56) The United States exports a good if its no-trade U.S. price is ________ its world price. With
international trade, U.S. production of the good ________ compared to the level of no-trade
production.
A) higher than; does not change
B) higher than; increases
C) lower than; increases
D) the same as; increases
E) the same as; does not change
9.2 Winners, Losers, and Net Gains from Trades
1) International trade benefits
A) only the exporter.
B) only the importer.
C) both the exporter and the importer.
D) neither the exporter nor the importer.
E) the exporter at all times and sometimes also the importer.
2) Who gains from international trade?
A) only the exporting nation
B) only the importing nation
C) both the importing and the exporting nations
D) neither the importing nor the exporting nations
E) The gains depends on which nation gets to keep the total revenue from the sale
3) Most t-shirts bought by Americans are made in Asia. U.S. consumers of t-shirts buy these t-
shirts because
A) they pay a higher price for t-shirts made in Asia than they would for similar shirts made in the
United States.
B) they pay a lower price for t-shirts made in Asia than they would for similar shirts made in the
United States.
C) they must buy some goods or services produced in Asia.
D) by so doing they are helping preserve U.S. jobs producing t-shirts.
E) they know that the United States has a comparative advantage in wearing t-shirts.
4) Most t-shirts bought by Americans are made in Asia. Producers in Asia making t-shirts trade
with America because they
A) receive a lower price than they would receive from another buyer.
B) receive a higher price than they would receive from another buyer.
C) must export something to the United States.
D) cannot produce enough t-shirts for their own domestic consumption.
E) cannot lower their price any lower and still make a profit.
5) After a nation starts importing a good from overseas, the domestic price of the good
A) falls.
B) stays the same.
C) rises.
D) might change, but more information about what the country exports is needed to determine if
the price rises, falls, or does not change.
E) might change, but more information about what else the country imports is needed to
determine if the price rises, falls, or does not change.
6) When a nation starts importing a good or service, domestic employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country imports is needed to
determine if employment increases, decreases, or does not change.
E) might change, but more information about what the country exports is needed to determine if
employment increases, decreases, or does not change.
7) When a nation imports a good or service, the nation’s consumer surplus ________, its
producer surplus ________, and its total surplus ________.
A) increases; decreases; increases
B) increases; decreases; decreases
C) increases; increases; increases
D) decreases; decreases; decreases
E) decreases; decreases; increases
8) When a nation imports a good, its ________ surplus decreases and its ________ surplus
increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
9) When a nation imports a good, its ________ surplus decreases and its ________ surplus
increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; total
E) total; consumer
10) When a nation imports a good, its ________ surplus increases and its ________ surplus
increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; total
E) total; consumer
11) When a nation imports a good, its consumer surplus ________, and its producer surplus
________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; increases
12) When a nation starts importing a good or service, the domestic production of the good or
service
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what the country exports is needed to determine if
production increases, decreases, or does not change.
E) might change, but more information about what else the country imports is needed to
determine if production increases, decreases, or does not change.
13) The above figure shows the U.S. market for chocolate. With no international trade,
consumer surplus is equal to
A) area A + area B + area C + area D.
B) area A.
C) area B + area C + area D.
D) area C + area D.
E) area E.
14) The above figure shows the U.S. market for chocolate. With international trade, consumer
surplus is equal to
A) area A + area B + area C + area D.
B) area A.
C) area B + area C + area D.
D) area C + area D.
E) area E.
15) The above figure shows the U.S. market for chocolate. With no international trade, producer
surplus is equal to
A) area A + area B + area C + area D.
B) area B + area C + area D + area E.
C) area B + area C + area D.
D) area C + area D.
E) area E.
16) The above figure shows the U.S. market for chocolate. With international trade, the gain in
total surplus is equal to
A) area B.
B) area A + area B + area C + area D.
C) area B + area C + area D + area E.
D) area C + area D.
E) area B + area C + area D.
17) The above figure shows the U.S. market for chocolate. With no international trade,
consumer surplus is equal to ________ and producer surplus is equal to
A) area A + area B + area C + area D; area E.
B) area B + area C + area D; area A + area E.
C) area A; area E.
D) area C + area D; area B + area E.
E) area E; area A + area B + area C + area D.
18) The above figure shows the U.S. market for chocolate. With international trade, ________ is
the transfer of surplus from producers to consumers.
A) area B +area C + area D
B) area B
C) area C + area D
D) area A
E) area E
19) When a nation exports a good or service in which it has a comparative advantage,
employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country exports is needed to
determine if employment increases, decreases, or does not change.
E) might change, but more information about what the country imports is needed to determine if
employment increases, decreases, or does not change.
20) When a nation exports a good or service in which it has a comparative advantage, production
of the good or service
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what the country imports is needed to determine if
production increases, decreases, or does not change.
E) might change, but more information about what else the country exports is needed to
determine if production increases, decreases, or does not change.
21) When a nation exports a good or service, employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country exports is needed to
determine if employment increases, decreases, or does not change.
E) might change, but more information about what the country imports is needed to determine if
employment increases, decreases, or does not change.
22) When a nation exports a good, its consumer surplus ________, and its producer surplus
________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; increases
23) When a nation exports a good, its ________ surplus decreases and its ________ surplus
increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
24) When a nation exports a good, its ________ surplus decreases and its ________ surplus
increases.
A) consumer; total
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
25) When a nation exports a good, its ________ surplus increases and its ________ surplus
increases.
A) consumer; total
B) consumer; consumer
C) producer; producer
D) producer; total
E) total; consumer
26) When a nation exports a good or service, the nation’s consumer surplus ________, its
producer surplus ________, and its total surplus ________.
A) increases; decreases; increases
B) increases; decreases; decreases
C) increases; increases; increases
D) decreases; decreases; decreases
E) decreases; increases; increases
27) The above figure shows the U.S. market for wheat. When there is no international trade,
consumer surplus is equal to ________.
A) area A + area B + area C
B) area A
C) area E + area F
D) area B + area C + area D
E) area A + area B + area C + area D
28) The above figure shows the U.S. market for wheat. With international trade, consumer
surplus is equal to ________.
A) area A + area B + area C
B) area E + area F
C) area B + area C + area D
D) area A + area B + area C + area D
E) area A
29) The above figure shows the U.S. market for wheat. Without international trade, producer
surplus is equal to ________.
A) area B + area C + area E + area F
B) area A
C) area B + area C +area D + area E + area F
D) area E + area F
E) area A + area B + area C + area D
30) The above figure shows the U.S. market for wheat. With international trade, the gain in total
surplus is equal to ________.
A) area A
B) area B + area C
C) area D
D) area C + area F
E) area C + area D + area F
31) The above figure shows the U.S. market for wheat. With no international trade, consumer
surplus is equal to ________ and producer surplus is equal to ________.
A) area A; area B + area C + area E + area F
B) area A + area B + area C; area E + area F
C) area E + area F; area A
D) area B + area C + area D; area E + area F
E) area A + area B + area C + area D; area E + area F
32) The above figure shows the U.S. market for wheat. With international trade, ________ is the
transfer of surplus from consumers to producers.
A) area B + area C
B) area D
C) area C + area F
D) area C + area D
E) area B + area C + area D
33) When a nation exports a good, its total surplus ________, and when it imports a good, its
total surplus ________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; does not change
34) When a nation exports a good, its ________ surplus increases, and when it imports a good,
its ________ surplus increases.
A) total; total
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
35) When a nation exports a good, its ________ surplus increases, and when it imports a good,
its ________ surplus increases.
A) consumer; total
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
36) When a nation exports a good, its ________ surplus increases, and when it imports a good,
its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
37) When a nation exports a good, its ________ surplus decreases, and when it imports a good,
its ________ surplus decreases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
38) International trade is definitely in the social interest if
A) consumer surplus increases.
B) producer surplus increases.
C) consumer surplus does not decreases.
D) producer surplus does not decreases.
E) total surplus increases.
39) Imports ________ consumer surplus, ________ producer surplus, and ________ total
surplus.
A) decrease; decrease; decrease
B) increase; increase; increase
C) increase; decrease; decrease
D) increase; decrease; increase
E) decrease; increase; increase
40) When a country imports a good, the ________ in consumer surplus is ________ the
________ in producer surplus.
A) decrease; larger than; increase
B) decrease; smaller than; increase
C) increase; smaller than; decrease
D) increase; equal to; decrease
E) increase; larger than; decrease
41) When a country exports a good, the country’s producer surplus ________, consumer surplus
________, and the country ________ from the trade.
A) increases; increases; gains
B) decreases; increases; gains
C) increases; decreases; gains
D) decreases; decreases; loses
E) increases; decreases; loses
42) Which of the following is correct?
i. U.S. total surplus decreases when the United States exports a good.
ii. U.S. total surplus decreases when the United States imports a good.
iii. U.S. total surplus increases when the United States imports a good and when it exports a
good.
A) i only
B) iii only
C) i and ii
D) ii only
E) None of the above because the U.S. total surplus does not change as a result of trade
9.3 International Trade Restrictions
1) A tariff is
A) a tax imposed on imports.
B) any non-tax action used to restrict trade.
C) a tax imposed on exports.
D) any non-subsidy used to increase trade.
E) a subsidy granted to imports.
2) A tariff is a tax
A) on an exported good.
B) on an imported good.
C) imposed on all traded goods.
D) imposed on people’s income.
E) imposed on the difference between the value of the goods a firm imports and the value of the
goods it exports.
3) A tax on a good that is imposed by the importing country is called a
A) tariff.
B) nontariff barrier.
C) quantitative restriction.
D) licensing regulation.
E) trade constraint.
4) A tariff is
A) the domestic price charged by an exporting firm.
B) a tax on an imported good imposed by the importing country.
C) a licensing regulation that limits imports.
D) price dumping by a firm engaging in international trade.
E) the world price of a good or service.
5) Since the mid-1970s, the average U.S. tariff rate is
A) less than 5 percent.
B) between 6 percent and 15 percent.
C) between 16 percent and 25 percent.
D) between 26 percent and 35 percent.
E) larger than 36 percent.
6) Looking at the average tariff rate in the United States since 1930, we see that
A) at first tariffs declined, but have recently risen.
B) tariffs have trended downward for most of the period.
C) tariff levels have remained high, at over 50 percent throughout the period.
D) while we talk about free trade, tariff levels have risen over the last 30 years.
E) tariffs were made illegal in the United States in 1955.
7) During the past 70 years, the peak average tariff rate in the United States stemmed from the
A) creation of GATT in the middle of the 1940s.
B) Kennedy Administration in the early 1960s.
C) Uruguay round of GATT in the 1980s.
D) Smoot-Hawley Tariff Act in the early 1930s.
E) Clinton-Bush tariff of 2000-2001.
8) The agreement between the United States, Mexico, and Canada that sought to lower trade
barriers is known as
A) the General Agreement on Tariffs and Trade.
B) the North American Free Trade Agreement.
C) the World Trade Organization.
D) the Smoot-Hawley Tariff Act.
E) the New World Free Trade Agreement.
9) In the wake of worsening relations with China, some Americans called for an increase in
tariffs on Chinese products coming into America. If higher tariffs are imposed on clothing
produced in China, the price of clothing in America would
A) decrease.
B) increase.
C) not change.
D) first increase then decrease.
E) first decrease then increase.
10) After a tariff is imposed on a good, the price of the good
A) does not change.
B) falls.
C) rises.
D) rises only if the domestic demand for the good does not change.
E) might rise, fall, or not change depending on whether the government did or did not
simultaneously impose a quota.
11) After a tariff is imposed, consumers must pay a price equal to the
A) world market price.
B) domestic equilibrium price when there is no trade.
C) world market price plus the tariff.
D) world market price less the tariff.
E) domestic equilibrium price when there is no trade plus the tariff.
12) Suppose the world price of widgets is $5 each. If a widget-importing country imposed a $2
per widget tariff, what price would that country’s consumers pay for widgets?
A) $10
B) $7
C) $5
D) $3
E) A price that is greater than $5 and less than $7
13) Which of the following chain of events occurs when a tariff is imposed on a good?
A) Domestic prices rise, shifting the domestic supply curve rightward.
B) Domestic prices fall, shifting the demand curve rightward, and consumers buy more of the
good.
C) Domestic prices fall, decreasing the domestic quantity supplied and increasing the quantity
demanded.
D) Domestic prices rise, decreasing the quantity demanded and increasing the domestic quantity
supplied.
E) Domestic prices rise, shifting the demand curve leftward and the domestic supply curve
rightward.
14) The imposition of tariffs on Korean steel has led to ________ in imports of Korean steel to
the United States and ________ the price of steel in the United States.
A) no change; raised
B) a decrease; raised
C) an increase; lowered
D) a decrease; no change in
E) an increase; raised
15) As a result of U.S. tariffs imposed on wool from New Zealand, the quantity of this wool that
is imported has
A) decreased.
B) increased a little.
C) not changed.
D) increased a lot.
E) changed but whether it has increased or decreased is ambiguous.