2464 Application: International Trade
64. What are the arguments in favor of trade restrictions, and what are the counterarguments?
According to most economists, do any of these arguments really justify trade restrictions?
Explain.
Problems
1. Suppose in the country of Jumanji that the price of coffee with no trade allowed is below the world
price of coffee. If Jumanji allows free trade, will Jumanji be an importer or an exporter of coffee?
Application: International Trade 2465
2. Suppose in the country of Jumanji that the price of wheat with no trade allowed is above the world
price of wheat. If Jumanji allows free trade, will Jumanji be an importer or an exporter of wheat?
3. Suppose in the country of Nash that the price of corn is $4 per bushel with no trade allowed. If the
world price of corn is $3 per bushel and if Nash allows free trade, will Nash be an importer or an
exporter of corn?
4. Suppose in the country of Nash that the price of oranges is $8 per bushel with no trade allowed. If
the world price of oranges is $10 per bushel and if Nash allows free trade, will Nash be an
importer or an exporter of oranges?
2466 Application: International Trade
5. A tax on an imported good is called a .
6. A country has a comparative advantage in a product if the world price is than that country’s
domestic price without trade.
7. Suppose the world price of coffee is $3 per pound and Brazil’s domestic price of coffee without
trade is $2 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of
coffee?
Application: International Trade 2467
8. Suppose the world price of coffee is $2 per pound and Brazil’s domestic price of coffee without
trade is $3 per pound. If Brazil allows free trade, will Brazil be an importer or an exporter of
coffee?
Figure 9-26
The following diagram shows the domestic demand and domestic supply curves in a market.
9. Refer to Figure 9-26. With no trade allowed, what are the equilibrium price and equilibrium
quantity in this market?
2468 Application: International Trade
10. Refer to Figure 9-26. With no trade allowed, how much are consumer surplus, producer surplus,
and total surplus in this market?
11. Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free
trade, how many units will domestic consumers demand, and how many units will domestic
producers produce?
12. Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free
trade, will the country import or export this good, and how many units will be imported/exported?
Application: International Trade 2469
13. Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free
trade, how much are consumer surplus, producer surplus, and total surplus with trade?
14. Refer to Figure 9-26. Suppose the world price in this market is $7. If the country allows free
trade, by how much do consumer surplus, producer surplus, and total surplus change with trade?
Figure 9-27
The following diagram shows the domestic demand and supply curves in a market. Assume that
the world price in this market is $20 per unit.
2470 Application: International Trade
15. Refer to Figure 9-27. With no trade allowed, what are the equilibrium price and equilibrium
quantity in this market?
16. Refer to Figure 9-27. With no trade allowed, how much are consumer surplus, producer
surplus, and total surplus?
17. Refer to Figure 9-27. If the country allows free trade, how many units will domestic consumers
demand and how many units will domestic producers produce?
Application: International Trade 2471
18. Refer to Figure 9-27. If the country allows free trade, will the country import or export this
good, and how many units will be imported/exported?
19. Refer to Figure 9-27. If the country allows free trade, how much are consumer surplus,
producer surplus, and total surplus with trade?
20. Refer to Figure 9-27. If the country allows free trade, by how much do consumer surplus,
producer surplus, and total surplus change with trade?
2472 Application: International Trade
21. Refer to Figure 9-27. Suppose the country imposes a $5 per unit tariff. If the country allows
trade with a tariff, how much are consumer surplus, producer surplus, tariff revenue, and total
surplus?
22. Refer to Figure 9-27. Suppose the country imposes a $5 per unit tariff. If the country allows
trade with a tariff, how much is the deadweight loss caused by the tariff?
Scenario 9-3
Suppose domestic demand and domestic supply in a market are given by the following equations:
23. Refer to Scenario 9-3. With no trade allowed, what are the equilibrium price and quantity in this
market?
Application: International Trade 2473
24. Refer to Scenario 9-3. With no trade allowed, how much are consumer surplus, producer
surplus, and total surplus in this market?
25. Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country
allows free trade, will the country import or export this good, and how many units will be
imported/exported?
26. Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country
allows free trade, how much are consumer surplus, producer surplus, and producer surplus with
trade?
2474 Application: International Trade
27. Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit. If the country
allows free trade, by how much do consumer surplus, producer surplus, and producer surplus
change?
28. Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit, and suppose the
country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much are
consumer surplus, producer surplus, tariff revenue, and total surplus?
29. Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit, and suppose the
country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much is the
deadweight loss caused by the tariff?
Application: International Trade 2475
Figure 9-28
The following diagram shows the domestic demand and domestic supply curves in a market.
30. Refer to Figure 9-28. With no trade allowed, what are the equilibrium price and equilibrium
quantity in this market?
31. Refer to Figure 9-28. With no trade allowed, how much are consumer surplus, producer surplus,
and total surplus in this market?
2476 Application: International Trade
32. Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free
trade, how many units will domestic consumers demand, and how many units will domestic
producers supply?
33. Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free
trade, will the country import or export this good, and how many units will be imported/exported?
34. Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free
trade, how much is consumer surplus?
Application: International Trade 2477
35. Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free
trade, how much is producer surplus?
36. Refer to Figure 9-28. Suppose the world price in this market is $6. If the country allows free
trade, how much is total surplus?
Figure 9-29
The following diagram shows the domestic demand and domestic supply curves in a market.
Assume that the world price in this market is $1 per unit.
2478 Application: International Trade
37. Refer to Figure 9-29. With no trade allowed, what are the equilibrium price and equilibrium
quantity in this market?
38. Refer to Figure 9-29. With no trade allowed, how much are consumer surplus, producer
surplus, and total surplus?
39. Refer to Figure 9-29. If the country allows free trade, how many units will domestic consumers
demand and how many units will domestic producers supply?
Application: International Trade 2479
40. Refer to Figure 9-29. If the country allows free trade, will the country import or export this
good, and how many units will be imported/exported?
41. Refer to Figure 9-29. If the country allows free trade, how much are consumer surplus,
producer surplus, and total surplus with trade?
42. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, what will be the domestic price in this market?
2480 Application: International Trade
43. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, how many units will domestic consumers demand and how many units will
domestic producers supply?
44. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, how many units will be imported?
45. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, how much are consumer surplus and producer surplus?
Application: International Trade 2481
46. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, how much is tariff revenue?
47. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, how much is total surplus?
48. Refer to Figure 9-29. Suppose the country imposes a $1 per unit tariff. If the country allows
trade with a tariff, how much is the deadweight loss caused by the tariff?
2482 Application: International Trade
49. List four benefits of international trade.
50. List five arguments given to support trade restrictions.