) All of the above
F) A) and D)

Question 12

When a country takes a unilateral approach to free trade, it

Accepted Answer

A)   removes trade restrictions on its own.
B)   reduces its trade restrictions while other countries do the same.
C)   does not remove trade restrictions no matter what other countries do.
D)   is willing to trade with multiple countries at once.E) B) and C)
F) C) and D)

Question 13

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

Accepted Answer

A)   that country becomes an exporter of pistachios.
B)   that country has a comparative advantage in producing pistachios.
C)   at the world price, the quantity of pistachios demanded in that country exceeds the quantity of pistachios supplied in that country.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

Figure 9-15 
-Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity demanded are

Accepted Answer

A)   P1 and Q1.
B)   P1 and Q4.
C)   P2 and Q2.
D)   P2 and Q3.E) B) and C)
F) A) and C)

Question 15

Suppose in the country of Jumanji that the price of wheat with no trade allowed is above the world price of wheat. If Jumanji allows free trade, will Jumanji be an importer or an exporter of wheat?

Accepted Answer

Jumanji wi...

Question 16

If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be

Accepted Answer

A)   better off no matter how Honduras responds.
B)   better off if Honduras gives in, and will be no worse off if it doesn't.
C)   worse off if Honduras doesn't give in to the threat.
D)   worse off no matter how Honduras responds.E) None of the above
F) All of the above

Question 17

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

Accepted Answer

A) True 
 B)False

Question 18

If a country is an exporter of a good, then it must be the case that

Accepted Answer

A)   the world price is less than its domestic price.
B)   consumer surplus is higher than a no trade situation.
C)   the world price is greater than its domestic price.
D)   they used an infant-industry argument to protect its producers.E) A) and B)
F) C) and D)

Question 19

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is

Accepted Answer

A)   $30.
B)   $90.
C)   $110.
D)   $140.E) B) and C)
F) C) and D)

Question 20

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. If this country allows free trade in tricycles,

Accepted Answer

A)   consumers will gain and producers will lose.
B)   consumers will lose and producers will gain.
C)   both consumers and producers will gain.
D)   both consumers and producers will lose.E) A) and C)
F) A) and D)

Exam 9: Application: International Trade

Free trade allows firms to realize economies of scale, resulting in higher costs of production.

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Figure 9-19. On the diagram below, Q represents the quantity of textiles and P represents the price of textiles. -Refer to Figure 9-19. With free trade, consumer surplus in the textile market amounts to

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Suppose in the country of Jumanji that the price of wheat with no trade allowed is above the world price of wheat. If Jumanji allows free trade, will Jumanji be an importer or an exporter of wheat?

Correct AnswerverifiedJumanji wi...View AnswerShow Answer

If the world price of coffee is higher than Colombia's domestic price of coffee without trade, then Colombia

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Figure 9-15 -Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity demanded are

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Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

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

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Figure 9-17 -Refer to Figure 9-17. When the country moves from free trade to trade and a tariff, consumer surplus

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Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is

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If a country is an exporter of a good, then it must be the case that

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Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil. -Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,

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Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. The horizontal line at the world price of tricycles represents the

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Figure 9-4. The domestic country is Nicaragua. -Refer to Figure 9-4. With trade, Nicaragua

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If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. If this country allows free trade in tricycles,

Correct AnswerverifiedShow Answer

When a country takes a unilateral approach to free trade, it

Correct AnswerverifiedShow Answer

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

Correct AnswerverifiedShow Answer

By comparing the world price of pecans to India's domestic price of pecans, we can determine whether India

Correct AnswerverifiedShow Answer

Suppose Ecuador imposes a tariff on imported bananas. If the increase in producer surplus is $50 million, the reduction in consumer surplus is $150 million, and the deadweight loss of the tariff is $30 million, then the tariff generates $130 million in revenue for the government.

Correct AnswerverifiedShow Answer

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Jumanji wi...
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