Monetary Review

69. If S = 1P represents a country's home supply curve and D = 100 - 1P represents its home demand curve, then the equilibrium price and quantity in autarky are: A) $100 and 0 units. B) $50 and 50 units. C) $0 and 100 units. D) $75 and 25 units.

.B) $50 and 50 units.

17. An export subsidy has a similar effect as a tariff for a small nation. What is the effect of an export subsidy for a large nation? A) Losses are greater for the large nation than for the small nation because of the cost of the subsidy to the home government. B) Losses are lower for the large nation than for the small nation. C) It is beneficial for the large nation but not for the small nation. D) It is beneficial for consumers but harmful for firms in the large nation

A) Losses are greater for the large nation than for the small nation because of the cost of the subsidy to the home government.

8. Suppose that the world price of sugar is $100 per ton. If a small country gives its sugar exporters a subsidy of $50 per ton, then its exporters will receive: A) $150 per ton. B) $50 per ton. C) $100 per ton. D) first $150 per ton, then $100 per ton.

A) $150 per ton.

72. Suppose that the equations S = 2P and D = 6 - P represent a small country's home supply and home demand curves. Which of the following is the equilibrium price in autarky? A) $2 B) $4 C) $6 D) $8

A) $2

70. If S = 1P represents a country's home supply curve and D = 100 - 1P represents its home demand curve, then the equation representing its import demand curve is: A) 100 - 2P. B) 50-1P. C) 100 - 1P. D) 50-2P.

A) 100 - 2P.

133. (Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. What is its profit-maximizing output level? A) 5 B) 6 C) 7 D) 8

A) 5

43. Which of the following was an important reason why the United States did NOT sign the Kyoto Protocol? A) It believed that exemptions for some of its major developingcountry trading partners (such as China and India) were unfair. B) It believed that Europe's targets were set ridiculously low. C) It believed that pollution does not cause global warming. D) It believed that targets for some of its major developing-country trading partners (such as China and India) were too low.

A) It believed that exemptions for some of its major developingcountry trading partners (such as China and India) were unfair.

17. An export subsidy has a similar effect as a tariff for a small nation. What is the effect of an export subsidy for a large nation? A) Losses are greater for the large nation than for the small nation because of the cost of the subsidy to the home government. B) Losses are lower for the large nation than for the small nation. C) It is beneficial for the large nation but not for the small nation. D) It is beneficial for consumers but harmful for firms in the large nation.

A) Losses are greater for the large nation than for the small nation because of the cost of the subsidy to the home government.

33. Which of the following regional trade agreements is a free-trade area? A) NAFTA B) the European Union C) Mercosur D) NATO

A) NAFTA

36. In which form of regional trading agreements are rules of origin required? A) a free-trade area B) a customs union C) a common market D) an economic union

A) a free-trade area

51. A small country in international trade faces: A) a perfectly elastic world supply curve. B) a perfectly inelastic world supply curve. C) a perfectly elastic world demand curve. D) a perfectly inelastic world demand curve.

A) a perfectly elastic world supply curve.

101. If a large country imposes a tariff: A) its economic welfare may increase. B) its economic welfare must always fall. C) its economic welfare will increase if its deadweight losses exceed gains from its terms-of-trade effect. D) the tariff will have the same impact as an identical tariff imposed by a small country.

A) its economic welfare may increase.

136. A monopoly firm will sell ________output and charge a ________ price than a perfectly competitive firm. A) less; higher B) more; higher C) more; lower D) less; lower

A) less; higher

37. As of May 2016, Republican and Democratic Presidential candidates: A) oppose the Trans-Pacific Partnership (TPP). B) are in favor of the Trans-Pacific Partnership (TPP). C) have not commented on the Trans-Pacific Partnership (TPP). D) are indifferent about the Trans-Pacific Partnership (TPP).

A) oppose the Trans-Pacific Partnership (TPP).

35. Automobiles imported from Canada or Mexico must have 60% North American content to be eligible for tariff elimination under NAFTA rules. This is an example of a(n): A) rules of origin requirement. B) environmental standard. C) health and safety requirement. D) preferential trade agreement.

A) rules of origin requirement

15. Suppose that the world price of sugar is $100 per ton. If a small country exporter gives its sugar exporters a subsidy of $50 per ton, then the country will: A) suffer deadweight production and consumption losses. B) enjoy deadweight production and consumption gains. C) suffer deadweight production losses only. D) suffer deadweight consumption losses only.

A) suffer deadweight production and consumption losses.

30. Which of the following is part of the NAFTA? A) tariff elimination on trade among Canada, Mexico, and the United States B) establishment of common tariffs applied to nonmember countries C) partnering with the European Union to reduce tariffs D) elimination of restrictions on labor mobility among the three Countries

A) tariff elimination on trade among Canada, Mexico, and the United States

4. Where were subsidies on agricultural products particularly high prior to the 2015 WTO agreement on agricultural export subsidies? A) the European Union B) Korea C) Russia D) Canada

A) the European Union

48. We can measure producer and consumer surplus by looking at a graph of supply and demand. Producer surplus is: A) the area above the supply curve but below the equilibrium price. B) the area below the demand curve but greater than the equilibrium price. C) the area below the demand curve all the way down to the quantity axis. D) the combined triangular area below the demand curve and above the supply curve.

A) the area above the supply curve but below the equilibrium price.

104. If a large country imposes a tariff: A) the terms-of-trade effect may offset deadweight losses on its economy. B) the terms-of-trade effect can never offset deadweight losses on its economy. C) there will be no terms-of-trade effect. D) the country will always be worse off.

A) the terms-of-trade effect may offset deadweight losses on its economy.

134. (Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. What is its profit-maximizing price? A) $20 B) $15 C) $10 D) $5

B) $15

54. Suppose that Norway is a small country and currently produces 100,000 board feet of lumber at $600 per 1,000 board feet. Then it begins to trade at the world price of $500 per 1,000 board feet. As a result of trade, Norway's production falls to 50,000 board feet and its consumption increases to 200,000 board feet. What is Norway's total gain in consumer surplus once it begins to trade? A) $10,000 B) $15,000 C) $100,000 D) $150,000

B) $15,000

135. (Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. If the firm's profit-maximizing output level is 5 and its profit-maximizing price is $15, what are its monopoly profits at this price and quantity? A) $25 B) $50 C) $75 D) $100

B) $50

55. Suppose that Norway is a small country and currently produces 100,000 board feet of lumber at $600per 1,000 board feet. Then it begins to trade at the world price of $500 per 1,000 board feet. As a result of trade, Norway's production falls to 50,000 board feet and its consumption increases to 200,000 board feet. What is Norway's total welfare gain once it begins to trade? A) $5,000 B) $7,500 C) $15,000 D) $17,500

B) $7,500

50. How many units will a country import if S = 1P represents its home supply curve, D = 100 -1P represents its home demand curve, and the world price is $25? A) 25 B) 50 C) 75 D) 100

B) 50

97. What is a difference between a tariff imposed by a large country and a tariff imposed by a small country? A) A tariff imposed by a large country has no deadweight consumption and production losses. B) A tariff imposed by a large country has a terms-of-trade effect. C) A tariff imposed by a small country has a terms-of-trade effect. D) A tariff imposed by a large country has no deadweight consumption loss.

B) A tariff imposed by a large country has a terms-of-trade effect.

23. Compare the effects on world prices for an export tariff in a small country with an export tariff in a large country. A) An export tariff in a small country and an export tariff in a large country both increase the world price by the amount of the tariff. B) An export tariff in a small country does not change the world price, while an export tariff in a large country increases the world price. C) An export tariff in a small country increases the world price, while an export tariff in a large country has no effect on the world price. D) Neither an export tariff in a small country nor an export tariff in a large country has any effect on the world price

B) An export tariff in a small country does not change the world price, while an export tariff in a large country increases the world price.

77. Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. Who will gain and who will lose as a result Finland's €60-per-ton tariff on imported steel? A) Both Finnish steel producers and steel consumers will be worse off with the tariff than without it. B) Finnish steel producers will be better off; Finnish steel consumers will be worse off with the tariff than without it. C) Finnish steel producers will be worse off; Finnish steel consumers will be better off with the tariff than without it. D) Both Finnish steel producers and steel consumers will be better off with the tariff than without it.

B) Finnish steel producers will be better off; Finnish steel consumers will be worse off with the tariff than without it.

9. (Scenario: Sugar Trade in Birdonia) In autarky, suppose that equilibrium sugar price is $100 per ton in Birdonia, a small agricultural nation. Now, suppose Birdonia engages in free trade with the rest of the world. The world price of sugar is $125 per ton. Now suppose that the government of Birdonia gives an export subsidy of $50 per ton to its sugar producers. What will happen to the domestic price of sugar in Birdonia? A) It will not change. B) It will rise to $175 per ton. C) It will rise to $150 per ton. D) It will rise to between $125 and $175 per ton.

B) It will rise to $175 per ton.

44. Which of the following is one of the two important sources of the significant drop in U.S. emissions of CO2 between 2007 and 2012? A) U.S. gasoline prices rose considerably over the period. B) The Great Recession of 2009? 3 slowed economic growth, which slowed CO2 emissions. C) U.S. manufacturing activity grew over the period despite slower economic growth. D) The high price of natural gas slowed the substitution of natural gas for coal used in generating electricity.

B) The Great Recession of 2009? 3 slowed economic growth, which slowed CO2 emissions.

32. Which of the following statements about the European Union (EU) is correct? A) EU member countries maintain separate tariff schedules. B) There is free trade among EU member countries. C) All EU member countries use a common currency (the euro). D) All EU member countries have eliminated tariffs on imports from non-EU member countries.

B) There is free trade among EU member countries.

25. What is COP21? A) an agreement negotiated in Copenhagen that resulted in developed countries immediately eliminating agricultural export subsidies B) an agreement negotiated in Paris in which countries committed to develop plans to reduce their emissions of greenhouse gases C) an agreement negotiated in Kyoto, Japan, in which countries agreed to further reduce their trade barriers D) an agreement negotiated in Doha, Qatar, in which countries agreed to reduce their agricultural export subsidies

B) an agreement negotiated in Paris in which countries committed to develop plans to reduce their emissions of greenhouse gases

5. Under rules of the GATT, exporting countries can expect importing countries to impose _______ to offset their export subsidies. A) antidumping duties B) countervailing duties C) safeguard duties D) quotas

B) countervailing duties

100. When a large country imposes a tariff, the burden is often shared by: A) foreign consumers and domestic producers. B) domestic consumers and foreign producers. C) all producers and consumers in each nation equally. D) its government.

B) domestic consumers and foreign producers.

1. In general, an export subsidy: A) discourages foreign sales in favor of domestic sales. B) encourages firms to export rather than sell domestically. C) penalizes producers that export. D) justifies government involvement in helping firms export.

B) encourages firms to export rather than sell domestically.

102. Who bears the burden of the terms-of-trade effect when a large country imposes a tariff? A) foreign consumers B) foreign producers C) domestic producers D) domestic consumers

B) foreign producers

132. The no-trade equilibrium in a monopolistic market occurs where: A) marginal revenue = price. B) marginal cost = marginal revenue. C) market demand = market supply. D) marginal cost = average revenue.

B) marginal cost = marginal revenue.

131. A profit-maximizing monopolist will produce at the point where: A) total revenue = total costs. B) marginal revenue = marginal cost. C) average revenue = average cost. D) the difference between average revenue and average cost is maximized.

B) marginal revenue = marginal cost.

95. To measure the impact of a tariff on the total welfare of society, we calculate the: A) rise in consumer surplus plus the rise in producer surplus. B) rise in producer surplus plus the increase in tariff revenue going to the government minus the loss of consumer surplus. C) rise in government revenues plus the rise in consumer surplus. D) total number of jobs saved by the tariff times the average wage.

B) rise in producer surplus plus the increase in tariff revenue going to the government minus the loss of consumer surplus.

47. We can measure producer and consumer surplus by looking at a graph of supply and demand. Consumer surplus is: A) the area above the supply curve but below the equilibrium price. B) the area below the demand curve but greater than the equilibrium price. C) the area below the demand curve all the way down to the quantity axis. D) the combined triangular area below the demand curve and above the supply curve

B) the area below the demand curve but greater than the equilibrium price.

52. If there is free trade in a small economy, the nation will be able to import unlimited quantities of the product at: A) the domestic price. B) the world price. C) the price measured in euros. D) the price determined after all tariffs are assessed.

B) the world price.

98. Foreign supply curves facing a large country differ from those facing a small country. Large countries face _____________ foreign supply curves, and small countries face ______________ foreign supply curves. A) perfectly price elastic; upward-sloping B) upward-sloping; perfectly price elastic C) downward-sloping; perfectly price elastic D) upward-sloping; downward-sloping

B) upward-sloping; perfectly price elastic

78. Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. Suppose that the €60-per-ton tariff caused Finnish production of steel to increase by 100,000 tons and Finnish consumption of steel to fall by 100,000 tons. What is the value of Finland's welfare loss due to the tariff? A) 200,000 tons B) €6 million C) €12 million D) €15 million

B) €6 million

73. Suppose that the equations S = 2P and D = 6 - P represent a small country's home supply and home demand curves. If the world price is $1, which of the following is the increase in the country's welfare when it trades compared with autarky? A) $6.00 B) $4.50 C) $1.50 D) $0.50

C) $1.50

38. It has been estimated that the Trans-Pacific Partnership (TPP) could increase U.S. national income by as much as: A) $130,000. B) $130,000,000. C) $130,000,000,000. D) $130,000,000,000,000

C) $130,000,000,000.

53. Suppose that Norway is a small country and currently produces 100,000 board feet of lumber at $600 per 1,000 board feet. Then it begins to trade at the world price of $500 per 1,000 board feet. As a result of trade, Norway's production falls to 50,000 board feet and its consumption increases to 200,000 board feet. How many board feet of lumber does Norway now import? A) 250,000 board feet B) 200,000 board feet C) 150,000 board feet D) 100,000 board feet

C) 150,000 board feet

96. How does a tariff imposed by a large country differ from a tariff imposed by a small country? A) If a large nation imposes a tariff, that government gets more revenue. B) It may not have any effect at all in the large country, since its consumers have so many other choices. C) Because of its size, the large nation's tariff not only decreases the quantity demanded of the product but may also reduce the world price of the good. D) The large nation can just buy up foreign producers if the foreign producers don't like having a tariff imposed.

C) Because of its size, the large nation's tariff not only decreases the quantity demanded of the product but may also reduce the world price of the good.

2. The European agricultural export subsidy program is known as the: A) European Subsidy System. B) European Agricultural System. C) Common Agricultural Policy. D) Common European Policy

C) Common Agricultural Policy.

40. (Scenario: Electric Fan Trade) U.S. firms can produce and sell electric fans for $25. The United States can also import electric fans from China at $19 each and from Canada at $20 each. Electric fans made in the United States, China, and Canada are identical. Currently, the United States imposes a 30% tariff on imported electric fans. Without a regional trade agreement, from which country(ies) will the United States import fans? A) China B) Canada C) It will import fans from neither China nor Canada. D) It will import fans from both China and Canada.

C) It will import fans from neither China nor Canada.

75. Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. What is the purpose of this €60-per-ton tariff? A) Its purpose is to protect Finnish steel consumers from foreign competition. B) Its purpose is to protect Finnish steel producers and consumers from the World Trade Organization. C) Its purpose is to protect Finnish steel producers from foreign competition. D) Its purpose is to cause Finland to comply with provisions of the General Agreement on Tariffs and Trade.

C) Its purpose is to protect Finnish steel producers from foreign competition.

143. What will happen to domestic monopolists' prices and outputs when a small country engages in international trade? A) Prices will rise and outputs will fall. B) Prices will rise and outputs will rise. C) Prices will fall and outputs will rise. D) Prices will fall and outputs will fall.

C) Prices will fall and outputs will rise.

16. What happens to the large country's domestic price of widgets when a large country gives a subsidy of X dollars for each unit exported? A) The domestic price will rise by X dollars. B) The domestic price will rise by more than X dollars C) The domestic price will rise by less than X dollars. D) The domestic price will not change.

C) The domestic price will rise by less than X dollars.

20. Which groups will be harmed the most as a result of the WTO's elimination of agricultural subsidies? A) agricultural exporters in smaller nations without subsidy programs because world food prices will rise B) agricultural consumers all over the world because prices will be higher C) agricultural producers in nations that subsidize their production D) governments of rich nations that will have to provide support to farmers who are hurt

C) agricultural producers in nations that subsidize their production

68. The home import demand curve is downward sloping because: A) as the government forces the price down, consumers buy more. B) foreign companies want to help domestic competitors. C) as the price falls below domestic equilibrium, the shortage in demand is filled by importing more quantity from abroad. D) consumers can control the price of the good.

C) as the price falls below domestic equilibrium, the shortage in demand is filled by importing more quantity from abroad.

144. If we allow free trade in a small nation's industry where there is a domestic monopolist, the monopoly firm: A) gains even more power. B) sees its profits rise. C) becomes a price taker, is not able to charge a higher price, and behaves like a competitive firm. D) is able to charge a higher price.

C) becomes a price taker, is not able to charge a higher price, and behaves like a competitive firm.

27. In a large-country case, an optimal tariff is one for which the termsof- trade gain exceeds the: A) producer surplus. B) increased price of the product imported. C) deadweight loss. D) consumer surplus.

C) deadweight loss.

22. In a small country, an export tariff will cause a(n) _______ in the domestic price of the export and _______ in the world price of the export. A) increase; a decrease B) decrease; a decrease C) decrease; no change D) increase; no change

C) decrease; no change

71. Suppose that the world price of radios is above the no-trade domestic price. In that case, the country: A) imports radios at the world price. B) imports radios at the no-trade domestic price. C) exports radios at the world price. D) exports radios at the no-trade domestic price.

C) exports radios at the world price.

21. In a small country, an export tariff will cause exports to ___________ and domestic consumption to ________. A) rise; fall B) rise; rise C) fall; rise D) fall; fall

C) fall; rise

19. Export subsidies applied by a large country create ___________for importing countries in the rest of the world by _________ their import prices. A) losses; increasing B) gains; increasing C) gains; decreasing D) losses; decreasing

C) gains; decreasing

26. In a large-country case, an optimal tariff would be one: A) that increases the producer surplus. B) that raises the price of the product imported. C) in which the terms-of-trade gain exceeds the deadweight loss. D) that easily passes the legislative process.

C) in which the terms-of-trade gain exceeds the deadweight loss.

137. If a monopoly suddenly became a perfectly competitive industry, equilibrium output would _________, and the equilibrium price would _________. A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase

C) increase; decrease

141. The no-trade equilibrium in a perfectly competitive market occurs where: A) marginal revenue = price. B) marginal cost = total revenue. C) market quantity demanded = market quantity supplied. D) average revenue = price.

C) market quantity demanded = market quantity supplied.

24. The WTO is a _____, involving many countries, with an agreement to lower tariffs between all members. A) bilateral trade organization B) trilateral trade organization C) multilateral trade organization D) quasipolitical organization

C) multilateral trade organization

6. An export subsidy works to _______________ the price of exported products for producers to encourage _______________ production. A) lower; less B) lower; more C) raise; more D) raise; less

C) raise; more

103. Because a large nation can force the nation exporting the product to pay a substantial amount of the tariff, its _________ may improve after the tariff is imposed. A) consumption B) production C) terms of trade D) income tax collection rate

C) terms of trade

39. Which country is expected to be the major loser if the Trans-Pacific Partnership is NOT approved by member countries? A) China B) India C) the United States D) Vietnam

C) the United States

99. A large nation faces a(n) ____ foreign export supply curve, rather than a(n) ____ foreign export supply curve. A) flat; upward-sloping B) downward-sloping; upward-sloping C) upward-sloping; flat D) flat; downward-sloping

C) upward-sloping; flat

79. Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. How much total tariff revenue will the Finnish government collect as a result of the €60- perton tariff? A) €6 million B) €12 million C) €18 million D) €30 million

C) €18 million

74. Suppose that the equations S = 2P and D = 6 - P represent a small country's home supply and home demand curves, and the free-trade world price is $1. If the government imposed a 50% tariff on imports, how much revenue would it collect as a result of the tariff? (Note: It is possible to consume partial units of this product, such as 2.5 units.) A) $1.50 B) $2.75 C) $0.50 D) $0.75

D) $0.75

76. Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. What is likely to happen to Finnish production of steel and the price of steel sold in Finland after the €60-per-ton tariff is imposed? A) Finnish steel production will fall, and the Finnish price of steel will fall. B) Finnish steel production will rise, and the Finnish price of steel will fall. C) Finnish steel production will fall, and the Finnish price of steel will rise. D) Finnish steel production will rise, and the Finnish price of steel will rise.

D) Finnish steel production will rise, and the Finnish price of steel will rise.

7. Which of the following will happen when a small country enacts an export subsidy? A) The country will be able to sell less abroad. B) The domestic price of the subsidized export will decrease C) The country's demand for the subsidized product will increase. D) Foreign demand for the subsidized product will increase.

D) Foreign demand for the subsidized product will increase.

89. Which of the following is NOT an effect of an import tariff? A) It increases producer surplus by raising the market price and allowing more production. B) It raises government revenue. C) It reduces consumer surplus by raising the market price. D) It improves efficiency in the economy overall because it saves high-paying jobs.

D) It improves efficiency in the economy overall because it saves high-paying jobs.

140. Comparing the monopoly firm with a perfectly competitive firm reveals that: A) the competitive firm sells less quantity. B) the monopoly firm charges a lower price. C) the competitive firm's price is above MC. D) None of these is revealed when the two firm are compared.

D) None of these is revealed when the two firm are compared.

31. Which of the following statements characterizes NAFTA's economic arrangements among its member countries (Canada, Mexico, and the United States)? A) There are no restrictions on the movement of labor from one country to another. B) There are no restrictions on the movement of capital from one country to another. C) All three countries have adopted the same identical tariff system. D) There is free trade among the three member countries.

D) There is free trade among the three member countries.

42. Which of the following is NOT a reason why the United States did NOT sign the Kyoto Protocol? A) Although the evidence toward global warming is strong, we still do not understand all the consequences of policy actions. B) Meeting the Kyoto targets would negatively affect the U.S. economy. C) Kyoto failed to include the developing countries, especially China and India. D) There was not enough cash incentive being provided to the United States to sign the protocol.

D) There was not enough cash incentive being provided to the United States to sign the protocol.

142. If a perfectly competitive industry suddenly became a monopolist, equilibrium output would _________, and the equilibrium price would _________. A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase

D) decrease; increase

34. To be able to enforce the rules of a free-trade area, goods from outside the region imported into the lowest-tariff nation cannot be shipped _____ into another nation in the area. A) with no transportation costs B) without a labor certificate C) with no customs inspection D) duty free

D) duty free

28. When a large nation imposes a tariff, which of the following is NOT a cost incurred? A) deadweight efficiency loss B) reduced consumer surplus C) deterioration of terms of trade for the trading partners D) falling government revenues for the nation imposing the tariff

D) falling government revenues for the nation imposing the tariff

18. A large nation's export subsidy ________ importing countries' terms of trade; a small nation's export subsidy _________ importing countries' terms of trade. A) improves; worsens B) worsens; improves C) improves; improves D) improves; does not affect

D) improves; does not affect

14. When assessing the welfare effect of an export subsidy on a small nation, it can be shown that the subsidy: A) increases national welfare. B) can be paid for out of increased revenues. C) hurts producers and helps consumers. D) is just the same as a tariff on imports: it raises domestic price, increases domestic production, and involves the same efficiency and consumption losses.

D) is just the same as a tariff on imports: it raises domestic price, increases domestic production, and involves the same efficiency and consumption losses.

3. In Europe, the Common Agricultural Policy: A) taxed European agricultural products sold in Europe. B) allowed European farmers to sell their output at above world prices in the European market. C) subsidized agricultural products, allowing European farmers to sell output at a price much higher than the world market price. D) subsidized agricultural products, allowing European farmers to sell output at a price much lower than the world market price.

D) subsidized agricultural products, allowing European farmers to sell output at a price much lower than the world market price.

49. We can measure producer and consumer gains by looking at a graph of supply and demand. Total welfare in the economy would be: A) the area above the supply curve but below the equilibrium price. B) the area below the demand curve but greater than the equilibrium price. C) the area below the demand curve all the way down to the quantity axis. D) the combined triangular area below the demand curve and above the supply curve.

D) the combined triangular area below the demand curve and above the supply curve.

88. In general, a tariff reduces the national welfare of the small importing nation because: A) there is a fall in producer surplus. B) there is a rise in consumer surplus. C) the gain in consumer surplus is smaller than the loss in producer surplus. D) the gain in producer surplus is smaller than the loss in consumer surplus.

D) the gain in producer surplus is smaller than the loss in consumer surplus.