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Chapter 9 Application: International Trade

Test A
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When the United States engages in international trade with China, a. it is an equal tradeoff so neither country benefits nor loses. b. China reaps economic benefits and the United States loses. c. both China and the United States reap economic benefits. d. China loses and the United States reaps economic benefits. ANSW !" c. both China and the United States reap economic benefits. #$% " & ' $1" C ()* C#+, " 1 !AN-(&" $
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Countries usually impose restrictions on free foreign trade to protect a. domestic consumers. b. foreign consumers. c. foreign producers. d. domestic producers. ANSW !" d. domestic producers. #$% " & ' $1" - S C#+(N" 1 ()* C#+, " 1 !AN-(&" $
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+f a country allows trade and the domestic price of a good is higher than the world price, a. the country will become an importer of the good. b. the country will become an e0porter of the good. c. the country will neither e0port nor import the good. d. additional information about demand is needed to determine whether the country will e0port or import the good. ANSW !" a. the country will become an importer of the good. #$% " & ' $1" C S C#+(N" 1 ()* C#+, " 1 !AN-(&" $
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A country has a comparati2e ad2antage in a product if the world price is a. equal to its domestic price. b. higher than its domestic price. c. lower than its domestic price. d. #here is no way to tell by comparing the world price with the domestic price. ANSW !" b. higher than its domestic price. #$% " & ' $1" - S C#+(N" 1 ()* C#+, " 1 !AN-(&" $
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When a country allows trade and becomes an e0porter of a good, a. both domestic producers and domestic consumers are better off. b. both domestic producers and domestic consumers are worse off. c. domestic producers are better off, and domestic consumers are worse off. d. domestic producers are worse off, and domestic consumers are better off. ANSW !" c. domestic producers are better off, and domestic consumers are worse off. #$% " & ' $1" - S C#+(N" . ()* C#+, " . !AN-(&" $

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When a country allows trade and becomes an importer of a good, a. e2eryone in the country benefits. b. e2eryone in the country loses. c. the losses of the losers e0ceed the gains of the winners. d. the gains of the winners e0ceed the losses of the losers. ANSW !" d. the gains of the winners e0ceed the losses of the losers. #$% " & ' $1" - S C#+(N" . ()* C#+, " . !AN-(&" $
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When a country allows free trade, a. the domestic price will equal the world price. b. the domestic price will be lower than the world price. c. the domestic price will be greater than the world price. d. it does not matter what the world price is, the domestic price is the pre2ailing price. ANSW !" a. the domestic price will equal the world price. #$% " & ' $1" - S C#+(N" . ()* C#+, " . !AN-(&" $ #he before:trade domestic price of pineapple in the United States is ;3<< per ton. #he world price of pineapple is ;7<< per ton. #he United States is a price:ta=er in the pineapple mar=et.
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According to this scenario, if trade in pineapple is allowed, the price of pineapple in the United States a. will decrease. b. will increase. c. will be unaffected. d. could increase or decrease. ANSW !" b. will increase. #$% " & ' $1" # S C#+(N" . ()* C#+, " . +NS#!UC#+(N" 1 !AN-(&" $
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According to this scenario, if trade in pineapple is allowed, total well:being in the United States a. will decrease. b. will increase. c. will be unaffected. d. could increase or decrease. ANSW !" b. will increase. #$% " & ' $1" # S C#+(N" . ()* C#+, " . +NS#!UC#+(N" 1 !AN-(&" $

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According to the graph, Argentina would a. e0port ?/ @ ?1 saddles. b. e0port ?. @ ?1 saddles. c. import ?/ @ ?1 saddles. d. import ?/ @ ?. saddles. ANSW !" a. e0port ?/ @ ?1 saddles. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" > !AN-(&" $
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According to the graph, consumer surplus in Argentina after trade is equal to a. A. b. C. c. A C ). d. A C ) C -. ANSW !" a. A. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" > !AN-(&" $
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According to the graph, the change in total surplus in Argentina because of trade is equal to a. B. b. A C ). c. ) C -. d. - C . ANSW !" a. B. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" > !AN-(&" $

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According to the graph, Spain would a. e0port ?/ @ ?1 barrels of oil. b. e0port ?. @ ?1 barrels of oil. c. import ?/ @ ?1 barrels of oil. d. import ?/ @ ?. barrels of oil. ANSW !" c. import ?/ @ ?1 barrels of oil. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" 1 !AN-(&" $
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According to the graph, producer surplus in Spain after trade would be equal to a. C. b. C C ). c. A C ) C C. d. ) C C C - C . ANSW !" a. C. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" 1 !AN-(&" N
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According to the graph, producer surplus plus consumer surplus in Spain after trade is equal to a. A C ). b. A C ) C C. c. ) C C C -. d. A C ) C C C - C . ANSW !" d. A C ) C C C - C . #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" 1 !AN-(&" N
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A tariff on a product ma=es domestic sellers a. better off and domestic buyers better off. b. worse off and domestic buyers better off. c. better off and domestic buyers worse off. d. worse off and domestic buyers worse off. ANSW !" c. better off and domestic buyers worse off. #$% " & ' $1" - S C#+(N" . ()* C#+, " 1 !AN-(&" $ #he United States is an importer of down pillows. #he world price of these pillows is ;.3. #he United States imposes a ;1< tariff on pillows. #he United States is a price:ta=er in the pillow mar=et.

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As a result of the tariff the U.S. price of pillows will be a. ;.3 and the quantity of pillows purchased will increase. b. ;/3 and the quantity of pillows purchased will increase. c. ;.3 and the quantity of pillows purchased will decrease. d. ;/3 and the quantity of pillows purchased will decrease. ANSW !" d. ;/3 and the quantity of pillows purchased will decrease. #$% " & ' $1" S C#+(N" . ()* C#+, " 1 +NS#!UC#+(N" . !AN-(&" N

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+n the figure shown, consumer surplus after the tariff would be equal to a. A. b. A C ). c. A C C C A. d. A C ) C C C - C C B. ANSW !" b. A C ). #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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+n the figure shown, as a result of the tariff, go2ernment tariff re2enue would be equal to a. ). b. . c. - C B. d. ) C - C C B. ANSW !" b. . #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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When a quota is imposed on a mar=et the a. supply cur2e Dabo2e the world priceE shifts to the left by the amount of the quota. b. supply cur2e Dabo2e the world priceE shifts to the right by the amount of the quota. c. demand cur2e Dabo2e the world priceE shifts to the right by the amount of the quota. d. demand cur2e Dabo2e the world priceE shifts to the left by the amount of the quota. ANSW !" b. supply cur2e Dabo2e the world priceE shifts to the right by the amount of the quota. #$% " & ' $1" - S C#+(N" . ()* C#+, " 1 !AN-(&" $
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A tariff and an import quota will both 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 lower domestic price. d. reduce the quantity of imports and raise domestic price. ANSW !" d. reduce the quantity of imports and raise domestic price. #$% " & ' $1" - S C#+(N" . ()* C#+, " 1 !AN-(&" $

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+n the figure shown, after the quota, imports would be equal to a. ?1 minus ?1. b. ?/ minus ?.. c. ?/ minus ?.. d. ?. minus ?1. ANSW !" b. ?/ minus ?.. #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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+n the figure shown, after the quota, deadweight loss would be equal to a. ). b. . c. - C B. d. ) C - C C B. ANSW !" c. - C B. #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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Which of the following is N(# an argument for restricting tradeF a. the Gobs argument b. the efficiency argument c. the infant:industry argument d. the national security argument ANSW !" b. the efficiency argument #$% " & ' $1" - S C#+(N" / ()* C#+, " 3 !AN-(&" $
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#he North American Bree #rade Agreement a. increased trade restrictions among Canada, &e0ico and the United States. b. reduced trade restrictions among Canada, &e0ico and the United States. c. eliminated tariffs on imports to North America from the rest of the world. d. reduced trade restrictions among uropean countries. ANSW !" b. reduced trade restrictions among Canada, &e0ico and the United States. #$% " & ' $1" - S C#+(N" / ()* C#+, " 3 !AN-(&" $

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ANSW !" c. both China and the United States reap economic benefits. #$% " & ' $1" C ()* C#+, " 1 !AN-(&" $
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ANSW !" d. domestic producers. #$% " & ' $1" - S C#+(N" 1 ()* C#+, " 1 !AN-(&" $
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ANSW !" a. the country will become an importer of the good. #$% " & ' $1" C S C#+(N" 1 ()* C#+, " 1 !AN-(&" $
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ANSW !" b. higher than its domestic price. #$% " & ' $1" - S C#+(N" 1 ()* C#+, " 1 !AN-(&" $
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ANSW !" c. domestic producers are better off, and domestic consumers are worse off. #$% " & ' $1" - S C#+(N" . ()* C#+, " . !AN-(&" $
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ANSW !" d. the gains of the winners e0ceed the losses of the losers. #$% " & ' $1" - S C#+(N" . ()* C#+, " . !AN-(&" $
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ANSW !" a. the domestic price will equal the world price. #$% " & ' $1" - S C#+(N" . ()* C#+, " . !AN-(&" $
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ANSW !" b. will increase. #$% " & ' $1" # S C#+(N" . ()* C#+, " . +NS#!UC#+(N" 1 !AN-(&" $
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ANSW !" b. will increase. #$% " & ' $1" # S C#+(N" . ()* C#+, " . +NS#!UC#+(N" 1 !AN-(&" $
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ANSW !" a. e0port ?/ @ ?1 saddles. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" > !AN-(&" $
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ANSW !" a. A. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" > !AN-(&" $
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ANSW !" a. B. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" > !AN-(&" $
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ANSW !" c. import ?/ @ ?1 barrels of oil. #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" 1 !AN-(&" $
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ANSW !" a. C.

#$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" 1 !AN-(&" N
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ANSW !" d. A C ) C C C - C . #$% " & ' $1" A S C#+(N" . ()* C#+, " / A!A%5 B(!&A#" & ?U S#+(N A!A%5" +NS#!UC#+(N" 1 !AN-(&" N
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ANSW !" c. better:off and domestic buyers worse:off. #$% " & ' $1" - S C#+(N" . ()* C#+, " 1 !AN-(&" $
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#$% " & ' $1"


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ANSW !" d. ;/3 and the quantity of pillows purchased will decrease. S C#+(N" . ()* C#+, " 1 +NS#!UC#+(N" . !AN-(&" N

ANSW !" b. A C ). #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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ANSW !" b. . #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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ANSW !" b. supply cur2e Dabo2e the world priceE shifts to the right by the amount of the quota. #$% " & ' $1" - S C#+(N" . ()* C#+, " 1 !AN-(&" $
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ANSW !" d. reduce the quantity of imports and raise domestic price. #$% " & ' $1" - S C#+(N" . ()* C#+, " 1 !AN-(&" $
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ANSW !" b. ?/ minus ?.. #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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ANSW !" c. - C B. #$% " & ' $1" A S C#+(N" . ()* C#+, " 1 A!A%5 B(!&A#" & ?U S#+(N A!A%5" !AN-(&" $
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ANSW !" b. the efficiency argument #$% " & ' $1" - S C#+(N" / ()* C#+, " 3 !AN-(&" $
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ANSW !" b. reduced trade restrictions among Canada, &e0ico and the United States. #$% " & ' $1" - S C#+(N" / ()* C#+, " 3 !AN-(&" $