Application: International Trade 2285
33. When a country allows international trade and becomes an exporter of a good,
a. domestic producers of the good become better off.
b. domestic consumers of the good become worse off.
c. the gains of the winners exceed the losses of the losers.
d. All of the above are correct.
34. Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result,
a. consumer surplus increases for consumers of coats in Iceland.
b. producer surplus increases for producers of coats in Iceland.
c. total surplus remains unchanged in the coat market in Iceland.
d. it is reasonable to infer that other countries have a comparative advantage over Iceland in coat
production.
2286 Application: International Trade
35. Suppose Iceland goes from being an isolated country to being an importer of coats. As a result,
a. consumer surplus increases for consumers of coats in Iceland.
b. producer surplus increases for producers of coats in Iceland.
c. total surplus remains unchanged in the coat market in Iceland.
d. it is reasonable to infer that Iceland has a comparative advantage over other countries in coat
production.
36. 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 worse off.
c. the gains of the winners exceed the losses of the losers.
d. All of the above are correct.
Application: International Trade 2287
37. Assume, for Colombia, that the domestic price of coffee without international trade is higher than
the world price of coffee. This suggests that
a. other countries have a comparative advantage over Colombia in producing coffee.
b. Colombia has an absolute advantage over other countries in producing coffee.
c. Colombia will export coffee if international trade is allowed.
d. Colombian coffee buyers will become worse off if international trade is allowed.
38. Suppose a country begins to allow international trade in steel. Which of the following outcomes
will be observed regardless of whether the country finds itself importing steel or exporting steel?
a. The sum of consumer surplus and producer surplus for domestic traders of steel increases.
b. The quantity of steel demanded by domestic consumers increases.
c. Domestic producers of steel receive a higher price for steel.
d. The losses of the losers exceed the gains of the winners.
2288 Application: International Trade
39. After a country goes from disallowing trade in coffee with other countries to allowing trade in
coffee with other countries,
a. the domestic price of coffee will be greater than the world price of coffee.
b. the domestic price of coffee will be lower than the world price of coffee.
c. the domestic price of coffee will equal the world price of coffee.
d. The world price of coffee does not matter; the domestic price of coffee prevails.
40. Within a country, the domestic price of a product will equal the world price if
a. trade restrictions are imposed on the product.
b. the country allows free trade.
c. the country chooses to import, but not export, the product.
d. the country chooses to export, but not import, the product.
Application: International Trade 2289
41. Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the
price of a television there was $350. Once Paraguay began allowing trade in televisions with
other countries, Paraguay began
a. importing televisions and the price of a television in Paraguay decreased to $300.
b. importing televisions and the price of a television in Paraguay remained at $350.
c. exporting televisions and the price of a television in Paraguay decreased to $300.
d. exporting televisions and the price of a television in Paraguay remained at $350.
42. The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the
price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds
with other countries, Uruguay began
a. exporting almonds and the price per pound in Uruguay remained at $3.00.
b. exporting almonds and the price per pound in Uruguay increased to $4.50.
c. importing almonds and the price per pound in Uruguay remained at $3.00.
d. importing almonds and the price per pound in Uruguay increased to $4.50.
2290 Application: International Trade
43. Suppose a country abandons a no–trade policy in favor of a free-trade policy. If, as a result, the
domestic price of beans increases to equal the world price of beans, then
a. that country becomes an exporter of beans.
b. that country has a comparative advantage in producing beans.
c. at the world price, the quantity of beans supplied in that country exceeds the quantity of beans
demanded in that country.
d. All of the above are correct.
44. Suppose a country abandons a no–trade policy in favor of a free-trade policy. If, as a result, the
domestic price of pistachios decreases to equal the world price of pistachios, then
a. that country becomes an exporter of pistachios.
b. that country has a comparative advantage in producing pistachios.
c. at the world price, the quantity of pistachios demanded in that country exceeds the quantity of
pistachios supplied in that country.
d. All of the above are correct.
Application: International Trade 2291
Figure 9-2
The figure illustrates the market for calculators in a country.
45. Refer to Figure 9-2. Without trade, consumer surplus is
a. $423.
b. $845.
c. $1,690.
d. $3,380.
2292 Application: International Trade
46. Refer to Figure 9-2. Without trade, producer surplus is
a. $423.
b. $845.
c. $1,690.
d. $3,380.
47. Refer to Figure 9-2. With free trade, this country will
a. import 50 calculators.
b. import 100 calculators.
c. export 50 calculators.
d. export 100 calculators.
Application: International Trade 2293
48. Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will
be
a. $15 and 80 calculators will be sold domestically.
b. $15 and 130 calculators will be sold domestically.
c. $20 and 80 calculators will be sold domestically.
d. $20 and 130 calculators will be sold domestically.
49. Refer to Figure 9-2. With free trade, consumer surplus is
a. $320.
b. $640.
c. $845.
d. $1,690.
2294 Application: International Trade
50. Refer to Figure 9-2. With free trade, producer surplus is
a. $845.
b. $1,620.
c. $1,690.
d. $3,240.
51. Refer to Figure 9-2. As a result of trade, total surplus increases by
a. $50.
b. $100.
c. $250.
d. $500.
Application: International Trade 2295
52. Refer to Figure 9-2. This country
a. has a comparative advantage in calculators.
b. should export calculators.
c. is a price taker in the world economy.
d. All of the above are correct.
53. Refer to Figure 9-2. The world price for calculators represents
a. the demand for calculators from the rest of the world.
b. the supply of calculators from the rest of the world.
c. the level of inefficiency in the domestic market caused by trade.
d. the gap between domestic quantity demanded and domestic quantity supplied and the resulting
shortage.
2296 Application: International Trade
54. Refer to Figure 9-2. At the world price and with free trade,
a. the domestic quantity of calculators demanded is greater than the domestic quantity of
calculators supplied.
b. the calculator market is in equilibrium.
c. the domestic demand for calculators is perfectly inelastic.
d. both domestic producers of calculators and domestic consumers of calculators are better off
than they were without free trade.
Figure 9-3. The domestic country is China.
Application: International Trade 2297
55. Refer to Figure 9-3. With no international trade,
a. the equilibrium price is $12 and the equilibrium quantity is 300.
b. the equilibrium price is $16 and the equilibrium quantity is 200.
c. the equilibrium price is $16 and the equilibrium quantity is 300.
d. the equilibrium price is $16 and the equilibrium quantity is 450.
56. Refer to Figure 9-3. If China were to abandon a no–trade policy in favor of a free-trade policy,
a. Chinese producers of pencil sharpeners would become worse off.
b. Chinese consumers of pencil sharpeners would become better off.
c. total surplus in the Chinese economy would increase.
d. All of the above are correct.
57. Refer to Figure 9-3. With trade, China will
a. import 100 pencil sharpeners.
b. import 250 pencil sharpeners.
c. export 150 pencil sharpeners.
d. export 250 pencil sharpeners.
2298 Application: International Trade
58. Refer to Figure 9-3. With trade, producer surplus in China is
a. $800.
b. $1,200.
c. $1,800.
d. $2,700.
59. Refer to Figure 9-3. Relative to a no–trade situation, which of the following comes with trade?
a. Consumer surplus increases by $1,800 and producer surplus increases by $1,600.
b. Consumer surplus decreases by $1,000 and producer surplus increases by $1,500.
c. Consumer surplus decreases by $1,000 and producer surplus increases by $1,750.
d. Total surplus increases by $400.
60. Refer to Figure 9-3. The increase in total surplus in China when trade is allowed is
a. $400.
b. $500.
c. $600.
d. $750.
Application: International Trade 2299
Figure 9-4. The domestic country is Nicaragua.
61. Refer to Figure 9-4. With trade, Nicaragua
a. imports 150 calculators.
b. imports 250 calculators.
c. exports 100 calculators.
d. exports 250 calculators.
2300 Application: International Trade
62. Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is
a. $375.
b. $2,000.
c. $2,250.
d. $8,700.
63. Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is
a. $625, and this is an increase in total surplus.
b. $750, and this is an increase in total surplus.
c. $625, and this is a decrease in total surplus.
d. $750, and this is a decrease in total surplus.
64. Refer to Figure 9-4. Which of the following statements is accurate?
a. Consumer surplus with trade is $3,200.
b. Producer surplus with trade is $375.
c. The gains from trade amount to $800.
d. The gains from trade are represented on the graph by the area bounded by the points (0, $12),
(300, $12), (300, $7) and (0, $7).
Application: International Trade 2301
Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The world
price of peaches is
$52 per bushel. The U.S. is a price-taker in the market for peaches.
65. Refer to Scenario 9-1. If trade in peaches is allowed, the United States
a. will become an importer of peaches.
b. will become an exporter of peaches.
c. may become either an importer or an exporter of peaches, but this cannot be determined.
d. will experience increases in both consumer surplus and producer surplus.
66. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States
a. will increase, and this will cause consumer surplus to decrease.
b. will decrease, and this will cause consumer surplus to increase.
c. will be unaffected, and consumer surplus will be unaffected as well.
d. could increase or decrease or be unaffected; this cannot be determined.
2302 Application: International Trade
67. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States
a. will be greater than the world price.
b. will be equal to the world price.
c. will be less than the world price.
d. could be greater than, equal to, or less than the world price; this cannot be determined.
68. Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches
a. will be better off.
b. will be worse off.
c. will be unaffected.
d. will experience a decrease in their collective producer surplus.
Application: International Trade 2303
69. Refer to Scenario 9-1. If trade in peaches is allowed, the
a. price paid by American consumers of peaches is unchanged relative to the no-trade situation.
b. total well-being of American producers of peaches is diminished relative to the no-trade
situation.
c. total well-being of American consumers of peaches is enhanced relative to the no-trade
situation.
d. total well-being of the United States is enhanced relative to the no–trade situation.
Figure 9-5
The figure illustrates the market for tricycles in a country.
2304 Application: International Trade
70. Refer to Figure 9-5. The horizontal line at the world price of tricycles represents the
a. demand for tricycles from the rest of the world.
b. supply of tricycles from the rest of the world.
c. level of inefficiency in the domestic market caused by trade.
d. surplus in the domestic tricycle market.
71. Refer to Figure 9-5. With trade, this country
a. exports 160 tricycles.
b. exports 320 tricycles.
c. imports 160 tricycles.
d. imports 320 tricycles.