Microeconomics Chapter 9

If the world price for a good exceeds a country's before-trade domestic price for that good, the country should import that good.

False

Tariffs tend to benefit consumers.

False

Trade can make everyone better off if the winners from trade compensate the losers from trade.

True

Trade makes everyone better off.

False

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good, a. both producers and consumers will gain. b. both producers and consumers will lose. c. producers will gain and consumers will lose. d. consumers will gain and producers will lose.

d. consumers will gain and producers will lose.

An import quota that restricts imports to the same degree as a tariff raises more government revenue than the equivalent tariff.

False

If free trade is allowed and a country exports a good, the gains of domestic producers exceed the losses of domestic consumers and total surplus rises.

True

Which of the following statements about import quotas is true? a. Voluntary quotas established by the exporting country reduce the importing country's deadweight loss from the trade restriction. b. An import quota reduces the price to the domestic consumers. c. Import quotas benefit domestic producers by limiting import competition. d. Import quotas are preferred to tariffs because they raise more revenue for the imposing government.

a) Import quotas benefit domestic producers by limiting import competition.

Because producers are better able to organize than consumers, we would expect there to be political pressure to create a. export restrictions. b. import restrictions. c. free trade. d. none of these answers.

b. import restrictions.

A tariff raises the price of a good, reduces the domestic quantity demanded, increases the domestic quantity supplied, and increases the quantity imported.

False

Countries should import products for which they have a comparative advantage in production.

False

If free trade is allowed and a country exports a good, domestic producers of the good are worse off and domestic consumers of the good are better off when compared to the before-trade domestic equilibrium.

False

If a foreign country subsidizes its export industries, its tax payers are paying to improve the welfare of consumers in the importing countries.

True

If a worker in Brazil can produce 6 oranges or 2 apples in an hour while a worker in Mexico can produce 2 oranges or 1 apple in an hour, then Brazil should export oranges and Mexico should export apples.

True

If free trade is allowed and a country imports wheat, domestic buyers of bread are better off and domestic farmers are worse off when compared to the before-trade domestic equilibrium.

True

Opponents of free trade often argue that free trade destroys domestic jobs.

True

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

True

Trade increases the economic well-being of a nation because the gains of the winners exceed the losses of the losers.

True

If free trade is allowed, a country will export a good if the world price is a. above the before-trade domestic price of the good. b. below the before-trade domestic price of the good. c. equal to the before-trade domestic price of the good. d. none of these answers

a. above the before-trade domestic price of the good.

Which of the following statements about a tariff is true? a. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. b. A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus. c. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. d. A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus.

c. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus.

When a country allows trade and imports a good, a. domestic producers are worse off, domestic consumers are better off, and the nation is worse off because the losses of the losers exceed the gains of the winners. b. domestic consumers are worse off, domestic producers are better off, and the nation is worse off because the losses of the losers exceed the gains of the winners. c. domestic producers are worse off, domestic consumers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers. d. domestic consumers are worse off, domestic producers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers.

c. domestic producers are worse off, domestic consumers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers.

Which of the following is not employed as an argument in support of trade restrictions? a. Free trade harms the national security if vital products are imported. b. Free trade is harmful to importing countries if foreign countries subsidize their exporting industries. c. Free trade destroys domestic jobs. d. Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. e. Free trade harms infant industries in an importing country.

d. Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus.

If the world price for a good exceeds the before-trade domestic price for a good, then that country must have a. a comparative disadvantage in the production of the good. b. an absolute disadvantage in the production of the good. c. an absolute advantage in the production of the good. d. a comparative advantage in the production of the good.

d. a comparative advantage in the production of the good.

When a country allows trade and exports a good, a. domestic consumers are better off, domestic producers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners. b. domestic consumers are better off, domestic producers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers. c. domestic producers are better off, domestic consumers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners. d. domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.

d. domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.