unit 2.1

A common argument in favor of restricting international trade in good x is based on the premise that

. c. trade restrictions can be useful when one country bargains with its trading partners.

In a December 2007 New York Times column Paul Krugman argued in favor of

c. keeping world markets relatively open.

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. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States

a. will be equal to the world price.

Without trade, total surplus is

a. $1,200.

The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. Refer to Figure 9-25. With free trade, total surplus is

a. $2,000.

The figure illustrates the market for calculators in a country. Refer to Figure 9-2. Without trade, producer surplus is

b. $845.

The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $10 per unit. Refer to Figure 9-25. With free trade and a $5 per unit tariff, the country

c. imports 40 units of the good.

When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-tree policy, the result was that the country began to import automobiles. The change in policy improved the well-being of that nation in the sense that

c. the gains to automobile consumers in that nation exceeded the losses of the automobile producers in that nation.

When a country allows trade and becomes an exporter of a good,

d. domestic producers become better off, and domestic consumers become worse off.

Which of the following is the most accurate statement?

d.The idea that one nation might want to threaten another nation with a trade restriction is associated with the protection-as-a-bargaining-chip argument for restricting trade.

A result of the tariff is that, relative to the free-trade situation, the quantity of saddles imported decreases by

c. Q4 - Q3 + Q2 - Q1.

An import quota

a. reduces the welfare of domestic consumers.

The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-21. With free trade allowed, this country

b. exports 800 units of the good.

The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. ​Refer to Figure 9-22. With free trade, total surplus is

120,000 or 30,000

About what percent of total world trade is accounted for by countries that belong to the World Trade Organization?

a. 97 percent

Refer to Figure 9-15. Producer surplus with trade and without a tariff is

a. G.

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

a. consumers will gain more than producers will lose.

The figure illustrates the market for rice in Vietnam. Refer to Figure 9-20. With trade, Vietnam will

b. export 1,500 units of rice.

A logical starting point from which the study of international trade begins is

c. the principle of comparative advantage.

The figure illustrates the market for roses in a country. Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals

c. $100.

The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-22. With free trade, consumer surplus is

c. $108,000 and producer surplus is $12,000.

The figure illustrates the market for roses in a country. Refer to Figure 9-6. The imposition of a tariff on roses

c. decreases the number of roses imported by 200.

Refer to Figure 9-17. When comparing no trade to free trade, the gains from trade amount to

a. $600.

Trade among nations is ultimately based on

d. comparative advantage.

The figure illustrates the market for calculators in a country. Refer to Figure 9-2. As a result of trade, total surplus increases by

250

Mexico has imposed a tariff on the importation of chocolate. As a consequence of the tariff,

a. ​Mexico as a whole is worse off, since the increase in producer surplus is smaller than the drop in consumer surplus plus tariff revenues.

The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. With trade and a tariff, total surplus is

a. $114,000.

The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit. Refer to Figure 9-21. Consumer surplus with free trade is

a. $8,000.

• For a small country called Boxland, the equation of the domestic demand curve for cardboard is ​ Q^D=200-2P ​ where Q^D represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard. ​ • For Boxland, the equation of the domestic supply curve for cardboard is ​ Q^S=-60+3P ​ where Q^S represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard. Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard

a. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.

Assume, for Vietnam, that the domestic price of textiles without international trade is higher than the world price of textiles. This suggests that, in the production of textiles,

a. other countries have a comparative advantage over Vietnam and Vietnam will import textiles.

If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be

a. worse off if Colombia doesn't remove the subsidies in response to the threat.

• For a small country called Boxland, the equation of the domestic demand curve for cardboard is ​ Q^D=200-2P ​ where Q^D represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard. ​ • For Boxland, the equation of the domestic supply curve for cardboard is ​ Q^S=-60+3P ​ where Q^S represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard. Suppose the world price of cardboard is $45 and international trade is allowed. Then Boxland's consumers demand

b. 110 tons of cardboard and Boxland's producers supply 75 tons of cardboard.

The figure illustrates the market for tricycles in a country. Refer to Figure 9-5. Without trade, producer surplus amounts to

b. $3,240.

The following diagram shows the domestic demand and domestic supply for a market. In addition, assume that the world price in this market is $40 per unit Refer to Figure 9-21. With free trade, the domestic price and domestic quantity demanded are

b. $40 and 800.

The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is $20 per unit. ​Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and a tariff, consumer surplus is

b. $625 and producer surplus is $225.

• For a small country called Boxland, the equation of the domestic demand curve for cardboard is ​ , ​ where represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard. ​ • For Boxland, the equation of the domestic supply curve for cardboard is ​ , ​ where represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard. Refer to Scenario 9-2. Suppose the world price of cardboard is $60 and international trade is allowed. Then Boxland's consumers demand

b. 80 tons of cardboard and Boxland's producers supply 120 tons of cardboard.

Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to

b. D + F.

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?

b. Republica began exporting paper as a result of the policy change.

In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the world. We do so

b. because then we can assume that world prices of goods are unaffected by that country's participation in international trade.

The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. With trade, Guatemala will

b. export 22 units of coffee.

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. Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches

b. will be better off.

• For a small country called Boxland, the equation of the domestic demand curve for cardboard is ​ Q^D=200-2P ​ where Q^D represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard. ​ • For Boxland, the equation of the domestic supply curve for cardboard is ​ Q^S= -60+3P ​ where Q^S represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard. Suppose the world price of cardboard is $60. Then Boxland's gains from international trade in cardboard amount to

c. $160.

The figure illustrates the market for tricycles in a country. Refer to Figure 9-5. Without trade, consumer surplus amounts to

c. $3,240.

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

c. at the world price, the quantity of pistachios demanded in that country exceeds the quantity of pistachios supplied in that country.

Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case that

c. the world price without the tariff is less than the price of lumber without trade.

The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price. Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area

d. E.

The figure applies to the nation of Wales and the good is cheese. Refer to Figure 9-7. Which of the following is a valid equation for Welsh producer surplus with trade?

d. None of the above is correct.

The figure illustrates the market for rice in Vietnam. Refer to Figure 9-20. From the figure it is apparent that

d. Vietnam has a comparative advantage in producing rice, relative to the rest of the world.

Which of the following is not an important question for economic policy raised by the experience of the textile industry?

d. Which argument for restricting free trade is politically feasible?

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

d. importing televisions and the price of a television in Paraguay decreased to $300