Chapter 09

A tax on an imported good is called a A. quota. B. tariff. C. supply tax. D. trade tax.

B. tariff.

the govt revenue raised by the tariff represented by the area A. E. B. B + E. C. D + E + F. D. B + D + E + F.

A. E.

If the world price of coffee is lower than Colombia’s domestic price of coffee without trade, then Colombia A. should import coffee. B. has a comparative advantage in coffee. C. should produce just enough coffee to satisfy domestic demand. D. should produce no coffee domestically.

A. should import coffee.

If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price, A. the country will be an exporter of the good. B. the country will be an importer of the good. C. the country will be neither an exporter nor an importer of the good. D. Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

A. the country will be an exporter of the good.

Refer to Figure 9-2. With free trade, consumer surplus is A. $320. B. $640. C. $845. D. $1,690.

A. $320.

Refer to Figure 9-2. With free trade, producer surplus is A. $845. B. $1,620. C. $1,690. D. $3,240.

B. $1,620.

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. comparative advantage

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that A. Wheatland has a comparative advantage, relative to other countries, in producing corn. B. other countries have a comparative advantage, relative to Wheatland, in producing fish. C. the price of fish in Wheatland exceeds the world price of fish. D. if Wheatland were to allow trade, it would import corn.

D. if Wheatland were to allow trade, it would import corn.

Jamaica has a comparative advantage in the production of aluminum, but currently allows no international trade in aluminum. We can conclude that A. the domestic price of aluminum in Jamaica is higher than the world price for aluminum. B. Jamaica has an absolute advantage in the production of aluminum. C. Jamaica should import aluminum. D. the domestic price of aluminum in Jamaica is lower than the world price for aluminum.

D. the domestic price of aluminum in Jamaica is lower than the world price for aluminum.

Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the number of domestic jobs. An economist would argue that A. foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding. B. foreign competition may cause unemployment in import-competing industries, but the increase in consumer surplus due to free trade is more valuable than the lost jobs. C. the critics are correct, so countries must protect their industries with tariffs or quotas. D. foreign competition may cause unemployment in import-competing industries, but the increase in the variety of goods consumers can choose from is more valuable than the lost jobs.

A. foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding.

Refer to Figure 9-16. The area C + D + E + F represents A. the decrease in consumer surplus caused by the tariff. B. the decrease in total surplus caused by the tariff. C. the deadweight loss of the tariff minus government revenue raised by the tariff. D. the deadweight loss of the tariff plus government revenue raised by the tariff.

A. the decrease in consumer surplus caused by the tariff.

Within a country, the domestic price of a product will equal the world price if A. trade restrictions are imposed on the product. B. the country allows free trade. C. the country chooses to import, but not export, the product. D. the country chooses to export, but not import, the product.

B. the country allows free trade.

Refer to Figure 9-2. As a result of trade, total surplus increases by A. $50. B. $100. . C. $250. D. $500

C. $250.

Refer to Figure 9-16. The tariff A. decreases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F. B. decreases producer surplus by the area C + D and decreases consumer surplus by the area D + E + F. C. increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F. D. increases producer surplus by the area B + C and decrease consumer surplus by the area D + E + F.

C. increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F.

Refer to Figure 9-2. With free trade, this country will A. import 50 calculators. B. import 100 calculators. C. export 50 calculators. D. export 100 calculators.

D. export 100 calculators.

Which of the following is not a commonly-advanced argument for trade restrictions? A. the jobs argument B. the national-security argument C. the infant-industry argument D. the efficiency argument

D. the efficiency argument

Trade raises the economic well-being of a nation in the sense that A. the gains of the winners exceed the losses of the losers. B. everyone in an economy gains from trade. C. since countries can choose what products to trade, they will pick those products that are most beneficial to society. D. the nation joins the international community when it begins to engage in trade.

A. the gains of the winners exceed the losses of the losers.

A country has a comparative advantage in a product if the world price is A. lower than that country's domestic price without trade. B. higher than that country's domestic price without trade. C. equal to that country's domestic price without trade. D. not subject to manipulation by organizations that govern international trade.

B. higher than that country's domestic price without trade.

Refer to Figure 9-2. Without trade, producer surplus is A. $423. B. $845. C. $1,690. D. $3,380.

B. $845

Refer to Figure 9-2. Without trade, consumer surplus is A. $423. B. $845. C. $1,690. D. $3,380.

B. $845.

Refer to Figure 9-16. The deadweight loss created by the tariff is represented by the area A. B. B. D + F. C. D + E + F. D. B + D + E + F.

B. D + F.

Refer to Figure 9-16. The tariff A. decreases producer surplus by the area C, decreases consumer surplus by the area C + D + E, and decreases total surplus by the area D + F. B. increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F. C. creates government revenue represented by the area B + E and decreases total surplus by the area D + E + F. D. increases producer surplus by the area C + G and creates government revenue represented by the area D + E + F.

B. increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases total surplus by the area D + F.

Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run." This observation helps to explain why many economists are skeptical about the A. national-security argument. B. infant-industry argument. C. unfair-competition argument. D. jobs argument.

B. infant-industry argument.

Refer to Figure 9-2. At the world price and with free trade, A. the domestic quantity of calculators demanded is greater than the domestic quantity of calculators supplied. B. the calculator market is in equilibrium. C. the domestic demand for calculators is perfectly inelastic. D. both domestic producers of calculators and domestic consumers of calculators are better off than they were without free trade.

B. the calculator market is in equilibrium.

When the nation of Worldova allows trade and becomes an exporter of silk, A. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova rises. B. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova falls. C. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises. D. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova falls.

C. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.