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Application: International Trade 2405
Figure 9-22
The following diagram shows the domestic demand and domestic supply in a market. In addition,
assume that the
world price in this market is $40 per unit.
24.
Refer to Figure 9-22. With free trade, consumer surplus is
a.
$48,000 and producer surplus is $48,000.
b.
$18,000 and producer surplus is $12,000.
c.
$108,000 and producer surplus is $12,000.
d.
$18,000 and producer surplus is $48,000.
25.
Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. With trade and
a tariff, consumer
surplus is
a.
$75,000 and producer surplus is $27,000.
b.
$63,000 and producer surplus is $12,000.
c.
$75,000 and producer surplus is $12,000.
d.
$63,000 and producer surplus is $27,000.
26.
Refer to Figure 9-22. With free trade, total surplus is
a. $30,000.
b. $66,000.
c. $96,000.
d. $120,000.
27.
Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. With trade and
a tariff, total
surplus is
a. $96,000.
b. $114,000.
c. $120,000.
d. $126,000.
28.
Refer to Figure 9-22. With free trade, the country imports
a.
300 units of the good.
b.
600 units of the good.
c.
900 units of the good.
d.
1,200 units of the good.
29.
Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. The amount of
revenue collected
by the government from the tariff is
a. $6,000.
b. $9,000.
c. $12,000.
d. $15,000.
30.
Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. The deadweight
loss caused by the
tariff is
a. $6,000.
b. $9,000.
c. $12,000.
d. $15,000.
31.
Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. Relative to the
free-trade outcome,
the imposition of the tariff
a.
decreases imports of the good by 300 units and increases domestic production of the good by
300 units.
b.
decreases imports of the good by 300 units and increases domestic production of the good by
600 units.
c.
decreases imports of the good by 600 units and increases domestic production of the good by
300 units.
d.
decreases imports of the good by 600 units and increases domestic production of the good by
600 units.
32.
When a country allows trade and becomes an exporter of bicycles,
a.
domestic producers of bicycles are worse off, domestic consumers of bicycles are better off,
and the
economic well-being of the country rises.
b.
domestic producers of bicycles are worse off, domestic consumers of bicycles are better off,
and the
economic well-being of the country falls.
c.
domestic producers of bicycles are better off, domestic consumers of bicycles are worse off,
and the
economic well-being of the country rises.
d.
domestic producers of bicycles are better off, domestic consumers of bicycles are worse off,
and the
economic well-being of the country falls.
33.
When a country allows trade and becomes an importer of jet skis,
a.
domestic producers of jet skis are worse off, domestic consumers of jet skis are better off, and
the economic
well-being of the country rises.
b.
domestic producers of jet skis are worse off, domestic consumers of jet skis are better off, and
the economic
well-being of the country falls.
c.
domestic producers of jet skis are better off, domestic consumers of jet skis are worse off, and
the economic
well-being of the country rises.
d.
domestic producers of jet skis are better off, domestic consumers of jet skis are worse off, and
the economic
well-being of the country falls.
Figure 9-23
The following diagram shows the domestic demand and domestic supply for a market. Assume
that the world price
in this market is $120 per unit.
34.
Refer to Figure 9-23. With free trade, the domestic price and domestic quantity demanded are
a.
$90 and 5.
b.
$90 and 10.
c.
$120 and 5.
d.
$120 and 18.
35.
Refer to Figure 9-23. With free trade, the domestic price and domestic quantity supplied are
a. $90 and 10.
b. $90 and 18.
c. $120 and 5.
d. $120 and 18.
36.
Refer to Figure 9-23. With free trade allowed, this country
a.
exports 5 units of the good.
b.
imports 5 units of the good.
c.
exports 13 units of the good.
d.
imports 13 units of the good.
37.
Refer to Figure 9-23. Consumer surplus with free trade is
a. $75.
b. $150.
c. $200.
d. $300.
38.
Refer to Figure 9-23. Producer surplus with free trade is
a. $200.
b. $450.
c. $630.
d. $1,080
Figure 9-24
The following diagram shows the domestic demand and supply in a market. Assume that the
world price in this
market is $20 per unit.
39.
Refer to Figure 9-24. With free trade, the country
a.
exports 20 units of the good.
b.
imports 20 units of the good.
c.
exports 30 units of the good.
d.
imports 30 units of the good.
40.
Refer to Figure 9-24. With free trade, consumer surplus is
a.
$400 and producer surplus is $100.
b.
$400 and producer surplus is $400.
c.
$900 and producer surplus is $100.
d.
$900 and producer surplus is $400.
41.
Refer to Figure 9-24. With free trade, total surplus is
a. $500.
b. $800.
c. $1,000.
d. $1,300.
42.
Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and
a tariff, consumer
surplus is
a.
$625 and producer surplus is $25.
b.
$625 and producer surplus is $225.
c.
$1,225 and producer surplus is $25.
d.
$1,225 and producer surplus is $225.
43.
Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The amount of
revenue collected
by the government from the tariff is
a.
$50.
b.
$100.
c.
$150.
d. $200.
44.
Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. With trade and
a tariff, total
surplus is
a. $750.
b. $900.
c. $950.
d. $1,550.
45.
Refer to Figure 9-24. Suppose the government imposes a tariff of $10 per unit. The deadweight
loss caused by the
tariff is
a.
$25.
b.
$50.
c.
$75.
d.
d. $100.
Application: International Trade 2417
Figure 9-25
The following diagram shows the domestic demand and supply in a market. Assume that the
world price in this
market is $10 per unit.
46.
Refer to Figure 9-25. With free trade, total surplus is
a. $800.
b. $1,200.
c. $1,600.
d. $2,000.
47.
Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. With trade and a
tariff, total surplus
is
a. $1,700.
b. $1,800.
c. $1,900.
d. $2,000.
48.
Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. The amount of
revenue collected by
the government from the tariff is
a.
$50.
b.
$100.
c. $150.
d. $200.
49.
Refer to Figure 9-25. Suppose the government imposes a tariff of $5 per unit. The deadweight
loss caused by the
tariff is
a.
$25.
b.
$50.
c.
$75.
d. $100.
50.
Refer to Figure 9-25. With free trade and a $5 per unit tariff, the country
a.
exports 20 units of the good.
b.
imports 20 units of the good.
c.
exports 40 units of the good.
d.
imports 40 units of the good.
2420 Application: International Trade
Multiple Choice – Section 03: The Arguments for Restricting Trade
1.
Congressman Smith cites the “jobs argument” when he argues in favor of restrictions on trade; he
argues that
everything can be produced at lower cost in other countries. The likely flaw in
Congressman Smith’s reasoning is
that he ignores the fact that
a.
there is no evidence that any worker ever lost his or her job because of free trade.
b.
unemployment of labor is not a serious problem relative to other economic problems.
c.
the gains from trade are based on comparative advantage.
d.
the gains from trade are based on absolute advantage.
2.
“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.
3.
One should be especially wary of the national-security argument for restricting trade when that
argument is made by
a.
representatives of industry.
b.
representatives of the defense establishment.
c.
members of households.
d.
foreign government officials.
4.
The “unfaircompetition” argument might be cited by an American who believes that
a.
almost every country has a comparative advantage, relative to the United States, in producing
almost all
goods.
b.
young industries should be protected against foreign competition until they become profitable.
c.
the American automobile industry should be protected against Japanese firms that are able to
produce
automobiles at relatively low cost.
d.
the French government’s subsidies to French farmers justify restrictions on American imports of
French
agricultural products.
5.
If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not
remove agricultural
subsidies, the United States will be
a.
better off no matter how Honduras responds.
b.
better off if Honduras gives in, and will be no worse off if it doesn't.
c.
worse off if Honduras doesn't give in to the threat.
d.
worse off no matter how Honduras responds.
6.
Which of the following arguments for trade restrictions is often advanced?
a.
Trade restrictions make all Americans better off.
b.
Trade restrictions increase economic efficiency.
c.
Trade restrictions are necessary for economic growth.
d.
Trade restrictions are sometimes necessary for national security.
7.
About what percent of total world trade is accounted for by countries that belong to the World
Trade Organization?
a.
54 percent
b.
72 percent
c.
89 percent
d.
97 percent
8.
At present, the United States uses a system of quotas to limit the amount of sugar imported into the
country. Which
of the following statements is most likely true?
a.
The quotas are probably the result of lobbying from U.S. consumers of sugar. The quotas
increase consumer
surplus for the United States, reduce producer surplus for the United States,
and harm foreign sugar
producers.
b.
The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas
increase producer
surplus for the United States, reduce consumer surplus for the United States,
and harm foreign sugar
producers.
c.
The quotas are probably the result of lobbying from foreign producers of sugar. The quotas
reduce producer
surplus for the United States, increase consumer surplus for the United States,
and benefit foreign sugar
producers.
d.
U.S. lawmakers did not need to be lobbied to impose the quotas because total surplus for the
United States is
higher with the quotas than without them.
9.
Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German
wheat farmers. As a
result of the French subsidy, sales of French wheat to Germany
a.
may prompt German farmers to invoke the unfair-competition argument.
b.
increase the consumer surplus of German buyers of wheat.
c.
increase the total surplus of the German people.
d.
All of the above are correct.
10.
Congresswoman Gaga represents a state in which several firms manufacture furniture. She wants
to impose tariffs
on all imported furniture. Which of the following is the least likely consequence
of such tariffs?
a.
Domestic furniture buyers will lose consumer surplus, have less variety, and will pay higher
prices.
b.
Domestic furniture producers will gain producer surplus.
c.
Domestic furniture producers will have a higher rate of technological advance.
d.
Domestic furniture producers will have more market power.
