Application: International Trade 2345
145. A tariff on a product makes
a. domestic sellers better off and domestic buyers worse off.
b. domestic sellers worse off and domestic buyers worse off.
c. domestic sellers better off and domestic buyers better off.
d. domestic sellers worse off and domestic buyers better off.
146. A tariff on a product
a. is a direct quantitative restriction on the amount of a good that can be imported.
b. increases the domestic quantity supplied.
c. increases domestic consumer surplus.
d. All of the above are correct.
147. A tariff on a product
a. enhances the economic well-being of the domestic economy.
b. increases the domestic quantity supplied.
c. increases the domestic quantity demanded.
d. results in an increase in producer surplus that is greater than the resulting decrease in
consumer surplus.
2346 Application: International Trade
148. If the United States imports televisions and the U.S. government imposes a tariff on televisions,
then
a. total surplus in the American television market decreases.
b. producer surplus in the American television market increases.
c. U.S. imports of foreign televisions decrease.
d. All of the above are correct.
149. When a country that imports a particular good imposes a tariff on that good,
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.
150. When a country that imports a particular good imposes a tariff on that 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.
Application: International Trade 2347
151. When a country that imports a particular good imposes an import quota on that good,
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.
152. When a country that imports a particular good imposes an import quota on that 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.
153. A tariff is a tax placed on
a. an exported good and it lowers the domestic price of the good below the world price.
b. an exported good and it ensures that the domestic price of the good stays the same as the
world price.
c. an imported good and it lowers the domestic price of the good below the world price.
d. an imported good and it raises the domestic price of the good above the world price.
2348 Application: International Trade
154. A tariff
a. lowers the domestic price of the exported good below the world price.
b. keeps the domestic price of the exported good the same as the world price.
c. raises the domestic price of the imported good above the world price.
d. lowers the domestic price of the imported good below the world price.
155. When a country moves away from a free trade position and imposes a tariff on imports, it
causes
a. a decrease in total surplus in the market.
b. a decrease in producer surplus in the market.
c. an increase in consumer surplus in the market.
d. a decrease in revenue to the government.
Application: International Trade 2349
156. If the demand curve and the supply curve for a good are straight lines, then the deadweight loss
that results from a tariff is represented on the supply–and-demand graph by
a. the area of one triangle.
b. the area of one rectangle.
c. the combined areas of two different triangles.
d. the combined areas of two different rectangles.
157. Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case
that
a. Iran is an exporter of lumber.
b. the domestic quantity of lumber supplied exceeds the domestic quantity of lumber demanded at
the world price without the tariff.
c. the world price without the tariff is less than the price of lumber without trade.
d. the world price without the tariff is greater than the price of lumber without trade.
2350 Application: International Trade
158. Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose
Spain imposes a $5 tariff on chips. As a result,
a. Spanish consumers of chips and Spanish producers of chips both gain.
b. Spanish consumers of chips gain and Spanish producers of chips lose.
c. Spanish consumers of chips lose and Spanish producers of chips gain.
d. Spanish consumers of chips and Spanish producers of chips both lose.
159. Denmark is an importer of computer chips, taking the world price of $12 per chip as given.
Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is 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.
Application: International Trade 2351
160. Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose
Chile imposes a $7 tariff on chips. Which of the following outcomes is possible?
a. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips decreases;
and the quantity of chips imported by Chile decreases.
b. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases;
and the quantity of chips imported by Chile decreases.
c. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips increases;
and the quantity of chips imported by Chile decreases.
d. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases;
and the quantity of chips imported by Chile does not change.
161. Honduras is an importer of goose-down pillows. The world price of these pillows is $50.
Honduras imposes a $7 tariff on pillows. Honduras is a price-taker in the pillow market. As a
result of the tariff, the price of goose-down pillows in Honduras
a. remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases.
b. increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases.
c. increases to a new price between $50 and $57 and the quantity of goose-down pillows
purchased in Honduras decreases.
d. increases to a new price above $57 and the quantity of goose-down pillows purchased in
Honduras remains the same.
2352 Application: International Trade
162. Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a
$3-per-bushel tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the
tariff,
a. Turkish consumers of wheat become worse off and Turkish producers of wheat become
worse off.
b. Turkish consumers of wheat become worse off and Turkish producers of wheat become
better off.
c. Turkish consumers of wheat become better off and Turkish producers of wheat become
worse off.
d. Turkish consumers of wheat become better off and Turkish producers of wheat become
better off.
163. When the nation of Brownland first permitted trade with other nations, domestic producers of
wheat experienced
an increase in producer surplus of $4 million and total surplus in Brownland’s wheat market
increased by $1 million.
We can conclude that
a. Brownland became an exporter of wheat.
b. consumer surplus in Brownland increased by $3 million.
c. the opening of trade caused the domestic supply curve for wheat in Brownland to shift to the
left.
d. this example is inconsistent with the economic theory of international trade.
Application: International Trade 2353
164. When the nation of Mooseland first permitted trade with other nations, domestic producers of
sugar experienceda decrease in producer surplus of $5 million and total surplus in Mooseland’s
sugar market increased by $2 million We can conclude that
a. Mooseland became an exporter of sugar.
b. the overall economic well-being of participants in the sugar market in Mooseland fell because
of trade.
c. consumer surplus in Mooseland increased by $7 million.
d. the opening of trade caused the domestic demand curve for sugar in Mooseland to shift to the
right.
Figure 9-15
2354 Application: International Trade
165. Refer to Figure 9-15. With trade and without a tariff, the price and domestic quantity
demanded are
a. P1 and Q1.
b. P1 and Q4.
c. P2 and Q2.
d. P2 and Q3.
166. Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity demanded are
a. P1 and Q1.
b. P1 and Q4.
c. P2 and Q2.
d. P2 and Q3.
Application: International Trade 2355
167. Refer to Figure 9-15. With the tariff, the quantity of saddles imported is
a. Q3 – Q1.
b. Q3 – Q2.
c. Q4 – Q1.
d. Q4 – Q2.
168. Refer to Figure 9-15. A result of the tariff is that, relative to the free-trade situation, the
quantity of saddles imported decreases by
a. Q2 – Q1.
b. Q3 – Q2.
c. Q4 – Q3.
d. Q4 – Q3 + Q2 – Q1.
2356 Application: International Trade
169. Refer to Figure 9-15. Consumer surplus with trade and without a tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D + E + F.
170. Refer to Figure 9-15. Producer surplus with trade and without a tariff is
a. G.
b. C + G.
c. A + C + G.
d. A + B + C + G.
171. Refer to Figure 9-15. Consumer surplus with the tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D +E + F.
Application: International Trade 2357
172. Refer to Figure 9-15. Producer surplus with the tariff is
a. G.
b. C + G.
c. A + C + G.
d. A + B + C + G.
173. Refer to Figure 9-15. The amount of government revenue created by the tariff is
a. B.
b. E.
c. D + F.
d. B + D + E + F.
174. Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to
a. B.
b. E.
c. D + F.
d. B + D + E + F.
2358 Application: International Trade
175. Refer to Figure 9-15. For the saddle market, area B represents
a. government’s revenue from the tariff.
b. the deadweight loss of the tariff.
c. the increase in producer surplus, relative to the free-trade situation, as a result of the tariff.
d. None of the above is correct.
176. Refer to Figure 9-15. For the saddle market, area E represents
a. government’s revenue from the tariff.
b. producer surplus after the tariff becomes effective.
c. the decrease in consumer surplus, relative to the free-trade situation, as a result of the tariff.
d. the decrease in total surplus, relative to the free-trade situation, as a result of the tariff.
Application: International Trade 2359
Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P
represents price.
177. Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area
a. E.
b. B + E.
c. D + E + F.
d. B + D + E + F.
2360 Application: International Trade
178. Refer to Figure 9-16. The tariff
a. decreases producer surplus by the area C and decreases consumer surplus by the area C + D
+ E + F.
b. decreases producer surplus by the area C + D and decreases consumer surplus by the area D
+ E + F.
c. increases producer surplus by the area C and decreases consumer surplus by the area C + D
+ E + F.
d. increases producer surplus by the area B + C and decrease consumer surplus by the area D +
E + F.
179. Refer to Figure 9-16. The tariff
a. decreases producer surplus by the area C, decreases consumer surplus by the area C + D +
E, and decreases total surplus by the area D + F.
b. increases producer surplus by the area C, decreases consumer surplus by the area C + D + E
+ F, and decreases total surplus by the area D + F.
c. creates government revenue represented by the area B + E and decreases total surplus by the
area D + E + F.
d. increases producer surplus by the area C + G and creates government revenue represented
by the area D + E + F.
Application: International Trade 2361
180. Refer to Figure 9–16. The deadweight loss created by the tariff is represented by the area
a. B.
b. D + F.
c. D + E + F.
d. B + D + E + F.
181. Refer to Figure 9-16. The area C + D + E + F represents
a. the decrease in consumer surplus caused by the tariff.
b. the decrease in total surplus caused by the tariff.
c. the deadweight loss of the tariff minus government revenue raised by the tariff.
d. the deadweight loss of the tariff plus government revenue raised by the tariff.
182. A quota is
a. a tax placed on imports.
b. a limit on the quantity of imports.
c. a tax on exports to other countries.
d. an excess of exports over imports.
2362 Application: International Trade
183. Both tariffs and import quotas
a. increase the quantity of imports and raise the domestic price of the good.
b. increase the quantity of imports and lower the domestic price of the good.
c. decrease the quantity of imports and raise the domestic price of the good.
d. decrease the quantity of imports and lower the domestic price of the good.
184. A major difference between tariffs and import quotas is that
a. tariffs create deadweight losses, but import quotas do not.
b. tariffs help domestic consumers, and import quotas help domestic producers.
c. tariffs raise revenue for the government, but import quotas create surplus for those who get
the licenses to import.
d. All of the above are correct.
Application: International Trade 2363
185. Tariffs and quotas are different in the sense that
a. tariffs cause deadweight losses, while quotas do not cause deadweight losses.
b. tariffs raise revenue for the government, while quotas do not raise revenue for the
government.
c. tariffs enhance the well-being of domestic consumers, while quotas diminish the well–being of
domestic consumers.
d. tariffs enhance the well-being of domestic producers, while quotas diminish the well-being of
domestic producers.
186. Import quotas and tariffs produce similar results. Which of the following is not one of those
results?
a. The domestic price of the good increases.
b. Consumer surplus of domestic consumers increases.
c. Producer surplus of domestic producers increases.
d. A deadweight loss is experienced by the domestic country.
2364 Application: International Trade
187. Import quotas and tariffs produce some common results. Which of the following is not one of
those common results?
a. Total surplus in the domestic country falls.
b. Producer surplus in the domestic country increases.
c. The domestic country experiences a deadweight loss.
d. Revenue is raised for the domestic government.
188. An import quota
a. is preferable to a tariff since an import quota does not create a deadweight loss.
b. is a tax on imported goods.
c. reduces the welfare of domestic consumers.
d. reduces the welfare of domestic producers.