177. Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area
a.
E.
b.
B + E.
c.
D + E + F.
d.
B + D + E + F.
178. Refer to Figure 9-16. The tariff
a.
decreases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F.
b.
decreases producer surplus by the area C + D and decreases consumer surplus by the area D + E + F.
c.
increases producer surplus by the area C and decreases consumer surplus by the area C + D + E + F.
d.
increases producer surplus by the area B + C and decrease consumer surplus by the area D + E + F.
179. Refer to Figure 9-16. The tariff
a.
decreases producer surplus by the area C, decreases consumer surplus by the area C + D + E, and decreases
total surplus by the area D + F.
b.
increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F, and decreases
total surplus by the area D + F.
c.
creates government revenue represented by the area B + E and decreases total surplus by the area D + E + F.
d.
increases producer surplus by the area C + G and creates government revenue represented by the area D + E +
F.
180. Refer to Figure 9-16. The deadweight loss created by the tariff is represented by the area
a.
B.
b.
D + F.
c.
D + E + F.
d.
B + D + E + F.
181. Refer to Figure 9-16. The area C + D + E + F represents
a.
the decrease in consumer surplus caused by the tariff.
b.
the decrease in total surplus caused by the tariff.
c.
the deadweight loss of the tariff minus government revenue raised by the tariff.
d.
the deadweight loss of the tariff plus government revenue raised by the tariff.
182. A quota is
a.
a tax placed on imports.
b.
a limit on the quantity of imports.
c.
a tax on exports to other countries.
d.
an excess of exports over imports.
183. Both tariffs and import quotas
a.
increase the quantity of imports and raise the domestic price of the good.
b.
increase the quantity of imports and lower the domestic price of the good.
c.
decrease the quantity of imports and raise the domestic price of the good.
d.
decrease the quantity of imports and lower the domestic price of the good.
184. A major difference between tariffs and import quotas is that
a.
tariffs create deadweight losses, but import quotas do not.
b.
tariffs help domestic consumers, and import quotas help domestic producers.
c.
tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to
import.
d.
All of the above are correct.
185. Tariffs and quotas are different in the sense that
a.
tariffs cause deadweight losses, while quotas do not cause deadweight losses.
b.
tariffs raise revenue for the government, while quotas do not raise revenue for the government.
c.
tariffs enhance the well-being of domestic consumers, while quotas diminish the well-being of domestic
consumers.
d.
tariffs enhance the well-being of domestic producers, while quotas diminish the well-being of domestic
producers.
186. Import quotas and tariffs produce similar results. Which of the following is not one of those results?
a.
The domestic price of the good increases.
b.
Consumer surplus of domestic consumers increases.
c.
Producer surplus of domestic producers increases.
d.
A deadweight loss is experienced by the domestic country.
187. Import quotas and tariffs produce some common results. Which of the following is not one of those common results?
a.
Total surplus in the domestic country falls.
b.
Producer surplus in the domestic country increases.
c.
The domestic country experiences a deadweight loss.
d.
Revenue is raised for the domestic government.
188. An import quota
a.
is preferable to a tariff since an import quota does not create a deadweight loss.
b.
is a tax on imported goods.
c.
reduces the welfare of domestic consumers.
d.
reduces the welfare of domestic producers.
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 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.
190. 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.
191. 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
192. 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.
193. 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.
194. Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that engage 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.
195. 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.
196. 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.
197. 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.
198. Refer to Figure 9-17. Without trade, total surplus is
a.
$600.
b.
$1,200.
c.
$1,800.
d.
$2,250.
199. Refer to Figure 9-17. With free trade, total surplus is
a.
$600.
b.
$1,200.
c.
$1,800.
d.
$2,400.
200. 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.
201. 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.
202. 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.
203. 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.
204. Refer to Figure 9-17. The deadweight loss caused by the tariff is
a.
$24.
b.
$72.
c.
$96.
d.
$144.
205. 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.
206. 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.
207. 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.
208. 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.
209. 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.
210. 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.
211. Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following
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.
212. 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.
213. 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.
214. 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.
215. 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.
216. 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.
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 decrease in consumer surplus.
b.
an increase in producer surplus.
c.
an increase in total surplus.
d.
All of the above are correct.
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 $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.
219. 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.
220. 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.
221. 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.
222. For a country that is considering the adoption of either a tariff or an import quota on a particular good, an important
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.
223. 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.
224. 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.
225. Refer to Figure 9-19. With free trade, consumer surplus in the textile market amounts to
a.
$210.
b.
$320.
c.
$405.
d.
$910.
226. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particular 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.
227. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particular 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.
228. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particular 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.
229. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particular 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.
230. 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.
231. 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.
232. 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.
233. 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.
234. 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.
235. 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.
236. 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.
237. 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.