Chapter 9/Application: International Trade ❖ 41
143. Refer to Figure 9-14. A result of this country allowing international trade in crude oil is as follows:
a.
The well-being of domestic crude-oil producers is now higher in that they now sell more crude oil
at a higher price per barrel.
b.
The effect on the well-being of domestic crude-oil consumers is unclear in that they now buy more
crude oil, but at a higher price per barrel.
c.
The effect on the well-being of the country is unclear in that domestic producer surplus increases,
while the effect on domestic consumer surplus is unclear.
d.
All of the above are correct.
144. 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.
145. 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.
146. 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.
147. 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.
148. 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.
42 ❖ Chapter 9/Application: International Trade
149. 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.
150. 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.
151. 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.
152. 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.
153. 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.
154. 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.
Chapter 9/Application: International Trade ❖ 43
155. 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.
156. 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.
157. Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain impos-
es 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.
158. 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.
159. Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Chile impos-
es 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.
44 ❖ Chapter 9/Application: International Trade
160. 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.
161. 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.
162. When the nation of Brownland first permitted trade with other nations, domestic producers of wheat experi-
enced 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.
163. When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experi-
enced a 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.
Chapter 9/Application: International Trade ❖ 45
Figure 9-15
164. 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.
165. 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.
166. 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.
46 ❖ Chapter 9/Application: International Trade
167. 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.
168. 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.
169. 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.
170. 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.
171. 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.
172. 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.
Chapter 9/Application: International Trade ❖ 47
173. 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.
174. 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.
175. 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.
Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price.
176. 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.
48 ❖ Chapter 9/Application: International Trade
177. 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.
178. 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.
179. 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.
180. 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.
181. 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.
Chapter 9/Application: International Trade ❖ 49
182. 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.
183. 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.
184. 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.
185. 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.
186. 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.
187. 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.
50 ❖ Chapter 9/Application: International Trade
188. The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its
trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting
rugs. We can conclude that Aquilonia’s new free-trade policy has
a.
increased consumer surplus and producer surplus in the incense market.
b.
increased consumer surplus in the steel market and left producer surplus in the rug market
unchanged.
c.
decreased consumer surplus in both the steel and rug markets.
d.
decreased consumer surplus in the steel market and increased total surplus in the incense market.
189. The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its
trade restrictions, it discovers that it is importing rice, exporting steel, and neither importing nor exporting
TVs. We can conclude that producer surplus in Aquilonia is now
a.
higher in the steel market, lower in the rice market, and unchanged in the TV market.
b.
higher in the rice and steel markets, and unchanged in the TV market.
c.
lower in the rice and TV markets, and higher in the steel market.
d.
lower in the rice and steel markets, and the same in the TV market.
190. Zelzar has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions,
it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which
groups in Zelzar are better off as a result of the new free-trade policy?
a.
producers of incense and consumers of steel
b.
consumers of all three goods
c.
consumers of incense and producers of rugs
d.
producers of steel and consumers of incense
191. The United States has imposed taxes on some imported goods that have been sold here by foreign countries at
below their cost of production. These taxes
a.
benefit the United States as a whole, because they generate revenue for the government. In addition,
because the goods are priced below cost, the taxes do not harm domestic consumers.
b.
benefit the United States as a whole, because they generate revenue for the government and
increase producer surplus.
c.
harm the United States as a whole, because they reduce consumer surplus by an amount that
exceeds the gain in producer surplus and government revenue.
d.
harm the United States as a whole, because they reduce producer surplus by an amount that exceeds
the gain in consumer surplus and government revenue.
Chapter 9/Application: International Trade ❖ 51
192. Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is
called
a.
marginal cost of production.
b.
marginal benefit of size.
c.
economies of scale.
d.
economies of production.
193. Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that en-
gage in free trade
a.
can realize economies of scale more fully.
b.
have greater market power.
c.
experience larger producer surplus.
d.
All of the above are correct.
52 ❖ Chapter 9/Application: International Trade
Figure 9-17
Domestic Supply
Domestic Demand
World price + tariff
World Price
4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100 Quantity
4
8
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
Price
194. Refer to Figure 9-17. Without trade, consumer surplus is
a.
$400 and producer surplus is $200.
b.
$400 and producer surplus is $800.
c.
$1,600 and producer surplus is $200.
d.
$1,600 and producer surplus is $800.
195. Refer to Figure 9-17. With free trade, consumer surplus is
a.
$400 and producer surplus is $200.
b.
$400 and producer surplus is $800.
c.
$1,600 and producer surplus is $200.
d.
$1,600 and producer surplus is $800.
196. Refer to Figure 9-17. With trade and a tariff, consumer surplus is
a.
$808 and producer surplus is $200.
b.
$808 and producer surplus is $392.
c.
$1,024 and producer surplus is $200.
d.
$1,024 and producer surplus is $392.
Chapter 9/Application: International Trade ❖ 53
197. Refer to Figure 9-17. Without trade, total surplus is
a.
$600.
b.
$1,200.
c.
$1,800.
d.
$2,250.
198. Refer to Figure 9-17. With free trade, total surplus is
a.
$600.
b.
$1,200.
c.
$1,800.
d.
$2,400.
199. Refer to Figure 9-17. With trade and a tariff, total surplus is
a.
$1,224.
b.
$1,416.
c.
$1,512.
d.
$1,704.
200. Refer to Figure 9-17. With free trade, the country imports
a.
16 units of the good.
b.
24 units of the good.
c.
60 units of the good.
d.
64 units of the good.
201. Refer to Figure 9-17. Relative to the free-trade outcome, the imposition of the tariff
a.
decreases imports of the good by 16 units and increases domestic production of the good by 8 units.
b.
decreases imports of the good by 16 units and increases domestic production of the good by 16
units.
c.
decreases imports of the good by 24 units and increases domestic production of the good by 8 units.
d.
decreases imports of the good by 24 units and increases domestic production of the good by 24
units.
202. Refer to Figure 9-17. The amount of revenue collected by the government from the tariff is
a.
$32.
b.
$288.
c.
$368.
d.
$720.
54 ❖ Chapter 9/Application: International Trade
203. Refer to Figure 9-17. The deadweight loss caused by the tariff is
a.
$24.
b.
$72.
c.
$96.
d.
$144.
204. Refer to Figure 9-17. When comparing no trade to free trade, the gains from trade amount to
a.
$400.
b.
$600.
c.
$750.
d.
$1,000.
205. Refer to Figure 9-17. When the country moves from no trade to free trade, consumer surplus
a.
increases by $1,200 and producer surplus increases by $600.
b.
increases by $1,200 and producer surplus decreases by $600.
c.
decreases by $1,350 and producer surplus increases by $450.
d.
decreases by $1,350 and producer surplus decreases by $450.
206. Refer to Figure 9-17. When the country moves from free trade to trade and a tariff, consumer surplus
a.
decreases by $576 and producer surplus does not change.
b.
decreases by $576 and producer surplus increases by $192.
c.
decreases by $792 and producer surplus does not change.
d.
decreases by $792 and producer surplus increases by $192.
207. When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-
tree policy, the result was that the country began to import automobiles. The change in policy improved the
well-being of that nation in the sense that
a.
both producers of automobiles and consumers of automobiles in that nation became better off as a
result.
b.
the gains to automobile producers in that nation exceeded the losses of the automobile consumers in
that nation.
c.
the gains to automobile consumers in that nation exceeded the losses of the automobile producers in
that nation.
d.
even though total surplus in that nation decreased, it was still true that consumer surplus and
producer surplus increased.
Chapter 9/Application: International Trade ❖ 55
208. After a certain nation changed its policy from one that banned international trade in wheat to one that allowed
international trade in wheat, the nation began importing wheat. As a result, total surplus in the wheat market
increased by $10 million. Which of the following changes could have occurred as well?
a.
The price of wheat in that nation increased with the adoption of the new policy.
b.
The domestic quantity of wheat supplied increased with the adoption of the new policy.
c.
Consumer surplus in the wheat market increased by $7 million and producer surplus in the wheat
market increased by $3 million.
d.
Consumer surplus in the wheat market increased by $15 million and producer surplus in the wheat
market decreased by $5 million.
209. When the nation of Isoland opens up its steel market to international trade, that change
a.
creates winners and losers, regardless of whether Isoland ends up exporting or importing steel.
b.
results in a decrease in total surplus, regardless of whether Isoland ends up exporting or importing
steel.
c.
creates winners, but no losers, if Isoland ends up exporting steel.
d.
creates losers, but no winners, if Isoland ends up importing steel.
210. Some time ago, the nation of Republica opened up its paper market to international trade. Which of the fol-
lowing results of this policy change is consistent with the notion that Republica has a comparative advantage
over other countries in producing paper?
a.
The price of paper in Republica decreased as a result of the policy change.
b.
Republica began exporting paper as a result of the policy change.
c.
The domestic demand curve for paper shifted to the right as a result of the policy change.
d.
The domestic quantity of paper demanded increased as a result of the policy change.
211. Domestic producers of a good become better off, and domestic consumers of a good become worse off, when
a country begins allowing international trade in that good and
a.
the country becomes an importer of the good as a result.
b.
the world price exceeds the domestic price of the good that prevailed before international trade was
allowed.
c.
other countries have a comparative advantage, relative to the country in question, in producing the
good.
d.
total surplus does not change as a result.
56 ❖ Chapter 9/Application: International Trade
Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches.
The domestic country is Isoland.
Domestic demand
Domestic supply
10 20 30 40 50 60 Q
1
2
3
4
5
6
7
P
212. Refer to Figure 9-18. If Isoland allows international trade and if the world price of peaches is $5, then
a.
Isoland has a comparative advantage, relative to other countries, in producing peaches.
b.
Isoland will import peaches.
c.
consumer surplus with trade exceeds consumer surplus without trade.
d.
All of the above are correct.
213. Refer to Figure 9-18. If Isoland allows international trade and if the world price of peaches is $3, then
a.
Isoland has a comparative advantage, relative to other countries, in producing peaches.
b.
Isoland will export peaches.
c.
producer surplus with trade exceeds producer surplus without trade.
d.
consumer surplus with trade exceeds consumer surplus without trade.
214. Refer to Figure 9-18. If Isoland allows international trade, then it will be an exporter of peaches if and only if
the world price of peaches is
a.
above $2.
b.
below $4.
c.
above $4.
d.
below $7.
215. Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then
a.
producer surplus will be smaller than it would be if Isoland banned trade.
b.
consumer surplus will be smaller than it would be if Isoland banned trade.
c.
the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied.
d.
Isoland will be an importer of peaches.
Chapter 9/Application: International Trade ❖ 57
216. Refer to Figure 9-18. Suppose Isoland changes from a no-trade policy to a policy that allows international
trade. If the world price of peaches is $5, then the policy change results in
a.
a decrease in consumer surplus.
b.
an increase in producer surplus.
c.
an increase in total surplus.
d.
All of the above are correct.
217. Refer to Figure 9-18. Suppose Isoland changes from a no-trade policy to a policy that allows international
trade. If the world price of peaches is $5, then the policy change results in a
a.
$25 decrease in consumer surplus.
b.
$20 increase in consumer surplus.
c.
$25 decrease in producer surplus.
d.
$20 increase in producer surplus.
218. Refer to Figure 9-18. Suppose Isoland changes from a no-trade policy to a policy that allows international
trade. If the world price of peaches is $3, then the policy change results in a
a.
$15.00 decrease in producer surplus.
b.
$45.00 increase in consumer surplus.
c.
$20.00 increase in total surplus.
d.
$12.50 increase in total surplus.
219. Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?
a.
Consumer surplus decreases by $100; producer surplus increases by $100; and government revenue
from the tariff amounts to $50.
b.
Consumer surplus decreases by $200; producer surplus increases by $100; and government revenue
from the tariff amounts to $50.
c.
Consumer surplus increases by $100; producer surplus decreases by $200; and government revenue
from the tariff amounts to $50.
d.
Consumer surplus decreases by $50; producer surplus increases by $200; and government revenue
from the tariff amounts to $150.
220. Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts
to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8
million bottles per year, then we can conclude that
a.
the quantity of wine demanded by France, with the tariff, is 18 million bottles per year.
b.
the quantity of wine demanded by France, without the tariff, would be 24 million bottles per year.
c.
the amount of the deadweight loss is 24 million euros per year.
d.
the tariff causes French buyers of wine to pay 2 euros more per bottle than they would pay without
the tariff.
58 ❖ Chapter 9/Application: International Trade
221. For a country that is considering the adoption of either a tariff or an import quota on a particular good, an im-
portant difference is that
a.
an import quota has no effect on consumer surplus, while a tariff decreases consumer surplus.
b.
an import quota has no effect on producer surplus, while a tariff decreases producer surplus.
c.
a tariff raises total surplus, while an import quota does not.
d.
a tariff raises revenue for that country’s government, while an import quota does not.
222. For any country that allows free trade,
a.
domestic quantity demanded is equal to domestic quantity supplied at the world price.
b.
domestic quantity demanded is greater than domestic quantity supplied at the world price.
c.
both producers and consumers in that country gain when domestic products are exported, but both
groups lose when foreign products are imported.
d.
the domestic price is equal to the world price.
Figure 9-19. On the diagram below, Q represents the quantity of textiles and P represents the price of textiles.
Domestic supply
Domestic demand
World Price
20 40 60 80 100 120 140 Q
3
6
9
12
15
18
21
24 P
223. Refer to Figure 9-19. With free trade, the country for which the figure is drawn will
a.
export 30 units of textiles.
b.
export 50 units of textiles.
c.
import 30 units of textiles.
d.
import 50 units of textiles.
224. Refer to Figure 9-19. With free trade, consumer surplus in the textile market amounts to
a.
$210.
b.
$320.
c.
$405.
d.
$910.
Chapter 9/Application: International Trade ❖ 59
225. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particu-
lar 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.
226. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particu-
lar 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.
227. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particu-
lar 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.
228. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particu-
lar 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.
229. When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,
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.
230. When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,
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.
60 ❖ Chapter 9/Application: International Trade
231. When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
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.
232. Denmark is an importer of computer chips and adds a $5 per chip tariff to the world price of $12 per chip.
Suppose Denmark removes the tariff. Which of the following outcomes is not 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.
233. Japan imposes a $300 per ton tariff on imported steel, raising the price charged in Japan to $1,000. Using only
this information, which of the following statements is correct?
a.
The world price for steel is $300.
b.
The world price for steel is $700.
c.
The world price for steel is $1,000.
d.
The world price for steel is $1,300.
234. 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 better off.
c.
the gains of the winners fall short of the losses of the losers.
d.
All of the above are correct.
235. The world price of a ton of steel is $1,000. Before Russia allowed trade in steel, the price of a ton of steel there
was $650. Once Russia allowed trade in steel with other countries, Russia began
a.
exporting steel and the price per ton in Russia remained at $650.
b.
exporting steel and the price per ton in Russia increased to $1,000.
c.
importing steel and the price per ton in Russia remained at $650.
d.
importing steel and the price per ton in Russia increased to $1,000.
236. The world price of a ton of steel is $650. Before Russia allowed trade in steel, the price of a ton of steel there
was $1,000. Once Russia allowed trade in steel with other countries, Russia began
a.
exporting steel and the price per ton in Russia decreased to $650.
b.
exporting steel and the price per ton in Russia remained at $1,000.
c.
importing steel and the price per ton in Russia decreased to $650.
d.
importing steel and the price per ton in Russia remained at $1,000.