978-0132479431 Chapter 9 Part 8

71

25) A major reason why it is difficult to lower the barriers to free trade is

A) that total benefits are less than total costs from free trade.

B) the uneven distribution of gains and losses from free trade.

C) the loss of jobs without any gain of jobs from free trade.

D) the inability to compensate losers from free trade.

E) that the barriers allow us to compete with cheap foreign labor.

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: WM

AACSB: Reflective thinking

26) What is rent seeking with respect to restricting international trade?

A) The rent on factory buildings increases if trade is restricted.

B) The government avoids paying rent on buildings when importers pay the tariff.

C) An attempt to capture the gains from trade by imposing a tariff.

D) The government’s efforts to capture tariff rents.

E) The attempt by importers to avoid paying a tariff.

Skill: Level 1: Definition

Section: Checkpoint 9.4

Author: TPS

AACSB: Reflective thinking

27) Which of the following groups gain from international trade?

i. producers of exported goods

ii. domestic consumers of imported goods

iii. workers in exporting firms

A) i only

B) ii only

C) iii only

D) i and iii

E) i, ii, and iii

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: TS

AACSB: Reflective thinking

72

28) Why are the losers from free international trade not fully compensated for their losses?

A) The amount of compensation needed would bankrupt the government.

B) The people who claim to lose are also the same ones who benefit.

C) Identifying all losers and the size of their losses is extremely difficult.

D) No one actually loses from international trade.

E) The losers are foreigners.

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: TS

AACSB: Reflective thinking

29) Trade is often restricted because the

A) total gain to all producers is larger than the total loss to all consumers.

B) total gain to all producers is smaller than the total loss to all consumers.

C) gain per producer is larger than the loss per consumer.

D) gain per producer is less than the loss per consumer.

E) gain per consumer is larger than the loss per producer.

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: NAU

AACSB: Reflective thinking

30) The national security argument is used by those who assert they want to

A) increase imports as a way of strengthening their country.

B) increase exports as a way of earning money to strengthen their country.

C) limit imports that compete with domestic producers important for national defense.

D) limit exports to control the flow of technology to third world nations.

E) limit all imports.

Skill: Level 1: Definition

Section: Checkpoint 9.4

Author: STUDY GUIDE

AACSB: Reflective thinking

73

31) The argument that it is necessary to protect a new industry to enable it to grow into a mature

industry that can compete in world markets is known as the

A) national security argument.

B) diversity argument.

C) infant-industry argument.

D) environmental protection argument.

E) national youth protection argument.

Skill: Level 1: Definition

Section: Checkpoint 9.4

Author: STUDY GUIDE

AACSB: Reflective thinking

32) ________ occurs when a foreign firm sells its exports at a lower price than its cost of

production.

A) Dumping

B) The trickle-down effect

C) Rent seeking

D) Tariff avoidance

E) Nontariff barrier protection

Skill: Level 1: Definition

Section: Checkpoint 9.4

Author: STUDY GUIDE

AACSB: Reflective thinking

33) The United States

A) needs tariffs to allow us to compete with cheap foreign labor.

B) does not need tariffs to allow us to compete with cheap foreign labor.

C) should not trade with countries that have cheap labor.

D) will not benefit from trade with countries that have cheap labor.

E) avoids trading with countries that have cheap labor.

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: STUDY GUIDE

AACSB: Reflective thinking

74

34) Why do governments in less-developed nations impose tariffs?

A) The government gains revenue from the tariff.

B) The government’s low-paid workers are protected from high-paid foreign workers.

C) The nation’s total income will be increased.

D) The national security of the country definitely is improved.

E) The government diversify its economy.

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: STUDY GUIDE

AACSB: Reflective thinking

35) What is a major reason international trade is restricted?

A) rent seeking

B) to allow competition with cheap foreign labor

C) to save jobs

D) to prevent dumping

E) to eliminate monopolies

Skill: Level 2: Using definitions

Section: Checkpoint 9.4

Author: STUDY GUIDE

AACSB: Reflective thinking

75

9.5 Chapter Figures

The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve

and DUS is the domestic demand curve. The United States trades freely with the rest of the

world. The world price of a T-shirt is $5.

1) In the figure above, with international trade U.S. consumers buy ________ million T-shirts

per year at ________ per T-shirt.

A) 60; $5

B) 40; $8

C) 20; $5

D) 40; $5

E) 60; $11

Skill: Level 3: Using models

Section: Checkpoint 9.1

Author: CO

AACSB: Analytical reasoning

76

2) Based on the figure above, as a result of international trade, U.S. domestic production

________ million T-shirts per year.

A) decreases by 20

B) increases by 20

C) decreases by 10

D) increases by 40

E) increases by 10

Skill: Level 3: Using models

Section: Checkpoint 9.1

Author: CO

AACSB: Analytical reasoning

3) In the figure above, with international trade the United States ________ million T-shirts per

year.

A) imports 40

B) exports 40

C) exports 20

D) imports 20

E) imports 60

Skill: Level 3: Using models

Section: Checkpoint 9.1

Author: CO

AACSB: Analytical reasoning

4) Based on the figure above, as a result of international trade, consumer surplus

A) increases by $150 million.

B) decreases by $150 million.

C) increases by $90 million.

D) decreases by $90 million.

E) remains unchanged.

Skill: Level 4: Applying models

Section: Checkpoint 9.2

Author: CO

AACSB: Analytical reasoning

77

5) Based on the figure above, as a result of international trade, producer surplus

A) increases by $150 million.

B) decreases by $150 million.

C) increases by $90 million.

D) decreases by $90 million.

E) remains unchanged.

Skill: Level 4: Applying models

Section: Checkpoint 9.2

Author: CO

AACSB: Analytical reasoning

6) Based on the figure above, international trade leads to

A) a net gain of surplus of $60 million.

B) a net loss of surplus of $60 million.

C) a net gain of surplus of $90 million.

D) a net loss of surplus of $90 million.

E) no net gain or loss of surplus.

Skill: Level 4: Applying models

Section: Checkpoint 9.2

Author: CO

AACSB: Analytical reasoning

78

The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve

and DUS is the domestic demand curve. The United States trades freely with the rest of the

world. The world price of an airplane is $150 million.

7) Based on the figure above, as a result of international trade, U.S. domestic production

________ airplanes per year.

A) decreases by 200

B) increases by 300

C) decreases by 100

D) increases by 500

E) increases by 200

Skill: Level 3: Using models

Section: Checkpoint 9.1

Author: CO

AACSB: Analytical reasoning

79

8) In the figure above, U.S. consumers buy ________ airplanes per year at ________ million per

airplane.

A) 200; $150

B) 400; $100

C) 700; $150

D) 400; $150

E) 200; $100

Skill: Level 3: Using models

Section: Checkpoint 9.1

Author: CO

AACSB: Analytical reasoning

9) In the figure above, the United States ________ airplanes per year.

A) imports 500

B) exports 500

C) exports 400

D) imports 400

E) exports 200

Skill: Level 3: Using models

Section: Checkpoint 9.1

Author: CO

AACSB: Analytical reasoning

10) Based on the figure above, as a result of international trade, consumer surplus

A) increases by $15 billion.

B) decreases by $15 billion.

C) increases by $27.5 billion.

D) decreases by $12.5 billion.

E) remains unchanged.

Skill: Level 4: Applying models

Section: Checkpoint 9.2

Author: CO

AACSB: Analytical reasoning

80

11) Based on the figure above, as a result of international trade, producer surplus

A) increases by $15 billion.

B) decreases by $15 billion.

C) increases by $27.5 billion.

D) decreases by $12.5 billion.

E) remains unchanged.

Skill: Level 4: Applying models

Section: Checkpoint 9.2

Author: CO

AACSB: Analytical reasoning

12) Based on the figure above, international trade leads to

A) a net gain in surplus of $12.5 billion.

B) a net loss of surplus of $12.5 billion.

C) a net gain in surplus of $27.5 billion.

D) a net loss of surplus of $15 billion.

E) no net gain or loss of surplus.

Skill: Level 4: Applying models

Section: Checkpoint 9.2

Author: CO

AACSB: Analytical reasoning