Microeconomics, 12e (Parkin)
Chapter 7 Global Markets in Action
1 How Global Markets Work
1) Which of the following is CORRECT?
A) Both imports and exports include goods and services.
B) Imports includes both goods and services but exports includes only goods.
C) Imports includes only goods but exports includes both goods and services.
D) Both exports and imports include goods and neither includes services.
2) International trade arises from
A) absolute advantage.
B) comparative advantage.
C) importation duties.
D) the advantage of execution.
3) The fundamental force that drives international trade is
A) absolute advantage.
B) importation duties and tariffs.
C) export licenses.
D) comparative advantage.
4) Comparative advantage implies that a country will
A) import those goods in which the country has a comparative advantage.
B) export those goods in which the country has a comparative advantage.
C) find it difficult to conclude free trade agreements with other nations.
D) export goods produced by domestic industries with low wages relative to its trading partners.
5) The United States has a comparative advantage in producing airplanes if
A) it can produce them at a lower opportunity cost than can other nations.
B) it can produce them at a lower dollar cost than can other nations.
C) it can produce a larger quantity than can other nations.
D) it has a larger quantity of skilled workers than do other nations.
6) Prior to international trade, the price of good X is lower in country A than in country B. This
means that we know that
A) country B has an absolute advantage in the production of product X.
B) country B has a comparative advantage in the production of product X.
C) country A has an absolute advantage in the production of product X.
D) country A has a comparative advantage in the production of product X.
7) When the principle of comparative advantage is used to guide trade, then a country specializes
in producing only
A) goods with the highest opportunity cost.
B) goods with the lowest opportunity costs.
C) goods for which production takes fewer worker-hour than another country.
D) goods for which production costs are more than average total costs.
8) With international trade, a country will export tires. Prior to international trade, the quantity
of tires produced in the country ________ the quantity of tires consumed in the country.
A) must be more than
B) must be less than
C) might be more than, less than, or equal to
D) must equal
9) Which of the following statements about U.S. international trade in 2013 is CORRECT?
A) The value of U.S. exports exceeded the value of U.S. imports.
B) The value of U.S. exports was about 33 percent of the value of total U.S. production.
C) The United States imported only goods.
D) The United States was the world’s largest trader.
10) The United States has a comparative advantage in producing cotton if the U.S. price of
cotton before international trade is ________ the world price.
A) less than
B) equal to
C) greater than
D) not comparable to
11) Compared to the situation before international trade, after the United States exports a good
production in the United States ________ and consumption in the United States ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
12) Compared to the situation before international trade, after the United States imports a good
production in the United States ________ and consumption in the United States ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
2 Winners, Losers, and the Net Gain from Trade
1) The gains from trade that are possible when two countries have different opportunity costs for
wheat and coffee are realized when
A) trade occurs and resources are reallocated within the two countries.
B) the two countries continue to produce the same quantities of wheat and coffee.
C) each country has an absolute advantage in one of the two commodities.
D) the demand curves in both countries shift inward.
2) The United States has a comparative advantage and specialize in the production of airplanes.
Compared to the situation with no trade, which of the following will occur?
A) More airplanes will be produced in the United States.
B) There will be no change in the price of airplanes in the United States.
C) The world price of airplanes will increase.
D) The quantity of airplanes demanded in the United States will increase.
3) A country specializes in the production of goods for which it has a comparative advantage, so
A) some producers and consumers win, some lose, but overall the gains exceed the losses.
B) all producers win.
C) all consumers win.
D) producers win, consumers lose, but overall the gains exceed the losses.
4) Suppose sugar is exported from a nation. In the sugar market who does NOT benefit from the
exports?
A) domestic consumers
B) domestic producers
C) workers in the industry
D) foreign consumers
5) Who benefits from imports?
A) domestic consumers
B) domestic producers
C) foreign consumers
D) Both answers A and B are correct.
6) A country opens up to trade and becomes an importer of a sugar. In the sugar market,
consumer surplus will ________, producer surplus will ________, and total surplus will
________.
A) increase; decrease; increase
B) increase; decrease; decrease
C) decrease; decrease; decrease
D) decrease; increase; increase
7) Consider a market that is initially in equilibrium with quantity demanded equal to quantity
supplied at a price of $20. If the world price of the good is $10 and the country opens up to
international trade then in this market then
A) imports will increase, the price will fall, and the quantity supplied will fall.
B) exports will increase, the price will be unchanged, and the quantity supplied will increase.
C) imports will increase, the price will decrease, and the supply curve will shift to the left.
D) the quantity demanded will decrease, the quantity supplied will decrease, and the price will
decrease.
8) A country opens up to trade and imports clothing. In the clothing market, surplus has been
redistributed from
A) producers to consumers.
B) consumers to producers.
C) government to consumers.
D) producers to government.
9) Based on the table below, at what world price would the country import the good?
Price
Q Demanded
Q Supplied
2
100
70
4
95
75
6
90
80
8
85
85
10
80
90
12
75
95
A) a price below $8
B) at exactly $8
C) a price above $8
D) It is impossible to say.
10) Suppose the world price of a good is $4. Based on the table below, the country would
Price
Q Demanded
Q Supplied
2
100
70
4
95
75
6
90
80
8
85
85
10
80
90
12
75
95
A) import 20 units.
B) export 20 units.
C) import 10 units.
D) export 10 units.
11) In a market open to international trade, at the world price the quantity demanded is 150 and
quantity supplied is 200. This country will
A) export 50 units.
B) import 50 units.
C) export 200 units.
D) import 150 units.
12) A country opens up to trade and becomes an exporter of wheat. In the wheat market,
consumer surplus will ________, producer surplus will ________, and total surplus will
________.
A) decrease; increase; increase
B) increase; decrease; increase
C) decrease; increase; decrease
D) remain unchanged; increase; increase
13) A country opens up to trade and exports computer chips. In the computer chip market,
surplus has been redistributed from
A) consumers to producers.
B) producers to consumers.
C) producers to government.
D) government to consumers.
14) Based on the table below, at what world price would the country export the good?
Price
Q Demanded
Q Supplied
2
100
70
4
95
75
6
90
80
8
85
85
10
80
90
12
75
95
A) a price above $8
B) at only $8
C) a price below $8
D) It is impossible to say.
The figure shows the market for shirts in the United States, where D is the domestic demand
curve and S is the domestic supply curve. The world price is $20 per shirt.
15) In the figure above, with international trade American consumers buy ________ million
shirts per year.
A) 48
B) 32
C) 16
D) 24
16) In the figure above, with international trade ________ million shirts per year are produced in
the United States.
A) 48
B) 32
C) 16
D) 20
17) In the figure above, with international trade the United States ________ million shirts per
year.
A) imports 32
B) imports 48
C) exports 16
D) exports 32
18) In the figure above, international trade ________ consumer surplus in the United States by
________.
A) increases; $320 million
B) decreases; $192 million
C) increases; $192 million
D) decreases; $320 million
19) In the figure above, international trade ________ producer surplus in the United States by
________.
A) increases; $320 million
B) decreases; $192 million
C) increases; $192 million
D) decreases; $320 million
20) In the figure above, international trade ________ total surplus in the United States by
________.
A) increases; $128 million
B) decreases; $192 million
C) increases; $320 million
D) decreases; $256 million
The figure shows the market for helicopters in the United States, where D is the domestic
demand curve and S is the domestic supply curve. The United States trades helicopters with the
rest of the world at a price of $36 million per helicopter.
21) In the figure above, with international trade U.S. companies buy ________ helicopters per
year.
A) 240
B) 480
C) 720
D) 360
22) In the figure above, with international trade ________ helicopters per year are produced in
the United States.
A) 360
B) 480
C) 720
D) 240
23) In the figure above, the United States ________ helicopters per year.
A) exports 480
B) exports 720
C) imports 480
D) imports 240
24) In the figure above, international trade ________ consumer surplus in the United States by
________.
A) decreases; $2.88 billion
B) decreases; $1.92 billion
C) increases; $2.88 billion
D) increases; $4.8 billion
25) In the figure above, international trade ________ producer surplus in the United States by
________.
A) decreases; $2.88 billion
B) decreases; $1.92 billion
C) increases; $4.8 billion
D) increases; $3.6 billion
26) In the figure above, international trade ________ total surplus in the United States by
________.
A) increases; $1.92 billion
B) decreases; $2.56 billion
C) increases; $4.8 billion
D) decreases; $3.6 billion
27) U.S. producer surplus ________ when the United States imports a good and U.S. producer
surplus ________ when the United States exports a good.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
28) When the United States exports a good, U.S. consumer surplus ________ and U.S. total
surplus ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
29) When the United States exports a good, the amount of the ________ in U.S. consumer
surplus is ________ the amount of the ________ in U.S. producer surplus.
A) increase; smaller than; increase
B) increase; larger than; decrease
C) decrease; smaller than; increase
D) decrease; equal to; decrease
1) A tariff is a
A) tax on an exported good or service.
B) tax on an imported good or service.
C) subsidy on an exported good.
D) subsidy on an imported good.
2) A tariff is a tax that is imposed by the ________ country when an ________ good crosses its
international boundary.
A) exporting; imported
B) importing; exported
C) exporting; exported
D) importing; imported
3) A tariff
A) is a tax imposed on imported goods.
B) is a tax imposed on exported goods.
C) encourages worldwide specialization according to the principle of comparative advantage.
D) has no effect on prices paid by domestic consumers, even though it increases the revenue
collected by domestic producers.
4) A tariff is
A) a licensing regulation that limits imports.
B) a quantitative restriction of imports.
C) a tax on an imported good.
D) an agreement to restrict the volume of exports.
5) A tax that is imposed by the importing country when an imported good crosses its
international boundary is called
A) an import quota.
B) dumping.
C) a voluntary export restraint.
D) a tariff.
6) A major purpose of tariffs is to
A) encourage imports.
B) encourage exports.
C) discourage imports.
D) discourage exports.
7) Tariffs and import quotas differ in that
A) one is a form of trade restriction, while the other is not.
B) one is a tax, while the other is a limit.
C) one is imposed by the government, while the other is imposed by the private sector.
D) one is legal, while the other is not.
8) Tariffs and import quotas both result in
A) lower levels of domestic production.
B) the domestic government gaining revenue.
C) lower levels of imports.
D) higher levels of domestic consumption.
9) If the United States imposes a tariff on imported cars, the
A) U.S. demand curve shifts rightward.
B) U.S. demand curve shifts leftward.
C) U.S. supply curve shifts rightward.
D) the price in the United States rises but neither the U.S. demand curve nor the U.S. supply
curve shift.
10) Which of the following statements concerning tariffs is NOT true?
A) A tariff results in a deadweight loss.
B) A tariff creates revenue for the government.
C) A tariff decreases international trade.
D) A tariff leaves the price of imports unchanged.
11) If a country imposes a tariff on an imported good, the tariff ________ the price in the
importing country and ________ the quantity of imports.
A) raises; decreases
B) raises; increases
C) raises; does not change
D) lowers; does not change
12) A tariff on imported peanuts ________ the quantity of peanuts imported and ________ the
domestic price of peanuts.
A) decreases; decreases
B) decreases; increases
C) increases; lowers
D) does not change; increases
13) A tariff imposed by the United States on Japanese cars ________ the price of cars in the
United States and ________ the quantity of Japanese cars imported into the United States.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases
14) If the United States imposes a tariff on $1 per imported shirt, the tariff will
A) raise the price of a shirt to U.S. consumers.
B) benefit U.S. shirt producers.
C) decrease imports of shirts into the United States.
D) all of the above
15) If the United States imposes a tariff on imported steel, the tariff will
A) raise the U.S. price of imported steel.
B) decrease the U.S. production of steel.
C) increase the total U.S. consumption of steel.
D) decrease employment in the U.S. steel industry.
16) Suppose the country of Mooland imposes a tariff on imported beef from the country of
Aqualand. As a result of the tariff, the
A) price of beef in Mooland falls.
B) quantity of beef exported by Mooland increases.
C) quantity of beef imported by Mooland decreases.
D) quantity of beef imported by Mooland increases.
17) Lowering the tariff on imported ethanol
A) increases domestic employment in the ethanol industry.
B) increases the imports of ethanol.
C) increases the domestic price of ethanol.
D) has no effect unless the nation’s trading partner also lowers its tariff on ethanol.
18) Reducing a tariff will ________ the domestic production of the good and ________ the total
domestic consumption of the good.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
19) Increasing a tariff will ________ the domestic quantity consumed of the good, while
________ the domestic production of the good.
A) increase; increasing
B) increase; decreasing
C) decrease; increasing
D) decrease; decreasing
20) A U.S. tariff on textiles would ________ U.S. clothing prices and ________ jobs in the U.S.
textile industry.
A) reduce; decrease
B) reduce; increase
C) raise; decrease
D) raise; increase
21) Tariffs
A) generate revenue for consumers.
B) generate revenue for the government.
C) encourage domestic consumers to buy more imports.
D) encourage domestic producers to produce less.
22) The United States imports cars from Japan. If the United States imposes a tariff on cars
imported from Japan
A) U.S. consumers lose and Japanese producers gain.
B) U.S. tariff revenue equals the loss of U.S. consumer surplus.
C) U.S. consumers lose and U.S. producers gain.
D) U.S. car manufacturers gain revenue equal to the revenue lost by Japanese car manufacturers.
23) A U.S. tariff imposed on items that can be produced more cheaply abroad
A) benefits Americans by making these goods cheaper.
B) makes the goods more expensive in foreign markets.
C) creates a deadweight loss.
D) makes the world market more efficient.
24) Japan imposes a tariff on imported rice. In Japan, surplus will be redistributed from
A) consumers to producers and government.
B) consumers to producers.
C) consumers to government.
D) government to producers.
25) The winners from a Japanese tariff on imported cars are
I. Japanese car producers.
II. Japanese car consumers.
III. the Japanese government.
A) only I and III
B) only I
C) only II
D) I, II, and III
26) A tariff is imposed on a good. The tariff will ________ the domestic quantity supplied,
________ the domestic quantity demanded, and ________ price in the home country.
A) increase; decrease; increase
B) increase; remain unchanged; remain unchanged
C) increase; increase; increase
D) increase; decrease; decrease
27) A tariff is imposed on a good. This will ________ the domestic producer surplus, ________
the domestic consumer surplus, and ________ total surplus in the home country.
A) increase; decrease; decrease
B) increase; decrease; increase
C) increase; remain unchanged; increase
D) increase; increase; increase
28) Consider a market in which there is an import tariff. Which of the following is TRUE?
A) The lost consumer surplus equals the gain in producer surplus plus the government revenue
plus the deadweight loss.
B) The lost consumer surplus equals the gain in producer surplus.
C) The lost consumer surplus equals the gain in producer surplus plus the government revenue.
D) The lost consumer surplus plus the deadweight loss equal the gain in producer surplus plus
the government revenue.