Midterm 2 Monetary

decrease; increase

If a perfectly competitive industry suddenly became a monopolist, equilibrium output would ___________ and the equilibrium price would _____________

the world price

If there is free trade in a small economy, the nation will be able to import unlimited quantities of the product at:

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

If we allow free trade in a small nation's industry where there is a domestic monopolist, the monopoly firm:

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

In Europe, the Common Agriculture Policy:

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

What is the difference between a tariff imposed by a large country and a tariff imposed by a small country?

its economic welfare may increase

If a large country imposes a tariff:

the terms of trade effect may offset deadweight losses on its economy

If a large country imposes a tariff:

upward sloping; flat

A large nation faces a(n) __________ foreign export supply curve, rather than a(n) _________ foreign export supply curve

improves; does not affect

A large nation's export subsidy __________ importing countries' terms of trade; a small nation's export subsidy _____________ importing countries' terms of trade

less; higher

A monopoly firm will sell __________ output and charge a ___________ price than a perfectly competitive firm

marginal revenue = marginal cost

A profit maximizing monopolist will produce at the point where:

a perfectly elastic world supply curve

A small country in international trade faces:

rules of origin requirement

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):

surplus; 60; exported

According to the graph, at hte world price of $125 there is a ______ of _______ in the home market, which is _____.

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

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?

raise; more

An export subsidy works to ____________ the price of exported products for producers to encourage _____________ production.

oppose the Trans-Pacific Partnership (TPP)

As of May 2016, Republican and Democratic Presidential candidates:

increase; decrease

If a monopoly suddenly became a perfectly competitive industry, equilibrium output would __________ and the equilibrium price would ______________

terms of trade

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

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

How does a tariff imposed by a large country differ from a tariff imposed by a small country?

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

Compare the effects on world prices for an export tariff in a small country with an export tariff in a large country.

none of these is revealed when the two firms are compared

Comparing the monopoly firm with a perfectly competitive firm reveals that:

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

100 - 2P

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:

$50 and 50 units

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 autarky are:

gains; decreasing

Export subsidies applied by a large country create ____________ for importing countries int eh rest of the world by _______ their import prices

upward sloping; perfectly price elastic

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

deadweight loss

In a large country case, an optimal tariff is one for which the terms of trade gain exceed the:

in which the terms of trade gain exceeds the deadweight loss

In a large country case, an optimal tariff would be one:

decrease; no change

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

fall; rise

In a small country, an export tariff will cause exports to __________ and domestic consumption to ________

It will rise to $175 per ton

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?

the gain in producer surplus is smaller than the loss in consumer surplus

In general, a tariff reduces the national welfare of the small importing nation because:

encourages firms to export rather than sell domestically

In general, an export subsidy

a free-trade area

In which form of regional trading agreements are rules of origin required?

$130,000,000,000

It has been estimated that the Trans-Pacific Partnership (TPP) could increase U.S. national income by as much as:

$2

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?

$1.50

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?

exports radios at the world price

Suppose that the world price of radios is above the no-trade domestic price. In that case, the country:

$150 per ton

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:

suffer deadweight production and consumption losses

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:

common agricultural policy

The European agricultural export subsidy program is known as the:

2 widgets

The US can import widgets from China at $4 each and from Mexico at $5 each. The US imposes a tariff of $2 on each of its widget imports. Suppose that the US and Mexico forma free trade area. How much trade in widgets is created?

multilateral trade organization

The WTO is a ___________, involving many countries, with an agreement to lower tariffs between all members

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

The home import demand curve is downward sloping because:

market quantity demanded = market quantity supplied

The no-trade equilibrium in a perfectly competitive market occurs where:

marginal cost = marginal revenue

The no=trade equilibrium in a monopolistic market occurs where:

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

What is COP21

duty free

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

Rise in producer surplus plus the increase in tariff revenue going tot he government minus the loss of consumer surplus

To measure the impact of a tariff on the total welfare of society, we calculate the:

It will import fans from neither China nor Canada

US firms can produce and sell electric fans for $25. The US can also import electric fans from China at $19 each and from Canada at $20 each. Electric fans made in the US, China, and Canada are identical. Currently, the US imposes a 30% tariff on imported electric fans. Without a regional trade agreement, from which country(ies) will the US import fans?

countervailing duties

Under the rules of the GATT, exporting countries can expect importing countries to impose ____________ to offset their export subsidies

the combined triangular area below the demand curve and above the supply curve

We can measure producer and consumer gains by looking at a graph of supply and demand. Total welfare in the economy would be:

the area below the demand curve but greater than the equilibrium price

We can measure producer and consumer surplus by looking at a graph of supply and demand. Consumer surplus is:

the area above the supply curve but below the equilibrium price

We can measure producer and consumer surplus by looking at a graph of supply and demand. Producer surplus is:

The domestic price will rise by less than X dollars

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?

prices will fall and outputs will rise

What will happen to domestic monopolists prices and outputs when a small country engages in international trade?

domestic consumers and foreign producers

When a large country imposes a tariff, the burden is often shared by:

failing government revenues for the nation imposing the tariff

When a large nation imposes a tariff, which of the following is NOT a cost incurred?

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

When assessing the welfare effect of an export subsidy on a small nation, it can be shown that the subsidy:

The European Union

Where were subsidies on agricultural products particularly high prior to the 2015 WTO agreement on agricultural export subsidies?

the United States

Which country is expected to be the major loser if the TPP is NOT approved by member countries?

agricultural producers in nations that subsidize their production

Which groups will be harmed the most as a result of the WTO's elimination of agricultural subsidies

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

Which of the following WAS an important reason why the US did NOT sign the Kyoto protocol?

There was not enough cash incentive being provided to the US to sign the protocol

Which of the following is NOT a reason why the US did NOT sign the Kyoto Protocol?

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

Which of the following is NOT an effect of an import tariff?

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

Which of the following is one of the two important sources of the significant drop in US emissions of CO2 between 2007 and 2012

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

Which of the following is part of the NAFTA?

NAFTA

Which of the following regional trade agreements is a free-trade area?

there is free trade among EU member countries

Which of the following statements about eh EU is correct?

There is free trade among the three member countries

Which of the following statements characterizes NAFTA's economic arrangements among its member countries (Canada, Mexico and the US)

Foreign demand for the subsidized product will increase

Which of the following will happen when a small country enacts an export subsidy?

foreign producers

Who bears the burden of the terms-of-trade effect when a large country imposes a tariff?