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Application: International Trade 2385
229.
When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer
of a particular
good,
a.
producer surplus increases and total surplus increases in the market for that good.
b.
producer surplus increases and total surplus decreases in the market for that good.
c.
producer surplus decreases and total surplus increases in the market for that good.
d.
producer surplus decreases and total surplus decreases in the market for that good.
230.
When a country that exported a particular good abandons a free-trade policy and adopts a no-
trade policy,
a.
consumer surplus increases and total surplus increases in the market for that good.
b.
consumer surplus increases and total surplus decreases in the market for that good.
c.
consumer surplus decreases and total surplus increases in the market for that good.
d.
consumer surplus decreases and total surplus decreases in the market for that good.
231.
When a country that exported a particular good abandons a free-trade policy and adopts a no-
trade policy,
a.
producer surplus increases and total surplus increases in the market for that good.
b.
producer surplus increases and total surplus decreases in the market for that good.
c.
producer surplus decreases and total surplus increases in the market for that good.
d.
producer surplus decreases and total surplus decreases in the market for that good.
232.
When a country that imported a particular good abandons a free-trade policy and adopts a no-
trade policy,
a.
consumer surplus increases and total surplus increases in the market for that good.
b.
consumer surplus increases and total surplus decreases in the market for that good.
c.
consumer surplus decreases and total surplus increases in the market for that good.
d.
consumer surplus decreases and total surplus decreases in the market for that good.
233.
Denmark is an importer of computer chips and adds a $5 per chip tariff to the world price of $12
per chip. Suppose
Denmark removes the tariff. Which of the following outcomes is not possible?
a.
More Danish-produced chips are sold in Denmark.
b.
More foreign-produced chips are sold in Denmark.
c.
Danish consumers of chips become better off.
d.
Total surplus in the Danish chip market increases.
234.
Japan imposes a $300 per ton tariff on imported steel, raising the price charged in Japan to
$1,000. Using only this
information, which of the following statements is correct?
a.
The world price for steel is $300.
b.
The world price for steel is $700.
c.
The world price for steel is $1,000.
d.
The world price for steel is $1,300.
235.
When a country allows international trade and becomes an importer of a good,
a.
domestic producers of the good become better off.
b.
domestic consumers of the good become better off.
c.
the gains of the winners fall short of the losses of the losers.
d.
All of the above are correct.
236.
The world price of a ton of steel is $1,000. Before Russia allowed trade in steel, the price of a
ton of steel there
was $650. Once Russia allowed trade in steel with other countries, Russia
began
a.
exporting steel and the price per ton in Russia remained at $650.
b.
exporting steel and the price per ton in Russia increased to $1,000.
c.
importing steel and the price per ton in Russia remained at $650.
d.
importing steel and the price per ton in Russia increased to $1,000.
237.
The world price of a ton of steel is $650. Before Russia allowed trade in steel, the price of a ton
of steel there was
$1,000. Once Russia allowed trade in steel with other countries, Russia began
a.
exporting steel and the price per ton in Russia decreased to $650.
b.
exporting steel and the price per ton in Russia remained at $1,000.
c.
importing steel and the price per ton in Russia decreased to $650.
d.
importing steel and the price per ton in Russia remained at $1,000.
238.
If Freedonia changes its laws to allow international trade in software and the world price is
higher than its domestic
price, then it must be the case that
a.
both consumer surplus and producer surplus increase.
b.
consumer surplus increases and producer surplus decreases.
c.
consumer surplus decreases and producer surplus increases.
d.
both consumer surplus and producer surplus decrease.
239.
If Freedonia changes its laws to allow international trade in software and the world price is lower
than its domestic
price, then it must be the case that
a.
both consumer surplus and producer surplus increase.
b.
consumer surplus increases and producer surplus decreases.
c.
consumer surplus decreases and producer surplus increases.
d.
both consumer surplus and producer surplus decrease.
240.
Domestic producers of a good become worse off, and domestic consumers of a good become
better off, when a
country begins allowing international trade in that good and
a.
the country becomes an importer of the good as a result.
b.
the world price exceeds the domestic price of the good that prevailed before international
trade was allowed.
c.
the country in question has a comparative advantage, relative to other countries, in producing
the good.
d.
total surplus does not change as a result.
241.
When a country allows trade and becomes an exporter of a good,
a.
domestic producers become better off, and domestic consumers become worse off.
b.
domestic producers become worse off, and domestic consumers become better off.
c.
domestic producers become better off, but the effect on the well-being of domestic consumers
is ambiguous.
d.
domestic consumers become worse off, but the effect on the well-being of domestic producers
is ambiguous.
242.
When a country allows trade and becomes an importer of a good,
a.
domestic producers become better off, and domestic consumers become worse off.
b.
domestic producers become worse off, and domestic consumers become better off.
c.
domestic consumers become better off, but the effect on the well-being of domestic producers
is ambiguous.
d.
domestic producers become worse off, but the effect on the well-being of domestic consumers
is ambiguous.
243.
In the market for apples in a certain country, consumer surplus increases and total surplus
increases when that
country
a.
abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of apples.
b.
abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of apples.
c.
abandons a free-trade policy, adopts a no-trade policy, and becomes an importer of apples.
d.
abandons a free-trade policy, adopts a no-trade policy, and becomes an exporter of apples.
Multiple Choice – Section 02b: The Winners and Losers from Trade
Figure 9-20
The figure illustrates the market for rice in Vietnam.
1.
Refer to Figure 9-20. From the figure it is apparent that
a.
Vietnam will experience a shortage of rice if trade is not allowed.
b.
Vietnam will experience a surplus of rice if trade is not allowed.
c.
Vietnam has a comparative advantage in producing rice, relative to the rest of the world.
d.
foreign countries have a comparative advantage in producing rice, relative to Vietnam.
2.
Refer to Figure 9-20. From the figure it is apparent that
a.
Vietnam has a comparative advantage in producing rice, relative to the rest of the world.
b.
foreign countries have a comparative advantage in producing rice, relative to Vietnam.
c.
Vietnam has an absolute advantage in producing rice, relative to the rest of the world.
d.
foreign countries have an absolute advantage in producing rice, relative to Vietnam.
3.
Refer to Figure 9-20. In the absence of trade, total surplus in the Vietnamese rice market
amounts to
a. 9,250.
b. 10,000.
c. 12,000.
d. 13,000.
4.
Refer to Figure 9-20. Given that Vietnam is a small country, it is apparent from the figure that
a.
Vietnam will export rice if trade is allowed.
b.
Vietnam will import rice if trade is allowed.
c.
Vietnam has nothing to gain either by importing or exporting rice.
d.
the world price will fall if Vietnam begins to allow its citizens to trade with other countries.
5.
Refer to Figure 9-20. With trade, Vietnam will
a.
export 1,000 units of rice.
b.
export 1,500 units of rice.
c.
import 1,000 units of rice.
d.
import 1,500 units of rice.
6.
Refer to Figure 9-20. With trade, Vietnamese rice producers will produce
a.
2,000 units of rice and their producer surplus will be 4,000.
b.
2,000 units of rice and their producer surplus will be 7,500.
c.
3,000 units of rice and their producer surplus will be 7,500.
d.
3,000 units of rice and their producer surplus will be 9,000.
7.
Refer to Figure 9-20. Vietnam’s gains from trade in rice amount to
a.
750.
b. 1,000.
c. 1,250.
d. 1,500.
2396 Application: International Trade
Scenario 9-2
•
For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
where represents the domestic quantity of cardboard demanded, in tons, and
represents the
price of a ton of cardboard.
•
For Boxland, the equation of the domestic supply curve for cardboard is
where represents the domestic quantity of cardboard supplied, in tons, and again
represents
the price of a ton of cardboard.
8.
Refer to Scenario 9-2. If Boxland prohibits international trade in cardboard, then the equilibrium
price of a ton of
cardboard is
a.
$36 and the equilibrium quantity of cardboard is 74 tons.
b.
$44 and the equilibrium quantity of cardboard is 88 tons.
c.
$52 and the equilibrium quantity of cardboard is 96 tons.
d.
$60 and the equilibrium quantity of cardboard is 100 tons.
9.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, if Boxland goes from
prohibiting
international trade in cardboard to allowing international trade in cardboard,
a.
domestic producers of cardboard become better off and domestic consumers of cardboard
become better off.
b.
domestic producers of cardboard become better off and domestic consumers of cardboard
become worse off.
c.
domestic producers of cardboard become worse off and domestic consumers of cardboard
become better off.
d.
domestic producers of cardboard become worse off and domestic consumers of cardboard
become worse
off.
10.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45 and international trade is
allowed. Then
Boxland’s consumers demand
a.
110 tons of cardboard and Boxland’s producers supply 75 tons of cardboard.
b.
110 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
c.
96 tons of cardboard and Boxland’s producers supply 75 tons of cardboard.
d.
96 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
11.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative to the no-
trade situation,
international trade in cardboard produces which of the following results for
Boxland?
a.
It increases consumer surplus, decreases producer surplus, and increases total surplus.
b.
It increases consumer surplus, increases producer surplus, and increases total surplus.
c.
It increases consumer surplus, decreases producer surplus, and decreases total surplus.
d.
It decreases consumer surplus, increases producer surplus, and increases total surplus.
12.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then Boxland’s gains from
international trade
in cardboard amount to
a. $88.75.
b. $102.50.
c. $122.50.
d. $135.00.
13.
Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative to the no-
trade situation,
international trade in cardboard
a.
benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00.
b.
benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.
c.
benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50.
d.
harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.
14.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, if Boxland goes from
prohibiting
international trade in cardboard to allowing international trade in cardboard,
a.
domestic producers of cardboard become better off and domestic consumers of cardboard
become better off.
b.
domestic producers of cardboard become better off and domestic consumers of cardboard
become worse off.
c.
domestic producers of cardboard become worse off and domestic consumers of cardboard
become better off.
d.
domestic producers of cardboard become worse off and domestic consumers of cardboard
become worse
off.
15.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60 and international trade is
allowed. Then Boxland’s consumers demand
a.
110 tons of cardboard and Boxland’s producers supply 120 tons of cardboard.
b.
96 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
c.
96 tons of cardboard and Boxland’s producers supply 115 tons of cardboard.
d.
80 tons of cardboard and Boxland’s producers supply 120 tons of cardboard.
16.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, relative to the no-
trade situation,
international trade in cardboard produces which of the following results for
Boxland?
a.
It decreases consumer surplus, increases producer surplus, and decreases total surplus.
b.
It decreases consumer surplus, increases producer surplus, and increases total surplus.
c.
It decreases consumer surplus, decreases producer surplus, and decreases total surplus.
d.
It increases consumer surplus, increases producer surplus, and increases total surplus.
17.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then Boxland’s gains from
international trade in cardboard amount to
a. $145.
b. $160.
c. $210.
d. $320.
18.
Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, relative to the no-
trade situation,
international trade in cardboard
a.
benefits Boxlandian consumers by $750 and harms Boxlandian producers by $660.
b.
harms Boxlandian consumers by $736 and harms Boxlandian producers by $598.
c.
harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864.
d.
harms Boxlandian consumers by $804 and benefits Boxlandian producers by $984.
2402 Application: International Trade
Figure 9-21
The following diagram shows the domestic demand and domestic supply for a market. In
addition, assume that the
world price in this market is $40 per unit.
19.
Refer to Figure 9-21. With free trade, the domestic price and domestic quantity demanded are
a. $30 and 1,200.
b. $40 and 800.
c. $30 and 800.
d. $40 and 1,600.
20.
Refer to Figure 9-21. With free trade, domestic production and domestic consumption,
respectively, are
a. 1,200 and 800.
b. 1,600 and 1,200.
c. 1,600 and 800.
d. 1,200 and 1,200
21.
Refer to Figure 9-21. Consumer surplus with free trade is
a. $4,000.
b. $8,000.
c. $16,000.
d. $18,000.
22.
Refer to Figure 9-21. Producer surplus with free trade is
a. $14,000.
b. $18,000.
c. $24,000.
d. $32,000.
23.
Refer to Figure 9-21. With free trade allowed, this country
a.
exports 200 units of the good.
b.
exports 400 units of the good.
c.
imports 400 units of the good.
d.
exports 800 units of the good.
