ECON FINAL EXAM PART V

3. A tax on an imported good is called a a. quota. b. tariff. c. supply tax. d. trade tax.

b

39. Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a $3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the tariff, a. Turkish consumers of wheat become worse off and Turkish producers of wheat become worse off. b. Turkish consumers of wheat become worse off and Turkish producers of wheat become better off. c. Turkish consumers of wheat become better off and Turkish producers of wheat become worse off. d. Turkish consumers of wheat become better off and Turkish producers of wheat become better off.

b

40. A quota is a. a tax placed on imports. b. a limit on the quantity of imports. c. a tax on exports to other countries. d. an excess of exports over imports.

b

2. Patterns of trade among nations are primarily determined by a. cultural considerations. b. political considerations. c. comparative advantage. d. differences in the income elasticity of demand among nations.

c

11. When a country allows trade and becomes an exporter of a good, a. domestic producers gain and domestic consumers lose. b. domestic producers lose and domestic consumers gain. c. domestic producers and domestic consumers both gain. d. domestic producers and domestic consumers both lose.

a

23. Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began a. importing televisions and the price of a television in Paraguay decreased to $300. b. importing televisions and the price of a television in Paraguay remained at $350. c. exporting televisions and the price of a television in Paraguay decreased to $300. d. exporting televisions and the price of a television in Paraguay remained at $350.

a

38. When a country moves away from a free trade position and imposes a tariff on imports, it causes a. a decrease in total surplus in the market. b. a decrease in producer surplus in the market. c. an increase in consumer surplus in the market. d. a decrease in revenue to the government.

a

42. When the nation of Isoland opens up its steel market to international trade, that change a. creates winners and losers, regardless of whether Isoland ends up exporting or importing steel. b. results in a decrease in total surplus, regardless of whether Isoland ends up exporting or importing steel. c. creates winners, but no losers, if Isoland ends up exporting steel. d. creates losers, but no winners, if Isoland ends up importing steel.

a

6. For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should a. export copper, since that country has a comparative advantage in copper. b. import copper, since that country has a comparative advantage in copper. c. neither export nor import copper, since that country cannot gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

a

7. 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 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.

a

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. 26. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States a. will increase, and this will cause consumer surplus to decrease. b. will decrease, and this will cause consumer surplus to increase. c. will be unaffected, and consumer surplus will be unaffected as well. d. could increase or decrease or be unaffected; this cannot be determined.

a

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. 27. Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches a. will be better off. b. will be worse off. c. will be unaffected. d. will experience a decrease in their collective producer surplus.

a

41. Import quotas and tariffs produce similar results. Which of the following is not one of those results? a. The domestic price of the good increases. b. Consumer surplus of domestic consumers increases. c. Producer surplus of domestic producers increases. d. A deadweight loss is experienced by the domestic country.

b

49. At present, the United States uses a system of quotas to limit the amount of sugar imported into the country. Which of the following statements is most likely true? a. The quotas are probably the result of lobbying from U.S. consumers of sugar. The quotas increase consumer surplus for the United States, reduce producer surplus for the United States, and harm foreign sugar producers. b. The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas increase producer surplus for the United States, reduce consumer surplus for the United States, and harm foreign sugar producers. c. The quotas are probably the result of lobbying from foreign producers of sugar. The quotas reduce producer surplus for the United States, increase consumer surplus for the United States, and benefit foreign sugar producers. d. U.S. lawmakers did not need to be lobbied to impose the quotas because total surplus for the United States is higher with the quotas than without them.

b

5. For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should a. export copper. b. import copper. c. neither export nor import copper, since that country cannot gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

b

8. Suppose Japan exports cars to Russia and imports wine from France. This situation suggests a. Japan has a comparative advantage relative to France in producing wine, and Russia has a comparative advantage to Japan in producing cars. b. Japan has a comparative advantage relative to Russia in producing cars, and France has a comparative advantage relative to Japan in producing wine. c. Japan has an absolute advantage relative to Russia in producing cars, and France has an absolute advantage relative to Japan in producing wine. d. Japan has an absolute advantage relative to France in producing wine, and Russia has an absolute advantage relative to Japan in producing cars.

b

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. 24. Refer to Scenario 9-1. If trade in peaches is allowed, the United States a. will become an importer of peaches. b. will become an exporter of peaches. c. may become either an importer or an exporter of peaches, but this cannot be determined. d. will experience increases in both consumer surplus and producer surplus.

b

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. 25. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States a. will be greater than the world price. b. will be equal to the world price. c. will be less than the world price. d. could be greater than, equal to, or less than the world price; this cannot be determined.

b

10. When a country allows trade and becomes an importer of a good, a. both domestic producers and domestic consumers become better off. b. domestic producers become better off, and domestic consumers become worse off. c. domestic producers become worse off, and domestic consumers become better off. d. both domestic producers and domestic consumers become worse off.

c

48. Most economists view the United States' experience with trade as a. one from which no firm conclusions about the virtues of free trade can be reached, due to the relatively short history of international trade in the U.S. b. one from which no firm conclusions about the virtues of free trade can be reached, due to the lack of trade within the U.S. throughout most of the early history of the U.S. c. an ongoing experiment that confirms the virtues of free trade. d. an ongoing experiment that calls into serious question the notion that free trade enhances the economic well-being of a nation.

c

50. Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to a. cause these factories to pay the U.S. minimum wage. b. increase the rate of technological advance in poor countries so that they can afford to pay higher wages. c. increase poverty in poor countries and benefit U.S. firms which compete with these imports. d. harm U.S. firms which compete with these imports.

c

1. What is the fundamental basis for trade among nations? a. shortages or surpluses in nations that do not trade b. misguided economic policies c. absolute advantage d. comparative advantage

d

4. The price of sugar that prevails in international markets is called the a. export price of sugar. b. import price of sugar. c. comparative-advantage price of sugar. d. world price of sugar.

d

9. The nation of Isolani forbids international trade. In Isolani, you can exchange 1 car for 5 motorcycles. In other countries, you can exchange 1 car for 4 motorcycles. These facts indicate that a. other countries have an absolute advantage, relative to Isolani, in producing cars. b. Isolani has a comparative advantage, relative to other countries, in producing cars. c. if Isolani were to allow trade, it would import motorcycles. d. the world price of motorcycles exceeds the price of motorcycles in Isolani.

d

Scenario 9-1 The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches is $52 per bushel. The U.S. is a price-taker in the market for peaches. 28. Refer to Scenario 9-1. If trade in peaches is allowed, the a. price paid by American consumers of peaches is unchanged relative to the no-trade situation. b. total well-being of American producers of peaches is diminished relative to the no-trade situation. c. total well-being of American consumers of peaches is enhanced relative to the no-trade situation. d. total well-being of the United States is enhanced relative to the no-trade situation.

d