Deck 9: International Trade

Question 1

Figure: Foreign Trade Reference: Ref 9-3 (Figure: Foreign Trade) Refer to the figure. What is the dollar value of the deadweight loss created as a result of prohibiting trade in this market?

A) $2,500
B) $10,000
C) $7,500
D) $5,000

Answer 1

D

Question 2

Reference: Ref 9-1 (Figure: Foreign Trade) Refer to the figure. What quantity would be traded in the absence of any international trade?

A) 600
B) 1,400
C) 1,000
D) 800

Answer 2

C

Question 3

Reference: Ref 9-2 (Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff results in:

A) an increase in imports of 80 million units.
B) a decrease in imports of 80 million units.
C) an increase in imports of 100 million units.
D) a decrease in imports of 100 million units.

Answer 3

B

Question 4

Reference: Ref 9-1 (Figure: Foreign Trade) Refer to the figure. What quantity would be traded in a free-trade environment?

A) 600
B) 1,400
C) 1,000
D) 800

Question 5

Reference: Ref 9-1 (Figure: Foreign Trade) Refer to the figure. What quantity would be imported?

A) 600
B) 1,400
C) 1,000
D) 800

Question 6

Reference: Ref 9-1 (Figure: Foreign Trade) Refer to the figure. What quantity would be produced domestically?

A) 600
B) 1,400
C) 1,000
D) 800

Question 7

Figure: Foreign Trade with a Tariff Reference: Ref 9-2 (Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff generates increased domestic production by:

A) $40 million units.
B) $90 million units.
C) $140 million units.
D) $180 million units.

Question 8

Consider the following statements: I. Relative to a no-trade situation, if the United States exported wheat, the U.S. domestic wheat price would rise and domestic production of wheat would expand. II. Relative to a no-trade situation, international trade causes prices of all goods to rise.

A) I is true; II is false.
B) I is false; II is true.
C) Both I and II are true.
D) Both I and II are false.

Question 9

Reference: Ref 9-3 (Figure: Foreign Trade) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

A) $30,000
B) $5,000
C) $2,500
D) $22,500

Question 10

Economic policies of protectionism include: I. reduced trade barriers. II. tariffs. III. quotas.

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 11

Which of the following is TRUE about the economic policy of "protectionism"?

A) It raises prices of foreign goods in domestic markets.
B) It restricts competitive forces in domestic markets.
C) It can be achieved through quotas and tariffs.
D) All of these statements are correct.

Question 12

A tariff is a:

A) tax on imports.
B) subsidy on exports.
C) restriction on the quantity of domestic goods consumed by foreigners.
D) restriction on the quantity of imports from foreign producers.

Question 13

Reference: Ref 9-3 (Figure: Foreign Trade) Refer to the figure. What is the dollar value of the producer surplus gained as a result of prohibiting trade in this market?

A) $15,000
B) $30,000
C) $12,500
D) $22,500

Question 14

The benefits of trade include: I. greater productivity due to specialization. II. higher output due to specialization according to comparative advantage. III. increased welfare when preferences differ.

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 15

A tariff is a:

A) tax credit for domestic exports.
B) tax on imports.
C) temporary grant of monopoly rights.
D) renewable subsidy to the energy industry.

Question 16

Imposing a restrictive quota on the import of sugar will likely:

A) increase the price of sugar and decrease the quantity consumed.
B) increase the price of sugar and increase the quantity consumed.
C) leave the price of sugar unchanged and decrease the quantity consumed.
D) leave the price of sugar unchanged and increase the quantity consumed.

Question 17

Protectionism refers to government policies that:

A) restrict imports of foreign products.
B) give foreign producers tax credits in an effort to increase their exports.
C) stimulate trade between countries and increase domestic producers profit.
D) restrict the output of domestic producers to keep their prices high.

Question 18

The U.S. government restricting the quantity of sugar imports into the country is an example of a(n):

A) trade quota.
B) embargo.
C) trade settlement.
D) market hanger.

Question 19

Reference: Ref 9-2 (Figure: Foreign Trade with a Tariff) Refer to the figure. A $1 tariff generates government revenue of:

A) $100 million.
B) $140 million.
C) $180 million.
D) $200 million.

Question 20

In terms of economics, international trade is very similar to trade between two people in a small local neighborhood, except:

A) for the impact of specialization that does not occur in local trade.
B) for political considerations such as country borders.
C) that international trade is based on the concept of comparative advantage whereas local trade is not.
D) for the impact of division of knowledge that does not exist in local trade.

Question 21

Reference: Ref 9-4 (Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

A) $10,000
B) $4,000
C) $7,500
D) $6,000

Question 22

Reference: Ref 9-6 (Figure: World Imports) Refer to the figure. The imposition of a $20 tariff would generate a value of lost gains from trade of:

A) $45.
B) $90.
C) $70.
D) $160.

Question 23

Which of the following statements describes reasons why free trade is beneficial for the United States?

A) Free trade increases consumer surplus for imported goods that are cheaper than U.S. goods.
B) Free trade directs U.S. resources to those goods and services for which the United States has a comparative advantage.
C) Through specialization the U.S. and its trading partners can use the same overall amount of resources to produce and consume a larger amount of goods.
D) All of these statements are correct.

Question 24

Reference: Ref 9-4 (Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the lost consumer surplus as a result of prohibiting trade in this market?

A) $26,000
B) $28,000
C) $32,000
D) $36,000

Question 25

Restricting the importation of foreign automobiles will:

A) raise the price of foreign automobiles but decrease the price of domestic automobiles.
B) raise the price of both foreign and domestic automobiles.
C) cause domestic producers to sell their automobiles at lower prices because of reduced competition.
D) lower the price of foreign automobiles but raise the price of domestic automobiles.

Question 26

If quotas on sugar were eliminated in the United States, domestic production of sugar would fall. Why is this a benefit in economic terms for the United States? I. because it frees up resources that could be used more efficiently elsewhere II. because it allows foreign producers of sugar to earn income and thus those countries are better off III. U.S. consumers are able to enjoy increased consumer surplus because of the lower prices of imported sugar.

A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question 27

Figure: Foreign Trade Reference: Ref 9-3 (Figure: Foreign Trade) Refer to the figure. What is the dollar value of the consumer surplus that consumers could gain if the trade restriction were removed?

A) $35,000
B) $22,500
C) $30,000
D) $25,000

Question 28

One of the costs of protectionism is:

A) increases in total national output.
B) a reduction in the variety of goods in domestic markets.
C) greater competition.
D) lower opportunity costs of domestic production.

Question 29

Economists consider tariffs to be:

A) necessary.
B) beneficial to domestic consumers.
C) harmful to domestic producers.
D) obstacles that reduce gains from trade.

Question 30

Which, if any, of the following conditions for efficient market functioning do tariffs and quotas violate? I. demanders with the highest willingness to pay purchase the supply of goods II. producers with the lowest costs produce and sell the supply of goods III. the sum of consumer and producer surplus is maximized

A) I only
B) II and III only
C) I, II, and III
D) III only

Question 31

Reference: Ref 9-5 (Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total value of deadweight loss as a result of the tariff is:

A) $150 million.
B) $200 million.
C) $400 million.
D) $550 million.

Question 32

Figure: World Imports Reference: Ref 9-6 (Figure: World Imports) Refer to the figure. An imposition of extreme trade restrictions that eliminated all trade in that market, would generate wasted resources of:

A) $70.
B) $530.
C) $90.
D) $160.

Question 33

Which of the following statements is TRUE? I. If the United States bans the importation of bananas, consumer surplus will decrease. II. If the United States bans the importation of bananas, producer surplus will decrease. III. If the United States bans the importation of bananas, it will produce bananas at a cost exceeding their world purchase price.

A) I, II, and III
B) I and II only
C) I and III only
D) II and III only

Question 34

Reference: Ref 9-6 (Figure: World Imports) Refer to the figure. The solution for a country without trade restrictions is where the equilibrium price and quantity are ________, respectively.

A) $20 and 4
B) $40 and 11
C) $20 and 11
D) $20 and 20

Question 35

A tariff results in a higher: I. consumer surplus. II. producer surplus. III. government revenue.

A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question 36

Figure: Foreign Trade Market Reference: Ref 9-4 (Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the deadweight loss created by the loss of foreign trade?

A) $10,000
B) $4,000
C) $36,000
D) $6,000

Question 37

Which of the following decreases the volume of international trade?

A) increasing tariffs
B) decreasing quotas
C) lower transportation costs
D) stable monetary conditions

Question 38

A trade quota on imports:

A) benefits domestic producers and hurts domestic consumers.
B) benefits domestic consumers and hurts domestic producers.
C) benefits both domestic producers and domestic consumers.
D) hurts both domestic producers and domestic consumers.

Question 39

Without trade restrictions the price of tennis shoes is $30, and with trade restrictions the price of tennis shoes is $45. The difference in the two prices reflects:

A) per-unit profits.
B) the value of the extra resources for domestic production of an additional pair of tennis shoes.
C) the gain in consumer surplus from free trade.
D) All of the answers are correct.

Question 40

Reference: Ref 9-5 (Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total cost of the tariff to the citizens in that country is:

A) $350 million.
B) $400 million.
C) $550 million.
D) $700 million.

Question 41

In a typical month in the United States:

A) almost 1.0 million jobs are lost because of unfair international trade.
B) several hundred thousand jobs are lost and several hundred thousand jobs are gained.
C) the unemployment rate averages 8.7 percent.
D) All of these observations are correct.

Question 42

Trade restrictions:

A) help to save jobs in the protected industry, which causes these workers to spend more money in other industries, netting increased output and job opportunities throughout the economy.
B) are a very inexpensive way of saving jobs, cheaper than job retraining programs.
C) may save jobs in one industry but at a cost of less job growth in other industries.
D) often have little support by politicians, media, and the public.

Question 43

Consider the following two statements and select the best answer. I. The national security argument might be a valid argument for trade protection. II. Industries with spillover effects should be protected from foreign competition.

A) I and II are both true.
B) I and II are both false.
C) I is likely to be true, and II is likely to be false.
D) I is likely to be false, and II is likely to be true.

Question 44

Protectionism protects domestic industries from the competitive forces exerted by foreign firms.

Question 45

Because of pressure from the United States, the garment industry in Bangladesh dismissed 30,000 to 50,000 child laborers. This action:

A) was very beneficial, for most of the children returned to school full time.
B) resulted in many of the children turning to prostitution, street begging, or working in jobs with even worse working conditions.
C) led to a civil uprising in Bangladesh, claiming the lives of almost 4,000 of these children.
D) None of the answers is correct.

Question 46

Studies show that more openness to trade __________ income and _______ child labor.

A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases

Question 47

Which of the following statements is TRUE?

A) Although inefficient, trade restrictions are effective at reducing child labor.
B) Most child labor around the world takes place in factories that export products.
C) Rising real GDP per capita has been an important force in reducing child labor.
D) About 50 percent of the world's children aged 10-14 work.

Question 48

Economic growth requires:

A) job destruction.
B) trade barriers.
C) government intervention.
D) job creation.

Question 49

Which of the following statements is TRUE about the removal of trade barriers?

A) Consumers are harmed while some suppliers benefit.
B) Consumers benefit while some suppliers are harmed.
C) Everyone benefits.
D) Everyone is harmed.

Question 50

Why does economic growth require job destruction?

A) Economic growth requires international trade, which has been proven to cause short-term job loss.
B) Economic growth comes from creating and producing goods that use resources more productively, causing job loss in industries that use out-dated technology.
C) Excessive job creation can destroy economic growth.
D) When economic growth occurs, there are not enough resources left over for worker retraining and re-education programs.

Question 51

In most cases, trade restrictions will:

A) save jobs without any other costs.
B) save some jobs and destroy other jobs.
C) benefit both producers and consumers.
D) benefit only the government.

Question 52

Trade restrictions based on national security concerns:

A) might be beneficial in certain cases, like vaccinations.
B) have never been granted in the United States.
C) have no merit and are always unwise.
D) give little incentive for industry lobbyists to declare their product vital for national security purposes.

Question 53

With free trade, the domestic price of a good must be equal to the world price of a good.

Question 54

If the United States bans the importation of Japanese automobiles:

A) U.S. consumers of cars will be better off as their consumer surplus increases.
B) there will likely be more U.S. auto workers but fewer Americans working in other industries.
C) U.S. producers of cars will be worse off because their producer surplus shrinks.
D) everyone in the United States will be much better off.

Question 55

Taxes and quotas on imports can ______ jobs in the import industry and ________ jobs in export industries.

A) decrease; increase
B) increase; increase
C) increase; decrease
D) decrease; decrease

Question 56

History has shown that one of the most effective tools against child labor is:

A) regulations.
B) laws.
C) economic growth.
D) quotas.

Question 57

Which of the following arguments is valid in the economics of international trade?

A) Trade restrictions are good ways to raise a country's employment.
B) Protectionism increases the well-being of domestic consumers.
C) Trade restrictions help to reduce child labor in poor countries.
D) Trade can result in a net job gain in the whole country.

Question 58

The paradox of trade restrictions on countries with child labor is that:

A) these restrictions aim to reduce child labor, but because they make the countries poorer, they actually cause more child labor.
B) children from those countries are actually more efficient than the adults.
C) children can be hired at lower wages than adults.
D) restrictions on trade cause losses in consumer surplus.

Question 59

If the United States imports teacups from other countries, then U.S. producers of teacups are better off, and U.S. consumers of teacups are worse off, as a result of trade.

Question 60

Suppose a government is facing accusations of allowing domestic jobs to be lost to foreign labor in other countries. How can the government address these concerns? I. Governments can ensure that unemployment insurance and strong education programs exist to help workers retrain for new jobs. II. Governments can stress the importance of job creation in those industries that benefit from international trade, and encourage job creation in those industries. III. Governments can set up extensive trade restrictions to limit the impact of foreign firms on domestic production.

A) I only
B) II and III only
C) I and II only
D) I, II, and III

Question 61

A tariff benefits domestic producers but hurts domestic consumers.

Question 62

Economic benefits to tariffs and import quotas include: more jobs in the protected industry, lower prices to consumers, and increased gains from trade.

Question 63

In a demand and supply diagram, the effects of a tariff and a quota on the supply and demand curves are identical.

Question 64

Removing tariffs and quotas will ensure that goods are sold by the low-cost producers and increase the sum of consumer and producer surplus.

Question 65

What are the gains and losses of a trade restriction versus free trade? Explain carefully.

Question 66

(Figure: Consumption with and without Trade) Refer to the figure. Suppose this diagram represents the market for sugar in the United States. a. What is the equilibrium price of sugar before trade? b. What is the equilibrium quantity of sugar before trade? c. What is the price of sugar after trade is allowed? d. What is the quantity of sugar imported after trade is allowed? e. What is the amount of consumer surplus before trade? f. By how much does consumer surplus increase after trade? g. What is the amount of producer surplus before trade? h. What is the amount of producer surplus after trade?

Question 67

There is strong evidence to support the idea that protectionism increases domestic job growth.

Question 68

Briefly discuss any benefits of "protectionism".

Question 69

What are the three major benefits of trade? Explain briefly.

Question 70

What are the arguments in favor of trade restrictions, and what are their counterarguments? According to most economists, do these arguments really justify trade restrictions? Explain.

Question 71

Economic growth requires job destruction, since the destroyed jobs free up resources for more productive activities.

Question 72

If the world price of a good is greater than the domestic price in a country that can engage in international trade, then that country becomes an importer of that good.

Question 73

Briefly describe a few activities that a typical student might do on any given day that reflect the effects of globalization.

Question 74

(Figure: Market Activity with and without Trade) Use the diagram for market activity with and without trade to consider the effects of a trade restriction that eliminated foreign trade in an economy and answer the following questions. a. What is the dollar amount of deadweight loss created as a result of the trade restriction? b. What is the dollar value of wasted resources as a result of the trade restriction? c. What is the dollar gain in domestic producer surplus as a result of the trade restriction?

Question 75

A quota is a stated quality standard that an imported good must reach before it can be allowed into the borders of the importing country.

Question 76

Trade increases competition for domestic producers and results in lower prices of domestic goods.

Question 77

With the aid of demand and supply curves, compare the amounts of imports and the prices of goods under (i) free trade, (ii) trade with a tariff, and (iii) a closed economy without trade.

Question 78

Economic theory supports the existence of specialized majors in college.