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66. The effects of tariffs and quotas are: a(n) __________ in consumers' surplus, and a(n) __________ in producers'
surplus.
a.
increase; increase
b.
increase; decrease
c.
decrease; increase
d.
decrease; decrease
67. The effect of a tariff is
a.
an increase in consumers' surplus.
b.
a decrease in producers' surplus.
c.
an increase in tariff revenues for government.
d.
b and c
e.
all of the above
68. International trade exists because countries
a.
can make themselves better off through trade.
b.
want to be neighborly with each other.
c.
want to be political allies.
d.
want to improve diplomatic relations with each other.
e.
want to avoid war with each other.
69. Which of the following is an example of a trade restriction?
a.
quotas
b.
tariffs
c.
dumping
d.
a and b
e.
a, b, and c
70. The situation where a country can produce a good at a lower opportunity cost than another country is called a(n)
__________ advantage.
a.
permanent
b.
transitory
c.
absolute
d.
comparative
e.
natural
Exhibit 34-4
Country 1
Country 2
Good A
Good B
Good A
Good B
200
0
75
0
160
20
60
15
120
40
45
30
80
60
30
45
40
80
15
60
0
100
0
75
71. Refer to Exhibit 34-4. The opportunity cost of one unit of good B is __________ for country 1 and __________ for
country 2.
a.
20A; 15A
b.
2A; 1A
c.
40A; 15A
d.
1/2A; 1A
e.
1/40A; 1/15B
72. Refer to Exhibit 34-4. The opportunity cost of one unit of good A is __________ for country 1 and __________ for
country 2.
a.
20B; 15B
b.
2B; 1B
c.
40B; 15B
d.
1/2B; 1B
e.
1/20B; 1/15B
73. Refer to Exhibit 34-4. Country 1 has a comparative advantage in the production of __________, and country 2 has a
comparative advantage in the production of __________.
a.
good A; good B
b.
good B; good A
c.
both goods; neither good
d.
neither good; both goods
e.
neither good; neither good
Exhibit 34-5
Country 1
Country 2
Good A
Good B
Good A
Good B
100
0
75
0
80
10
60
30
60
20
45
60
40
30
30
90
20
40
15
120
0
50
0
150
74. Refer to Exhibit 34-5. The opportunity cost of one unit of good B is __________ for country 1 and __________ for
country 2.
a.
20A; 15A
b.
1/20A; 1/15A
c.
10A; 15A
d.
1/2A; 1A
e.
2A; 1/2A
75. Refer to Exhibit 34-5. The opportunity cost of one unit of good A is __________ for country 1 and __________ for
country 2.
a.
20B; 15B
b.
10B; 15B
c.
2B; 1B
d.
1/2B; 2B
e.
1/10B; 1B
76. Refer to Exhibit 34-5. Country 1 has a comparative advantage in the production of __________, and country 2 has a
comparative advantage in the production of __________.
a.
good A; good B
b.
good B; good A
c.
both goods; neither good
d.
neither good; both goods
e.
neither good; neither good
77. If countries 1 and 2 produce only two goods, A and B, and they have the same opportunity cost for the production of
good A (and thus good B), then
a.
each country will specialize in the production of one good and engage in trade.
b.
neither country will specialize in the production of a good, but both will engage in trade.
c.
one country will specialize in the production of a good, and both will engage in trade.
d.
neither country will specialize in the production of a good, and there will be no incentive for trade.
78. Consumers' surplus is the difference between the price
a.
sellers receive for a good and the maximum price they would have paid for the good.
b.
sellers receive for a good and the minimum price for which they could have sold the good.
c.
buyers pay for a good and the maximum price they would have paid for the good.
d.
buyers pay for a good and the minimum price for which they would have sold the good.
79. Producers' surplus is the difference between the price
a.
sellers receive for a good and the maximum price they would have paid for the good.
b.
sellers receive for a good and the minimum price for which they could have sold the good.
c.
buyers pay for a good and the maximum price they would have paid for the good.
d.
buyers pay for a good and the minimum price for which they would have sold the good.
Exhibit 34-6
80. Refer to Exhibit 34-6. The opportunity cost of 1 unit of cheese in terms of units of wine is __________ for country A.
a.
1/2
b.
2
c.
10
d.
5
e.
none of the above
81. Refer to Exhibit 34-6. The opportunity cost of 1 unit of wine in terms of units of cheese is __________ for country A.
a.
1/2
b.
2
c.
10
d.
5
e.
none of the above
82. Refer to Exhibit 34-6. The opportunity cost of 1 unit of cheese in terms of units of wine is __________ for country B.
a.
1
b.
5
c.
10
d.
15
83. Refer to Exhibit 34-6. The opportunity cost of 1 unit of wine in terms of units of cheese is __________ for country B.
a.
15
b.
10
c.
5
d.
1
84. Refer to Exhibit 34-6. Which of the following is true?
a.
Country A has a comparative advantage in both cheese and wine.
b.
Country B has a comparative advantage in both cheese and wine.
c.
Country A has a comparative advantage in cheese, and country B has a comparative advantage in wine.
d.
Country B has a comparative advantage in cheese, and country A has a comparative advantage in wine.
e.
none of the above
85. Refer to Exhibit 34-6. Which of the following terms of trade would both countries agree on?
a.
1 unit of wine = 2.5 units of cheese
b.
1 unit of wine = 1.5 units of cheese
c.
2.5 units of wine = 1 unit of cheese
d.
1.5 units of wine = 1 unit of cheese
e.
none of the above
Exhibit 34-7
86. Refer to Exhibit 34-7. The world price of good X is $15. Under a policy of free trade, the U.S. production of good X
would be
a.
10 units.
b.
20 units.
c.
25 units.
d.
50 units.
e.
none of the above
87. Refer to Exhibit 34-7. The world price of good X is $15. If imports of good X are legally limited to 30 units, the price
of X in the United States would be
a.
$20.
b.
$25.
c.
$30.
d.
$35.
e.
none of the above
88. Refer to Exhibit 34-7. The world price of good X is $15. Under a policy of free trade, U.S. consumers will import
___________ units of X from abroad.
a.
50
b.
45
c.
40
d.
30
89. Refer to Exhibit 34-7. Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good
X). Americans purchase ______ units of good X from U.S. producers and import _______ units of good X from abroad.
a.
0; 50
b.
20; 25
c.
10; 30
d.
10; 40
90. Refer to Exhibit 34-7. Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good
X). The government collects tariff revenue on good X in the amount of
a.
$100
b.
$200
c.
$250
d.
$300
e.
There is not enough information to answer this question.
Exhibit 34-8
91. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a
$100 per ton tariff on sugar imports). Americans purchase __________ million tons of sugar from U.S. producers and
import __________ million tons of sugar from abroad.
a.
15; 10
b.
15; 20
c.
10; 5
d.
10; 15
e.
10; 20
92. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a
$100 per ton tariff on sugar imports). The government collects tariff revenues on sugar imports in the amount of
__________ million.
a.
$500
b.
$1,000
c.
$1,500
d.
$2,000
e.
none of the above
93. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a
$100 per ton tariff on sugar imports). Consumers' surplus is equal to the area __________ while producers' surplus is
equal to the area __________.
a.
A + B + C + D + E + F; G + H + I + J + K
b.
A + C + G; B + D + E + F
c.
A + B; C + G
d.
A + C; G
e.
A + C; B + D + E + F
94. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a
$100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would cause a(n) __________ in imports of
__________ million tons.
a.
increase; 5
b.
increase; 10
c.
increase; 15
d.
decrease; 5
e.
decrease; 10
95. Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a
$100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would increase consumers' surplus by an
amount equal to area
a.
C.
b.
C + G.
c.
D + E + F.
d.
C + D + E + F + G + H.
e.
none of the above
96. Tariffs and quotas are often imposed when a government is more responsive to __________ interests, and the benefits
of those trade restrictions are often __________.
a.
consumer; concentrated
b.
consumer; widely dispersed
c.
producer; concentrated
d.
producer; widely dispersed
97. Which of the following statements is false?
a.
Specialization and trade allow a country's inhabitants to consume at a level beyond its production possibilities
frontier.
b.
Some of the goods the U.S. exports include cars, coal, and wheat.
c.
Some of the goods the U.S. imports include cars, oil, and coffee.
d.
A country has a comparative advantage in producing that good it can produce at lower opportunity cost than
another country.
e.
none of the above
98. The answer is: "It allows the inhabitants of a country to consume at a level beyond its production possibilities
frontier." What is the question?
a.
What do newly discovered resources do?
b.
What does technology do?
c.
What does specialization and international trade do?
d.
What does specialization do?
e.
a and b
99. The answer is: "The difference between the price buyers pay for a good and the maximum or highest price they would
have paid for the good." This is the definition for
a.
taxes.
b.
producers' surplus.
c.
consumers' surplus.
d.
the sum of producers' and consumers' surpluses.
e.
the welfare triangle.
100. Producers' surplus is
a.
the difference between the price a buyer pays for a good and the highest price he would have paid for the
good.
b.
the difference between the price a seller receives for a good and the minimum price for which he would have
sold the good.
c.
the difference between the price a seller receives for a good and the price a buyer pays for the good.
d.
equal to price times quantity sold.
e.
equal to the seller's minimum price and the buyer's maximum price.
101. The answer is: "A tax on imports." What is the question?
a.
What is comparative advantage?
b.
What is a quota?
c.
What is a tariff?
d.
What reduces consumers' surplus?
e.
c and d
102. If, at the world price, domestic producers are producing and selling 100 units of a good, then at the world price plus
tariff it follows that
a.
they will be producing and selling more than 100 units of the good.
b.
they will be producing and selling fewer than 100 units of the good.
c.
producers' surplus will be less than what it is when domestic producers produce and sell 100 units.
d.
consumers' surplus will be greater than what it is when domestic producers produce and sell 100 units.
e.
c and d
103. Which of the following statements is false?
a.
Consumers receive more consumers' surplus when tariffs do not exist.
b.
Producers receive more producers' surplus when tariffs do exist.
c.
A tariff results in a net loss to society.
d.
With a tariff, the gains to the winners are less than the losses to the losers.
e.
none of the above
104. Consumers receive more consumers' surplus when __________.
a.
tariffs exist.
b.
tariffs and quotas do not exist.
c.
quotas exist.
d.
a and c
105. In contrast to a tariff, a quota does not
a.
reduce consumers' surplus.
b.
increase producers' surplus.
c.
generate revenues for government.
d.
raise price.
e.
c and d
106. The effects of a quota include:
a.
decreasing consumers' surplus.
b.
increasing total revenue for the importers who sell the allowed number of imported units.
c.
increasing producers' surplus.
d.
b and c
e.
a, b, and c
107. Which of the following statements is false?
a.
As a result of a quota, consumers' surplus falls.
b.
As a result of a tariff, producers' surplus rises.
c.
As a result of a tariff, consumers' surplus falls.
d.
As a result of a quota, producers' surplus rises.
e.
none of the above
108. Which of the following conditions makes it most likely for a quota to be imposed?
a.
The benefits of the quota are spread over many and the costs are concentrated on a few.
b.
The benefits of the quota are spread over many and the costs are spread over many.
c.
The benefits of the quota are spread over few and the costs are spread over many.
d.
The benefits of the quota are spread over few and the costs are spread over few.
e.
There is not enough information to answer the question.
109. On an aggregate level, free trade produces a net __________ and restricted trade produces a net __________.
a.
loss; loss also
b.
benefit; benefit also
c.
benefit; loss
d.
loss; benefit
110. The national defense argument for trade protectionism holds that
a.
what is good for business is good for the country.
b.
what is good for consumers is good for the country.
c.
consumers' surplus rises by more than producers' surplus falls.
d.
producers' surplus rises by more than consumers' surplus falls.
e.
none of the above
111. The infant industry argument for trade protectionism holds that
a.
new industries sometimes need a protective environment in which to grow so that they can compete with
older, more established foreign competitors.
b.
foreign competitors are often viewed as "infants" by large U.S. firms.
c.
tariffs are often preferred to quotas.
d.
quotas raise prices more than tariffs raise prices.
e.
a and c
