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Page 1
1.
An economy moves from autarky to free international trade. In the import sector,
consumer surplus _____, producer surplus _____, and the economy as a whole _____.
A)
rises; rises; gains
B)
rises; falls; gains
C)
falls; rises; gains
D)
rises; falls; loses
Use the following to answer questions 2-5:
2.
(Ref 16-1 Figure: The Market for Roses) Use Figure 16-1: The Market for Roses.
Assume that PA is the autarky price and PW is the world price. Consumer surplus
without international trade would be area:
A)
W + X + Y.
B)
Z.
C)
W + X + Z.
D)
W.
3.
(Ref 16-1 Figure: The Market for Roses) Use Figure 16-1: The Market for Roses.
Assume that PA is the autarky price and PW is the world price. Consumer surplus with
international trade would be area:
A)
W + X + Y.
B)
Z.
C)
W + X + Z.
D)
W.
Page 2
4.
(Ref 16-1 Figure: The Market for Roses) Use Figure 16-1: The Market for Roses.
Assume that PA is the autarky price and PW is the world price. Producer surplus without
international trade would be area:
A)
X + Y + Z.
B)
W + X + Y.
C)
X + Y.
D)
Y.
5.
(Ref 16-1 Figure: The Market for Roses) Use Figure 16-1: The Market for Roses.
Assume that PA is the autarky price and PW is the world price. Producer surplus with
international trade would be area:
A)
X + Y + Z.
B)
W + X + Y.
C)
X + Y.
D)
Y.
6.
If a nation imports a good when the economy is opened to trade, the domestic price of
the good will _____ and domestic consumption will _____.
A)
rise; rise
B)
rise; fall
C)
fall; rise
D)
fall; fall
Use the following to answer questions 7-10:
Page 3
7.
(Ref 16-2 Figure: The Market for Oranges in South Africa) Use Figure 16-2: The
Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is
P1. When the economy is opened to trade, the price falls to PW. South Africa will _____
oranges, and the volume of trade will equal _____.
A)
import; CT - QT
B)
export; CT - QT
C)
import; Q1 - QT
D)
export; CT - Q1
8.
(Ref 16-2 Figure: The Market for Oranges in South Africa) Use Figure 16-2: The
Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is
P1. When the economy is opened to trade, the price falls to PW and consumer surplus
will _____ to area _____.
A)
fall; M
B)
fall; M + N
C)
rise; M + N + O
D)
rise; M + N + O + P
9.
(Ref 16-2 Figure: The Market for Oranges in South Africa) Use Figure 16-2: The
Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is
P1. When the economy is opened to trade, the price falls to PW and producer surplus will
_____ to area _____.
A)
fall; N + Q
B)
fall; Q
C)
rise; M + N + O + P
D)
rise; M + N + O + P + Q
10.
(Ref 16-2 Figure: The Market for Oranges in South Africa) Use Figure 16-2: The
Market for Oranges in South Africa. In autarky, the price of oranges in South Africa is
P1. When the economy is opened to trade, the price falls to PW and the change in total
surplus is area:
A)
O.
B)
O + P.
C)
M + N + O + P.
D)
M + N + O + P + Q.
Page 4
11.
The United States can produce wine domestically, but it can also import wine if the
world price is lower than the domestic price. If the United States imports wine,
consumer surplus will _____ by _____ the _____ in producer surplus; total surplus will
_____.
A)
increase; less than; decrease; decrease
B)
increase; the same amount as; decrease; stay constant
C)
decrease; less than; increase; increase
D)
increase; more than; decrease; increase
12.
Mexico produces lettuce but can also import it. If Mexico imports some lettuce:
A)
Mexico has a comparative advantage in lettuce production.
B)
the world price is lower than the domestic price.
C)
the price in Mexico will rise to equal the world price.
D)
the domestic quantity supplied will increase.
Use the following to answer questions 13-15:
13.
(Ref 16-3 Figure: Domestic Market for Digital Cameras) Use Figure 16-3: The
Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the
world price. Total surplus before international trade is equal to the area:
A)
A + B + C.
B)
A + B.
C)
A + B - D - E.
D)
A.
Page 5
14.
(Ref 16-3 Figure: Domestic Market for Digital Cameras) Use Figure 16-3: The
Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the
world price. Consumer surplus after international trade is equal to the area:
A)
A.
B)
A + B.
C)
A + B + D + E.
D)
A + B + D + E - C.
15.
(Ref 16-3 Figure: Domestic Market for Digital Cameras) Use Figure 16-3: The
Domestic Market for Digital Cameras. Assume that PA is the autarky price and PW is the
world price. Total surplus after international trade _____ by the area _____.
A)
rises; B + D + E
B)
falls; C
C)
rises; C
D)
rises; D + E
16.
A blockade at the border between the United States and Canada prevents the entry of all
lumber products to the United States from Canada. This blockade will:
A)
increase the consumer surplus for American lumber consumers.
B)
decrease the producer surplus for Canadian lumber producers.
C)
increase the total surplus for the American lumber market.
D)
increase the total surplus for the Canadian lumber market.
Use the following to answer questions 17-21:
Page 6
17.
(Ref 16-4 Figure: The Market for Beats by Dre) Use Figure 16-4: The Market for Beats
by Dre. Assume that Sd represents the domestic supply curve and Dd represents the
domestic demand curve. In the market for Beats by Dre, the autarky price equals:
A)
$140.
B)
$120.
C)
$110.
D)
$100.
18.
(Ref 16-4 Figure: The Market for Beats by Dre) Use Figure 16-4: The Market for Beats
by Dre. Assume that Sd represents the domestic supply curve and Dd represents the
domestic demand curve. If the world price equals $100 and there is free trade, this
country:
A)
will import 150,000 Beats by Dre.
B)
will export 150,000 Beats by Dre.
C)
has a domestic supply equal to 250,000 Beats by Dre.
D)
has a domestic demand equal to 100,000 Beats by Dre.
19.
(Ref 16-4 Figure: The Market for Beats by Dre) Use Figure 16-4: The Market for Beats
by Dre. Assume that Sd represents the domestic supply curve and Dd represents the
domestic demand curve. If the world price equals $100 and there is free trade, domestic
consumer surplus _____ and domestic producer surplus _____ compared with autarky.
A)
increases; decreases
B)
increases; increases
C)
decreases; increases
D)
decreases; decreases
20.
(Ref 16-4 Figure: The Market for Beats by Dre) Use Figure 16-4: The Market for Beats
by Dre. Assume that Sd represents the domestic supply curve and Dd represents the
domestic demand curve. If the world price equals $100 and there is free trade, what is
the gain in consumer surplus?
A)
$5 million
B)
$2.5 million
C)
$2.25 million
D)
$750,000
21.
(Ref 16-4 Figure: The Market for Beats by Dre) Use Figure 16-4: The Market for Beats
by Dre. If the world price equals $100 and there is free trade, producer surplus:
A)
gains $1.5 million.
B)
gains $2 million.
C)
gains $750,000.
D)
falls.
Page 7
Use the following to answer questions 22-24:
22.
(Ref 16-5 Figure: The Market for iPhones) Use Figure 16-5: The Market for iPhones.
Assume that PA is the autarky price, PW is the world price, and D and S represent
domestic demand and supply, respectively. Consumer surplus in free trade equals the
area:
A)
A.
B)
A + B + C.
C)
A + B + C + D.
D)
A + B.
23.
(Ref 16-5 Figure: The Market for iPhones) Use Figure 16-5: The Market for iPhones.
Assume that PA is the autarky price, PW is the world price, and D and S represent
domestic demand and supply, respectively. Producer surplus in free trade equals the
area:
A)
B + C.
B)
B + C + D +E.
C)
B + E.
D)
E.
24.
(Ref 16-5 Figure: The Market for iPhones) Use Figure 16-5: The Market for iPhones.
Assume that PA is the autarky price, PW is the world price, and D and S represent
domestic demand and supply, respectively. The loss of producer surplus when the
market moves from autarky to free trade equals the area:
A)
B.
B)
B + C + D +E.
C)
B + C + D.
D)
E.
Page 8
Use the following to answer questions 25-27:
25.
(Ref 16-6 Figure: The Domestic Supply and Demand for SUVs in the United States)
Use Figure 16-6: The Domestic Supply and Demand for SUVs in the United States.
Suppose the world price equals $50,000 and there is free trade. The United States would
_____ SUVs.
A)
import 6 million
B)
export 6 million
C)
export 2 million
D)
import 2 million
26.
(Ref 16-6 Figure: The Domestic Supply and Demand for SUVs in the United States)
Use Figure 16-6: The Domestic Supply and Demand for SUVs in the United States.
Suppose the world price equals $50,000 and there is free trade. In the United States,
consumer surplus would _____ and producer surplus would _____.
A)
increase; decrease
B)
increase; increase
C)
decrease; decrease
D)
decrease; increase
Page 9
27.
(Ref 16-6 Figure: The Domestic Supply and Demand for SUVs in the United States)
Use Figure 16-6: The Domestic Supply and Demand for SUVs in the United States.
Suppose the world price equals $50,000 and there is free trade. Calculate the loss of
consumer surplus.
A)
$41,250 million
B)
$30,000 million
C)
$52,500 million
D)
$22,250 million
Use the following to answer questions 28-29:
28.
(Ref 16-7 Figure: The Domestic Market for Rice) Use Figure 16-7: The Domestic
Market for Rice. Assume that PA is the autarky price and PW is the world price. Before
international trade, consumer surplus is equal to the area:
A)
A.
B)
A + B.
C)
A + B + C.
D)
A + B + D.
29.
(Ref 16-7 Figure: The Domestic Market for Rice) Use Figure 16-7: The Domestic
Market for Rice. Assume that PA is the autarky price and PW is the world price. After
international trade, this nation will _____ a quantity of rice equal to _____.
A)
import; Qs - Qd
B)
export; Qs - Qd
C)
export; Qs - Qa
D)
import; Qa - Qd
Page 10
30.
If a country's price for wood furniture in the absence of trade is lower than the price
with trade, the country will likely:
A)
import wooden furniture.
B)
export wooden furniture.
C)
have absolute advantage in wooden furniture production.
D)
have a surplus of wooden furniture.
31.
If a country's price in the absence of trade is lower than the price with trade, then the
domestic quantity supplied with trade is _____ the domestic quantity demanded.
A)
greater than
B)
less than
C)
equal to
D)
not comparable to
32.
If a country has the comparative advantage in producing cloth, in the market for cloth
the autarky price would be _____ the world price and the country would _____ cloth.
A)
less than; export
B)
greater than; export
C)
less than; import
D)
the same as; export
33.
If a country has the comparative advantage in producing wooden furniture, then with
free trade:
A)
the country will import wooden furniture.
B)
producer surplus in the market for wooden furniture will increase.
C)
consumer surplus in the market for wooden furniture will increase.
D)
the domestic quantity supplied will be less than the domestic quantity demanded.
34.
Assume an economy moves from autarky to free international trade. In the export
sector, consumer surplus _____, producer surplus _____, and the economy as a whole
_____.
A)
rises; rises; gains
B)
rises; falls; gains
C)
falls; rises; gains
D)
falls; rises; loses
Page 11
Use the following to answer questions 35-39:
35.
(Ref 16-8 Figure: The Market for Tea in Sri Lanka) Use Figure 16-8: The Market for
Tea in Sri Lanka. In autarky, the price is P1, consumer surplus equals _____ and
producer surplus equals _____.
A)
F + G + H + I; J + K
B)
F; G + H + I + J + K
C)
F + I; J + K
D)
F + G + H; J + K
36.
(Ref 16-8 Figure: The Market for Tea in Sri Lanka) Use Figure 16-8: The Market for
Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the
price rises to PW. Sri Lanka will _____ tea and the volume of trade will equal _____.
A)
import; QT - CT
B)
export; QT - CT
C)
import; QT - Q1
D)
export; Q1 - CT
37.
(Ref 16-8 Figure: The Market for Tea in Sri Lanka) Use Figure 16-8: The Market for
Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the
price rises to PW and consumer surplus _____ to _____.
A)
falls; F
B)
falls; F + G
C)
rises; F + G + H + I
D)
rises; G + H + I
Page 12
38.
(Ref 16-8 Figure: The Market for Tea in Sri Lanka) Use Figure 16-8: The Market for
Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the
price rises to PW, and producer surplus _____ to _____.
A)
falls; J + K
B)
falls; G + H + J + K
C)
rises; G + H + I + J + K
D)
rises; G + H + I
39.
(Ref 16-8 Figure: The Market for Tea in Sri Lanka) Use Figure 16-8: The Market for
Tea in Sri Lanka. In autarky, the price is P1. When the economy is opened to trade, the
price rises to PW and the change in total surplus is:
A)
I.
B)
G + H + I.
C)
G + H + I + J + K.
D)
F + G + H + I + J + K.
40.
When an economy moves from autarky to free international trade, for industries in the
export sector, consumer surplus _____, producer surplus _____, and the economy as a
whole _____.
A)
rises; rises; gains
B)
rises; falls; gains
C)
falls; rises; gains
D)
falls; rises; loses
Use the following to answer questions 41-44:
Page 13
41.
(Ref 16-9 Figure: The Market for Computers) Use Figure 16-9: The Market for
Computers. Assume that PA is the autarky price and PW is the world price. Consumer
surplus without international trade would be area:
A)
W + X + Y.
B)
W.
C)
Y.
D)
W + X.
42.
(Ref 16-9 Figure: The Market for Computers) Use Figure 16-9: The Market for
Computers. Assume that PA is the autarky price and PW is the world price. Consumer
surplus with international trade is area:
A)
W + X + Y.
B)
W.
C)
Y.
D)
W + X.
43.
(Ref 16-9 Figure: The Market for Computers) Use Figure 16-9: The Market for
Computers. Assume that PA is the autarky price and PW is the world price. Producer
surplus without international trade would be area:
A)
X + Y + Z.
B)
W + X + Y.
C)
X + Y.
D)
Y.
44.
(Ref 16-9 Figure: The Market for Computers) Use Figure 16-9: The Market for
Computers. Assume that PA is the autarky price and PW is the world price. Producer
surplus with international trade would be area:
A)
X + Y + Z.
B)
W + X + Y.
C)
X + Y.
D)
Y.
45.
If a nation exports a good when the economy is opened to trade, relative to the autarky
price, the domestic price of the good will _____ and domestic consumption will _____.
A)
rise; rise
B)
rise; fall
C)
fall; rise
D)
fall; fall
Page 14
46.
The effect of international trade on U.S. factor markets is to:
A)
increase the wage of highly educated workers.
B)
increase the wage of unskilled workers.
C)
decrease the wage of both highly educated workers and unskilled workers.
D)
increase the wage of both highly educated workers and unskilled workers.
47.
Since the United States imports a large quantity of textiles from Asia, the overall wages
of U.S. textile workers have _____, while the price of textiles in the United States has
_____.
A)
decreased; decreased
B)
increased; decreased
C)
decreased; increased
D)
increased; not changed
48.
If labor is abundant in South Africa but capital is scarce, when South Africa opens to
trade, the price of labor will _____ and the price of capital will _____.
A)
rise; rise
B)
fall; fall
C)
rise; fall
D)
fall; rise
49.
If labor is scarce in Sri Lanka but capital is abundant, when Sri Lanka opens to trade,
the price of labor will _____ and the price of capital will _____.
A)
rise; rise
B)
fall; fall
C)
rise; fall
D)
fall; rise
50.
When a country exchanges goods with another country, in the short run:
A)
producers in the exporting industry may be better off.
B)
consumers of the imported good may be worse off.
C)
consumers of the exported good may be better off.
D)
producers in the importing industry are better off.
Page 15
51.
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.
In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes
of tulips. When the two countries begin trading beef for tulips, we expect the price of
beef in Argentina:
A)
to fall.
B)
to rise.
C)
to remain at the autarky price.
D)
to be 10 boxes of tulips.
52.
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.
In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes
of tulips. When the two countries begin trading beef for tulips, we expect the total
surplus from beef consumption and production to:
A)
fall in Argentina.
B)
rise in Argentina.
C)
stay the same in Venezuela.
D)
either rise or fall in Venezuela.
53.
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.
In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes
of tulips. When the two countries begin trading beef for tulips, we expect the price of
beef in Venezuela:
A)
to fall.
B)
to rise.
C)
to remain at the autarky price.
D)
to be 15 boxes of tulips.
54.
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.
In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes
of tulips. When the two countries begin trading beef for tulips, we expect the consumer
surplus from beef consumption to:
A)
fall in Argentina.
B)
rise in Argentina.
C)
stay the same in Argentina.
D)
either rise or fall in Argentina.
55.
When a market begins to engage in international trade:
A)
producers in the exporting industry may be better off.
B)
consumers of the imported good may be worse off.
C)
consumers of the exported good may be better off.
D)
producers in the importing industry are better off.
Page 16
56.
If a market begins to engage in international trade, we can assume that:
A)
producers in the exporting industry may be worse off.
B)
consumers of the imported good may be worse off.
C)
consumers of the exported good may be better off.
D)
producers in the importing industry may be worse off.
57.
Compared with autarky, international trade leads to _____ domestic production in
exporting industries and _____ domestic production in import-competing industries.
A)
higher; lower
B)
higher; higher
C)
lower; higher
D)
lower; lower
58.
Policies that limit imports, usually to insulate domestic producers from foreign
competition, are known as:
A)
import-competing clauses.
B)
import reduction acts.
C)
trade protection.
D)
competition protection.
59.
Restrictions on free international trade designed to insulate domestic industries from
competitive market forces that originate beyond the borders of the country are _____
policies.
A)
competitive
B)
protectionist
C)
free-trade
D)
antitrust
Page 17
Use the following to answer questions 60-62:
60.
(Ref 16-10 Figure: The Market for Laptops) Use Figure 16-10: The Market for Laptops.
Assume that S and D are the domestic supply and demand curves and the world price is
PW. Identify the area of consumer surplus when a tariff raises the domestic price from
the world price to PT.
A)
A + B
B)
A + B + C + D + E + F
C)
A + C + G
D)
D + F
61.
(Ref 16-10 Figure: The Market for Laptops) Use Figure 16-10: The Market for Laptops.
Assume that S and D are the domestic supply and demand curves and the world price is
PW. Identify the area of deadweight loss when a tariff raises the domestic price from the
world price to PT.
A)
A + B
B)
C + D + E + F
C)
D + E + F
D)
D + F
62.
(Ref 16-10 Figure: The Market for Laptops) Use Figure 16-10: The Market for Laptops.
Assume that S and D are the domestic supply and demand curves and the world price is
PW. Identify the area of government tax revenue when a tariff raises the domestic price
from the world price to PT.
A)
D + E + F
B)
D + F
C)
E
D)
B
Page 18
63.
If the United States placed larger tariffs on all textiles, domestic _____ surplus would
_____.
A)
producer; increase
B)
consumer; increase
C)
total; increase
D)
producer; decrease
64.
An example of a tariff is a:
A)
limit on the total number of Honda automobiles imported from Japan.
B)
regulation specifying that each imported Honda automobile must meet certain
emission exhaust guidelines.
C)
tax of $500 on each Honda automobile produced in the United States.
D)
tax of 10% of the value of each Honda automobile imported from Japan.
65.
If Japan levies tariffs on U.S. goods entering Japan, this will tend to:
A)
benefit both Japanese and U.S. producers.
B)
damage U.S. producers and benefit Japanese producers.
C)
benefit U.S. producers and damage Japanese producers.
D)
damage both Japanese and U.S. producers.
66.
If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to
_____, domestic consumption to _____, and domestic production to _____.
A)
fall; fall; fall
B)
fall; rise; fall
C)
rise; fall; rise
D)
rise; rise; fall
Use the following to answer questions 67-70:
Page 19
67.
(Ref 16-11 Figure: A Tariff on Oranges in South Africa) Use Figure 16-11: A Tariff on
Oranges in South Africa. When the government imposes a tariff on imported oranges,
the price of oranges in South Africa rises from PW to PT and the volume of imports falls
to:
A)
Q2 - Q1.
B)
C1 - C2.
C)
C1 - Q1.
D)
C2 - Q2.
68.
(Ref 16-11 Figure: A Tariff on Oranges in South Africa) Use Figure 16-11: A Tariff on
Oranges in South Africa. When the government imposes a tariff on imported oranges,
the price of oranges in South Africa rises from PW to PT and domestic consumer surplus
_____ to _____.
A)
falls; F + L
B)
falls; F + G + I + J + K + L
C)
rises; F + L
D)
rises; F + G + I + J + K + L
69.
(Ref 16-11 Figure: A Tariff on Oranges in South Africa) Use Figure 16-11: A Tariff on
Oranges in South Africa. When the government imposes a tariff on imported oranges,
the price of oranges in South Africa rises from PW to PT and domestic producer surplus
_____ to _____.
A)
falls; G + I
B)
falls; G + I + J + K
C)
rises; G + + J + K
D)
rises; G + H
70.
(Ref 16-11 Figure: A Tariff on Oranges in South Africa) Use Figure 16-11: A Tariff on
Oranges in South Africa. When the government imposes a tariff on imported oranges,
the price of oranges in South Africa rises from PW to PT and there's a net _____ to total
surplus of _____.
A)
addition; I + J + K+ L
B)
addition; I + J + K
C)
reduction; I + K
D)
reduction; I + J + K + L
Page 20
71.
A tariff imposed on Japanese imports into the United States tends to _____ U.S.
producers and _____ Japanese producers.
A)
penalize; benefit.
B)
benefit; penalize
C)
penalize; penalize
D)
benefit; benefit
72.
The United States places a tariff on imported Brazilian ethanol. The impact of this tariff
on the domestic ethanol market is a _____ domestic price, _____ consumer surplus, and
_____ producer surplus.
A)
higher; less; more
B)
lower; less; more
C)
higher; more; less
D)
higher; less; less
73.
A tariff _____ the price received by domestic producers and _____ the price paid by
domestic consumers.
A)
decreases; increases
B)
increases; decreases
C)
decreases; decreases
D)
increases; increases
74.
A tariff is most likely to _____ prices and _____ domestic consumption of the good or
service being protected.
A)
decrease; increase
B)
increase; decrease
C)
have no effect on; not change
D)
decrease; decrease
75.
A tax on imported goods or services is a:
A)
quota.
B)
tariff.
C)
nontariff barrier.
D)
trade embargo.
Page 21
76.
If Japan levies tariffs on U.S. goods entering Japan, this will tend in the short run to
_____ U.S. producers and _____ Japanese producers.
A)
benefit; benefit
B)
damage; benefit
C)
benefit; damage
D)
damage; damage
77.
Which item is an example of a tariff?
A)
a regulation specifying that each imported Yamaha motorcycle must meet certain
emission exhaust guidelines
B)
a limit on the total number of Yamaha motorcycles imported from Japan
C)
a tax of 5% of the value of each Yamaha motorcycle imported from Japan
D)
a tax of $250 on each Yamaha motorcycle produced in the United States
78.
In the importing country, the most likely effect of a tariff is to:
A)
raise the price and decrease the quantity demanded.
B)
raise the price and increase the quantity demanded.
C)
raise the price without affecting the quantity demanded.
D)
decrease the quantity supplied.
79.
If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to
_____ and the quantity of shoes consumed in the domestic market to _____.
A)
fall; fall
B)
fall; rise
C)
rise; fall
D)
rise; rise
80.
If a country removes a tariff on imported shoes, we expect the domestic price of shoes
to _____ and the quantity of shoes consumed in the domestic market to _____.
A)
fall; fall
B)
fall; rise
C)
rise; fall
D)
rise; rise
Page 22
81.
If Canada imposes a tariff of $5 per bottle on French wine, the most likely effect will be
to raise the price of wine in Canada by:
A)
more than $5 per bottle.
B)
$5 per bottle.
C)
less than $5 per bottle and lower the price of wine in France by less than $5 per
bottle.
D)
less than $5 per bottle without affecting the price of wine in France.
82.
Assume that a tariff is imposed on Chinese imports into the United States. This tariff is
likely to _____ U.S. producers and _____ Chinese producers.
A)
penalize; penalize
B)
benefit; benefit
C)
benefit; penalize
D)
penalize; benefit
83.
A tariff imposed on U.S. imports into Japan tends to _____ U.S. producers and _____
Japanese producers.
A)
penalize; benefit
B)
benefit; penalize
C)
penalize; penalize
D)
benefit; benefit
84.
A tax on imports of foreign goods is called a(n):
A)
import quota.
B)
aubsidy.
C)
tariff.
D)
export restriction.
85.
A regulation that specifies the maximum amount of a good or service that may be
imported during a specified period is a(n):
A)
import quota.
B)
tariff.
C)
nontariff barrier.
D)
export quota.
Page 23
86.
An example of an import quota is a:
A)
limit on the total number of Honda automobiles imported from Japan.
B)
regulation specifying that each imported Honda automobile must meet certain
emission exhaust guidelines.
C)
tax of 10% of the value of each Honda automobile imported from Japan.
D)
subsidy from the Japanese government of $500 for each Honda automobile
imported into the United States.
87.
Assume that the United States imposes an import quota on Columbian coffee. Relative
to the equilibrium world price that would prevail in the absence of import quotas, it is
likely that the equilibrium price of coffee in the United States will _____ and the
equilibrium price of coffee in Columbia will _____.
A)
decrease; remain the same
B)
remain the same; increase
C)
increase; increase
D)
increase; decrease
88.
Assume that the United States imposes an import quota on Scottish wool suits. Relative
to the equilibrium price that would prevail in the absence of quotas, the equilibrium
price of suits in the United States will most likely _____ and the equilibrium price of
suits in Scotland will most likely _____.
A)
remain the same; decrease
B)
remain the same; increase
C)
increase; increase
D)
increase; decrease
89.
If the United States imposes an import quota on French wines, the result in the short run
is likely to be _____ profits for American wine producers and _____ profits for French
wine producers.
A)
lower; lower
B)
lower; higher
C)
higher; lower
D)
higher; higher
90.
A direct restriction on the quantity of an import is called a(n):
A)
import quota.
B)
tariff.
C)
import subsidy.
D)
import restriction.
Page 24
91.
If quota rents do not accrue to the government, then the net loss to the government from
an import quota is _____ the deadweight loss from an equivalent tariff.
A)
less than
B)
greater than
C)
equal to
D)
in the case of demand and supply both being elastic, less than
92.
In the case of U.S. trade protection, quota rents for the most important import licenses
are earned by:
A)
foreign governments.
B)
the U.S. government.
C)
U.S. producers of the good.
D)
importers who pay the highest price to get the licenses.
93.
Which item is an example of an import quota?
A)
a limit on the total number of shoes imported from Italy.
B)
regulations specifying that each imported toy from China must meet certain safety
guidelines.
C)
a tax of $100 on each Suzuki motorcycle produced in the United States.
D)
a tax of 10% of the value of each Suzuki motorcycle imported from Japan.
94.
Assume that the United States imposes an import quota on Italian shoes. Relative to the
equilibrium world price that would exist in the absence of import quotas, the
equilibrium price of shoes in the United States will most likely _____ and the
equilibrium price of shoes in Italy will most likely _____.
A)
increase; decrease
B)
decrease; remain the same
C)
decrease; increase
D)
increase; remain the same
95.
The most likely effects of tariffs and/or import quotas are to _____ prices and to _____
consumption of the protected goods in the importing country.
A)
raise; raise
B)
raise; lower
C)
lower; raise
D)
lower; lower
Page 25
96.
The main difference between a tariff and an import quota is that:
A)
an import quota reduces imports more sharply than a tariff.
B)
a tariff will cause higher prices than an import quota.
C)
a tariff generates tax revenue, while an import quota generates rents to the license
holders.
D)
a tariff will cause lower prices than an import quota.
97.
Suppose the United States auctioned off all import quotas, the auctions were perfectly
competitive, and the government received the revenues from the auction. In this case,
the deadweight loss from a quota would be _____ the deadweight loss from an
equivalent tariff.
A)
less than
B)
greater than
C)
equal to
D)
in the case of demand being elastic, greater than
98.
If the United States removed the tariffs and quotas on sugar, in the U.S. market for
sugar:
A)
consumer surplus would not change.
B)
consumer surplus would decrease.
C)
total surplus would decrease.
D)
producer surplus would decrease.
99.
A tariff or quota will _____ prices and _____ the consumption of the protected goods in
the importing country.
A)
raise; increase
B)
raise; decrease
C)
lower; increase
D)
lower; decrease
100.
Tariffs and import quotas tend to:
A)
increase the quantity of imports as compared to free trade.
B)
generate government revenue.
C)
increase consumer surplus as compared to free trade.
D)
reduce total surplus as compared to free trade.
Page 26
101.
Which argument is one that is common for trade protection?
A)
national security
B)
increased efficiency
C)
increased profitability
D)
increased productivity
102.
The infant industry argument for trade protection states that:
A)
small, traditional industries such as handicrafts should be protected from foreign
competition or they would not be able to survive.
B)
new industries should be protected from foreign competition until they become
established.
C)
industries that provide day care for their employees' children ought to be protected
from foreign competition.
D)
industries that produce products essential for the well-being of infants (e.g., the
baby food industry) ought to be protected since such products are essential for the
good health of future generations.
103.
In 2002, the steel industry argued that higher tariffs on steel were necessary to help fight
the war on terrorism. This is an example of the _____ argument.
A)
infant industry
B)
national security
C)
job creation
D)
predatory pricing
104.
According to the infant industry argument, import protection is needed because:
A)
foreign workers are often paid less than U.S. workers.
B)
it enables our protected industries to achieve technological efficiency and thus
become competitive with mature foreign industries.
C)
the nation's security depends on a strong industrial base.
D)
it provides consumers with more and better goods in the long run.
105.
If the executives of the U.S. silicon chip industry lobby Congress for protection from
imports on the grounds that theirs is a new industry that needs time to develop
technological efficiency, they are using the _____ argument.
A)
environmental standards
B)
infant industry
C)
cheap foreign labor
D)
national security
Page 27
106.
If the executives of the U.S. silicon chip industry lobby Congress for protection from
imports on the grounds that the military should have an unrestricted domestic supply of
silicon chips, they are using the _____ argument.
A)
infant industry
B)
job creation
C)
national security
D)
model industry
107.
The job creation argument for protection against free trade is:
A)
that keeping out foreign imports allows the goods and services to be produced by
domestic workers.
B)
frequently put forward by economists.
C)
mostly that we need full employment to defend the security of the nation.
D)
that we need full employment to prevent currency depreciation.
108.
Many countries engage in trade protection by imposing import tariffs or quotas for at
least some goods. This is because:
A)
economists have established that such restrictions are welfare-improving for certain
categories of goods (such as raw materials).
B)
such restrictions tend to benefit consumers without harming producers.
C)
while such restrictions harm consumers, they benefit producers, who are usually a
more cohesive and politically influential group.
D)
while such restrictions harm consumers and benefit producers, the losses to
consumers are outweighed by the gains to producers.
109.
Import protections are often imposed because:
A)
import protections increase total surplus, even though some groups are harmed.
B)
groups representing import-competing industries are more cohesive than
consumers.
C)
benefits to producers outweigh the costs to the consumer.
D)
the loss in consumer surplus is usually quite small.
110.
The organization that oversees global trade negotiations and settles trade disputes
among its members is the:
A)
World Bank.
B)
European Union.
C)
World Trade Organization.
D)
North American Free Trade Agreement.
Page 28
111.
Which statement is not true about the World Trade Organization (WTO)?
A)
The WTO provides the framework for complex negotiations involved in major
international trade agreements.
B)
The WTO resolves disputes between member countries.
C)
The WTO is an international organization.
D)
The WTO is a direct enforcer of trade agreements.
112.
In which area does the United States significantly limit imports?
A)
computers
B)
aircraft
C)
sugar
D)
oil
113.
_____ oversees international trade agreements.
A)
NAFTA
B)
The World Trade Organization
C)
The European Union
D)
The Federal Reserve Bank
114.
The World Trade Organization:
A)
is the primary member of the North American Free Trade Agreement.
B)
resolves disputes between member nations arising from alleged violations of
previous agreements dealing with international trade.
C)
is a world government with its own army.
D)
lends money to developing countries.
115.
The World Trade Organization:
A)
assists importers and exporters in conducting their trade.
B)
works together with United Nations forces to enforce international decisions.
C)
organizes the negotiations involved in trade agreements and resolves disputes
among members.
D)
promotes trade by organizing educational conferences.
116.
Canada, Mexico, and the United States have:
A)
joined together and are operating in what is called a closed-trade area with respect
to the European Union.
B)
developed a currency similar to the euro.
C)
eliminated many trade barriers among themselves.
D)
reduced trade among themselves to protect jobs at home.
Page 29
117.
When a business hires people in other countries to perform various tasks, _____ has
occurred.
A)
comparative advantage
B)
globalization
C)
offshore outsourcing
D)
pauper labor
Use the following to answer questions 118-121:
118.
(Ref 16-12 Figure: The Market for Calculators) Use Figure 16-12: The Market for
Calculators. Assume that S and D represent the domestic demand and supply of
calculators. The world price, PW, equals $100. When the economy moves from autarky,
under which the price is $150, to free trade, consumer surplus rises by area _____ and
producer surplus falls by _____.
A)
B + K + L; B
B)
B + C + K + L; B + C + K + L
C)
B + C+ H + I + K + L; B + C + H + I
D)
B + C + G + H + I + J + K + L; B + C
119.
(Ref 16-12 Figure: The Market for Calculators) Use Figure 16-12: The Market for
Calculators. Assume that S and D represent the domestic demand and supply of
calculators. The world price, PW, equals $100. The government imposes a quota
restricting imports to 25 calculators. The domestic price rises to _____ and the quota
rent is equal to area _____.
A)
$120; K + L
B)
$150; K + H + I + L
C)
$120; H + I
D)
$150; G + H + I + J
Page 30
120.
(Ref 16-12 Figure: The Market for Calculators) Use Figure 16-12: The Market for
Calculators. Assume that S and D represent the domestic demand and supply of
calculators. The world price, PW, equals $100. The government imposes a quota
restricting imports to 25 calculators. If import licenses are granted to foreigners, the net
loss due to the import quota is equal to area:
A)
K + L.
B)
G + J.
C)
G + H + I + J.
D)
G + H + I + J + K + L.
121.
(Ref 16-12 Figure: The Market for Calculators) Use Figure 16-12: The Market for
Calculators. Assume that S and D represent the domestic demand and supply of
calculators. The world price, PW, equals $100. The government imposes an import tariff
of $20 per calculator. Compared with the free trade situation, the tariff leads to a
deadweight loss equal to area:
A)
K + L.
B)
G + J.
C)
G + H + I + J.
D)
There is no deadweight loss, since the tariff revenue the government receives
offsets any losses.
122.
Exports increase producer surplus but decrease consumer surplus and total surplus.
A)
True
B)
False
123.
Evidence shows that increased international trade has increased the wages of unskilled
workers in the United States.
A)
True
B)
False
124.
Since labor is relatively scarce in Canada, free trade should cause the wages paid to
Canadian labor to rise.
A)
True
B)
False
Page 31
125.
When a country moves from autarky to free international trade, consumers and
producers in the import and export sectors all gain (i.e., both consumer surplus and
producer surplus increase in both sectors).
A)
True
B)
False
126.
United States follows a policy of free trade, which is especially apparent for sugar and
textiles, in which all restrictions on international trade have been removed.
A)
True
B)
False
127.
Import tariffs always benefit domestic producers more than they hurt domestic
consumers.
A)
True
B)
False
128.
In practice much trade protection reflects the political influence of import-competing
producers.
A)
True
B)
False
129.
The United States and the European Union levy heavy import tariffs on agricultural
products, which hurt many poor farmers from the very poorest countries in the world.
A)
True
B)
False
130.
When a country joins the World Trade Organization, it gives up all of its ability to
determine its trade policy.
A)
True
B)
False
131.
Suppose in a single year, Brazil can produce 100 tons of beef or 1,000 boxes of tulips.
Suppose in the world market, one ton of beef costs eight boxes of tulips. Brazil will
import beef.
A)
True
B)
False
Page 32
132.
If the world price of good X is lower than the domestic (autarky) price of that good, will
a nation be an exporter or importer of good X? How will the domestic market adjust the
price? Explain.
133.
Economists claim that opening up a market to imports leads to an increase in total
surplus but that trade makes winners and losers. How does this work?
134.
Suppose a nation has freely imported sugar at the world price PW for many years.
However, a new government administration decides to levy a tariff on imported sugar,
and the price rises to Pt. Most economists report that this has caused inefficiency. How?
135.
Suppose a nation is considering two alternative policies to protect a domestic industry
from world trade. The two policies are an import quota of X units and a per-unit tariff
that would reduce imports to X units. Though either policy would result in only X
imported units of this good, there is a fundamental difference in the outcome. Explain
this difference.
136.
Some advocates of trade protection in the domestic market for steel argue that it is
needed to protect domestic steelworkers' jobs. Why are economists usually unconvinced
by this argument?
137.
Advocates of trade barriers suggest that the barriers are needed for national security, job
creation, and to:
A)
protect producers who are just starting out so that they can become more
established.
B)
eliminate the need for governments to become involved in the trade discussions.
C)
enhance the comparative advantage nature of trade.
D)
increase tariff revenue for government.
Page 33
Use the following to answer questions 138-141:
138.
(Ref 16-12 Figure: The Markets for Melons in Russia) Use Figure 16-12: The Market
for Melons in Russia. Without trade, the country's producer surplus will equal area
_____, and consumer surplus will equal area _____.
A)
ACJ; ABJ
B)
BCJ; ABJ
C)
ABJ; BCJ
D)
BJDK; ABJ
139.
(Ref 16-12 Figure: The Markets for Melons in Russia) Use Figure 16-12: The Market
for Melons in Russia. If the world price of melons is equal to E, Russia will _____ of
melons.
A)
import I - H
B)
export I - H
C)
import G - F
D)
export G - F
140.
(Ref 16-12 Figure: The Markets for Melons in Russia) Use Figure 16-12: The Market
for Melons in Russia. Suppose the world price of melons is D. Russia will _____ of
melons.
A)
import I - H
B)
export I - H
C)
import G - F
D)
export G - F
Page 34
141.
(Ref 16-12 Figure: The Markets for Melons in Russia) Use Figure 16-12: The Market
for Melons in Russia. If Russia is trading based on comparative advantage and the world
price is D, then Russia has _____ in the production of melons.
A)
a comparative advantage
B)
a comparative disadvantage
C)
an absolute advantage
D)
neither an absolute nor a comparative advantage
142.
The World Trade Organization:
A)
oversees trade agreements.
B)
is an example of a trade agreement.
C)
includes all nations.
D)
was established before World War II.
Use the following to answer questions 143-146:
143.
(Ref 16-13 Figure: The Markets for Melons in Russia II) Use Figure 16-13: The Market
for Melons in Russia II. Suppose Russia opens to trade and finds the world price to be
$10. Russia will:
A)
import 30 units of melons.
B)
export 30 units of melons.
C)
not find it beneficial to trade.
D)
import 40 units of melons.
Page 35
144.
(Ref 16-13 Figure: The Markets for Melons in Russia II) Use Figure 16-13: The Market
for Melons in Russia II. Suppose producers lobby effectively for the imposition of a
tariff that raises the world price from $10 to $15. Tariff revenue to the government will
equal:
A)
$150.
B)
$200.
C)
75.
D)
$5.
145.
(Ref 16-13 Figure: The Markets for Melons in Russia II) Use Figure 16-13: The Market
for Melons in Russia II. As a result of a tariff that raises the world price from $10 to
$15, the country has a deadweight loss equal to:
A)
$37.5
B)
$150.
C)
$50.
D)
$5.
146.
(Ref 16-13 Figure: The Markets for Melons in Russia II) Use Figure 16-13: The Market
for Melons in Russia II. If the world price is $10 and a tariff of $5 is imposed on this
market, the burden of the tariff will be borne by:
A)
both producers and consumers.
B)
consumers.
C)
producers.
D)
the government.
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