Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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| 1. | The
domestic price of a product will equal the world price a. | when the
domestic supply of the product increases. | b. | when the country allows free trade. | c. | when trade
restrictions are imposed on the product. | d. | if the country chooses to export and not import the
product. | | |
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| 2. | Benefits from free trade include each of the following EXCEPT a. | increased
variety of goods. | b. | lower costs because of economies of
scale. | c. | enhanced flow of ideas. | d. | reduced
competition. | | |
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Figure 9-1
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| 3. | Refer
to Figure 9-1. Without trade, consumer surplus would be a. | $210. | b. | $245. | c. | $455. | d. | $490. | | |
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| 4. | Refer
to Figure 9-1. If this country chooses to trade, the price of baskets in this country would
be a. | $10 and 40 would
be sold domestically. | b. | $10 and 105 would be sold
domestically. | c. | $7 and 70 would be sold domestically. | d. | $7 and 40 would
be sold domestically. | | |
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| 5. | Refer
to Figure 9-1. With trade, total surplus increases by a. | $80. | b. | $97.50. | c. | $162.50. | d. | $495.50. | | |
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| 6. | Refer
to Figure 9-1. For this country, at the world price, a. | the domestic
quantity demanded is greater than the domestic quantity supplied. | b. | the domestic
quantity demanded is less than the domestic quantity supplied. | c. | the domestic
quantity demanded equals the domestic quantity supplied. | d. | this country
should raise the domestic price of baskets. | | |
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| 7. | Refer
to Figure 9-1. At the world price a. | the domestic quantity demanded is greater than the domestic
quantity supplied. | b. | the basket market is in equilibrium. | c. | the demand curve
is perfectly inelastic. | d. | both domestic producers and consumers will be better
off. | | |
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Scenario 9-1
The before-trade domestic price of tomatoes in the
United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker
in the tomatoes market.
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| 8. | Refer
to Scenario 9-1. If trade in tomatoes is allowed, total well-being in the United
States a. | will
increase. | b. | will decrease. | c. | will be
unaffected. | d. | could increase or decrease. | | |
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Figure 9-4
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| 9. | Refer
to Figure 9-4. With free trade, total surplus would increase by a. | $60. | b. | $75. | c. | $135. | d. | $210. | | |
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| 10. | Refer
to Figure 9-4. The increase in total surplus resulting from trade is a. | $60. Since
producer surplus increases by $180 and consumer surplus falls by $240. | b. | $60. Since
consumer surplus increases by $180 and producer surplus falls by $240. | c. | $75. Since
producer surplus increases by $240 and consumer surplus falls by $165. | d. | $75. Since
consumer surplus increases by $240 and producer surplus falls by $165. | | |
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Figure 9-5
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| 11. | Refer
to Figure 9-5. Imposing a tariff on carnations a. | increases imports by 100. | b. | increases
imports by 200. | c. | reduces imports by 200. | d. | reduces imports
by 400. | | |
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| 12. | Refer
to Figure 9-5. The amount of revenue collected by the government from the tariff is a. | $200. | b. | $400. | c. | $500. | d. | $600. | | |
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Figure 9-6
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| 13. | Refer
to Figure 9-6. If trade in shoes is allowed, Korea a. | will become an
importer of shoes. | b. | will become an exporter of shoes. | c. | could become
either an importer of shoes or an exporter of shoes. | d. | will neither
import nor export shoes. | | |
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Figure 9-8
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| 14. | Refer
to Figure 9-8. Producer surplus in this market before trade is a. | A. | b. | A + B. | c. | C + B +
D. | d. | C. | | |
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Figure 9-9
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| 15. | Refer
to Figure 9-9. The price of air conditioners and the quantity demanded in Kenya after trade would
be a. | P1, Q1. | b. | P1, Q2. | c. | P2, Q2. | d. | P0, Q0. | | |
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Figure 9-12
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| 16. | Refer
to Figure 9-12. Domestic production and domestic consumption respectively after trade would
be a. | 600 and
600. | b. | 600 and
300. | c. | 300 and
900. | d. | 600 and
900. | | |
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| 17. | In
2000, India raised the tariff on a. | American chicken legs from 35 percent to 100
percent. | b. | American chicken legs from 25 percent to 50
percent. | c. | American steel from 50 percent to 100
percent. | d. | American steel from 25 percent to 50
percent. | | |
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Figure 9-14
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| 18. | Refer
to Figure 9-14. After the quota is imposed price would be a. | $8 and quantity
sold would be 300. | b. | $6 and quantity sold would be 200. | c. | $6 and quantity
sold would be 400. | d. | $4 and quantity sold would be 300. | | |
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| 19. | Refer
to Figure 9-14. The loss in total surplus when the quota is imposed would be a. | $100. | b. | $200. | c. | $400. | d. | $500. | | |
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| 20. | 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 domestic producers of a. | incense are now
better off, consumers of incense are worse off; producers of steel are worse off, consumers of steel
are better off; both producers and consumers of rugs are unaffected. | b. | incense are now
worse off, consumers of incense are better off; producers of steel are better off, consumers of steel
are worse off; both producers and consumers of rugs are unaffected. | c. | incense are now
worse off, consumers of incense are better off; producers of steel are worse off, consumers of steel
are better off; both producers and consumers of rugs are unaffected. | d. | incense, steel,
and rugs are worse off and consumers of incense, steel and rugs are better off. This is because trade
always harms producers and helps consumers. | | |
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True/False
Indicate whether the sentence or statement is true
or false.
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| 21. | If
Belgium exports chocolate to the rest of the world, Belgian chocolate sellers benefit from higher
producer surplus, Belgian chocolate buyers are worse off because of lower consumer surplus, but total
surplus in Belgium increases because of trade.
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| 22. | Economists agree that trade ought to be restricted if free trade means that domestic
jobs might be lost because of foreign competition.
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Short Answer
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| | 23. | According to the graph, answer the following questions about
CDs.
a. | What is the equilibrium price of CDs before
trade? | b. | What is the
equilibrium quantity of CDs before trade? | c. | What is the price of CDs after trade is
allowed? | d. | What is the
quantity of CDs exported? | e. | What is the amount of consumer surplus before
trade? | f. | What is the
amount of consumer surplus after trade? | g. | What is the amount of producer surplus before
trade? | h. | What is the
amount of producer surplus after trade? | i. | What is the amount of total surplus before
trade? | j. | What is the
amount of total surplus after trade? | k. | What is the change in total surplus because of
trade? | | |
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| | 24. | Using
the graph shown, assume that free trade existed in this country before the government imposed an
import quota of 20 hammers. Answer the following questions given this
information.
a. | What is the price of hammers before the quota is
imposed? | b. | What is the
price of hammers after the quota is imposed? | c. | What is the quantity of hammers imported before the
quota? | d. | What is the
quantity of hammers imported after the quota? | e. | What is the amount of consumer surplus before the
quota? | f. | What is the
amount of consumer surplus after the quota? | g. | What is the amount of producer surplus before the
quota? | h. | What is the
amount of producer surplus after the quota? | i. | What would be the amount of deadweight loss due to the
quota? | | |
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| | 25. | Define the two approaches a nation can take to achieve free trade. Does one approach
have an advantage over the other?
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