Microeconomics quiz 9

Economists feel that national security concerns never provide a legitimate rationale for trade restrictions. True or False?

False

For Country A, the world price of soybeans exceeds the domestic equilibrium price of soybeans. As a result, international trade allows buyers of soybeans in Country A to experience greater consumer surplus than they otherwise would experience. True or False?

False

​Imposing a tariff on the import of a good is preferable to a quota because a tariff produces revenue for the government, while a quota never produces any revenue for a government. True or False?

False

A multilateral approach to free trade has greater potential to increase the gains from trade than a unilateral approach, because the multilateral approach can reduce trade restrictions abroad as well as at home. True or False?

True

A tariff increases the quantity of imports and moves the market farther from its equilibrium without trade. True or False?

false

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

false

GATT is an example of a successful unilateral approach to achieving free trade.

false

If Honduras were to subsidize the production of wool blankets and sell them in Sweden at artificially low prices, the Swedish economy would be worse off.

false

​Imposing a quota on the import of a good is preferable to a tariff because a tariff creates a deadweight loss while a quota does not.

false

​Since a tariff can increase employment in an industry, the result is a net increase in total surplus.

false

​There are only increases in total surplus when a country exports a good, since more units of the country's output of that good are produced.

false

According to the principle of comparative advantage, all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

true

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

true

For Country A, the world price of textiles exceeds the domestic equilibrium price of textiles. As a result, international trade allows sellers of textiles in Country A to experience greater producer surplus than they otherwise would experience.

true

​We can conclude that international trade is beneficial because, regardless of whether the country imports or exports a good, the overall increase in well-being outweighs the losses associated with trade.

true