Question 1

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. The free- market equilibrium price of refrigerators in Canada is P₀, implying that P₀is the

Accepted Answer

The answer of The diagram below shows the demand and...

Question 2

The effect of a tariff on a specific imported good on (domestic)consumer and producer surplus can be summarized as follows:

Accepted Answer

A tariff on an imported good raises the domestic price, reducing consumer surplus due to higher prices and increasing producer surplus as domestic producers can sell more at the higher price.

Question 3

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PS1U1B1WS1U1B0. Assume that all jeans are identical.
  FIGURE 34- 2
-Refer to Figure 34- 2. If Canada imposes a tariff of $t per pair of jeans, Canadian consumers will lose consumer surplus equal to the area

Accepted Answer

The answer of The diagram below shows the domestic demand...

Question 4

Which of the following actions (all of which affect international trade)would be taken by a private firm as opposed to a national government?

Accepted Answer

Dumping is an action taken by a private firm, not a national government. Dumping occurs when a company exports a product at a lower price than it sells the same product in its domestic market. This can lead to unfair competition and harm domestic producers in the importing country. National governments may impose anti-dumping duties to counteract this practice, but it is ultimately up to private companies to decide whether to engage in dumping or not. The other options listed (import duty, countervailing duty, quota, and tariff) are all measures that can be taken by national governments to regulate international trade.

Question 5

Suppose five countries in Central America agree that products are to be freely traded across their borders, they will share a common set of import duties, and that the flow of people will continue to be restricted. This is an example of a

Accepted Answer

A customs union involves free trade between member countries and a common external tariff on imports from non-member countries, but does not allow for the free movement of people.

Question 6

The diagram below shows the domestic demand and supply curves for cotton towels in Canada. The prevailing world price of cotton towels is PS1U1B1WS1U1B0. Assume that all cotton towels are identical.
  FIGURE 34- 3
-Refer to Figure 34- 3. If Canada imposes a tariff of $t per cotton towel, foreign producers' revenues from their Canadian sales will be equal to the area

Accepted Answer

The answer of The diagram below shows the domestic demand...

Question 7

When a firm sells its product abroad for less than the price at which it sells it in its domestic market, it is often accused of

Accepted Answer

When a firm sells its product abroad for less than the price at which it sells it in its domestic market, it is called dumping. This can be seen as an unfair trade practice as it can harm domestic industries and create an uneven playing field. The World Trade Organization (WTO) has strict rules and regulations against dumping, and countries can impose anti-dumping duties to protect their domestic industries.

Question 8

Suppose a national government chooses to impose barriers to trade in an effort to promote a more diversified economy. This objective would be particularly important to, for example, an economy largely dependent on one or two agricultural products because

Accepted Answer

Relying heavily on only one or two agricultural products makes an economy vulnerable to fluctuations in world prices of those commodities, which can cause great instability in the national income. Introducing diversification through barriers to trade can provide a more stable income by reducing dependence on a single product.

Question 9

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PS1U1B1WS1U1B0. Assume that all jeans are identical.
  FIGURE 34- 2
-Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

Accepted Answer

In the presence of free international trade, Canada's production will be at the quantity Q1, which is the quantity at which the world price (P_w) intersects Canada's supply curve (S_c).

Question 10

Suppose the Canadian government imposed more stringent environmental regulations on U.S.- owned pulp and paper mills than on Canadian- owned mills. This practice would be a violation of

Accepted Answer

The NAFTA principle of national treatment requires that foreign-owned businesses be treated no less favorably than domestic businesses. Imposing stricter regulations on U.S.-owned mills than on Canadian-owned ones would violate this principle.

Question 11

Countervailing duties are designed to offset

Accepted Answer

Countervailing duties are specifically designed to counteract subsidies provided by foreign governments to their domestic producers. This is to ensure fair competition in international trade and prevent the subsidized goods from flooding the market and leading to unfair advantages.

Question 12

The main difference between a tariff and an "equivalent" voluntary export restriction (VER)is that

Accepted Answer

A tariff generates revenue for the government of the importing country, while a VER allows the exporting country's producers to capture the extra market value.

Question 13

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. Suppose that P₀is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P₀to P₁, the consequence would be that

Accepted Answer

When Canada imposes a tariff causing the price of refrigerators to rise to P₁, the domestic production of refrigerators increases, as domestic producers are now incentivized to supply more refrigerators at the higher price. This leads to an increase in domestic production from Q₁ to Q₂. On the other hand, domestic consumption falls from Q₅ to Q₄ since consumers face higher prices due to the tariff. Therefore, choice C is the correct answer.

Question 14

In the past few decades, an example of the infant- industry argument at work has been the

Accepted Answer

The European commercial aircraft industry is the best choice as an example of the infant-industry argument at work. The argument suggests that new and developing industries should be protected from foreign competition until they can compete on their own. In the 1960s, European countries provided subsidies and government support to develop a commercial aircraft industry to compete with the dominant U.S. market. This led to the eventual success of Airbus, which became a major competitor in the global aircraft industry.

Question 15

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. Suppose that P₀is the world price and Canada imports refrigerators. Suppose the Canadian government then responds to political pressure from domestic refrigerator manufacturers and imposes a tariff high enough that all imports are eliminated. As a result of this tariff, the price and quantity of refrigerators in Canada will be, respectively,

Accepted Answer

The answer of The diagram below shows the demand and...

Quiz 34: Trade Policy

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. The free- market equilibrium price of refrigerators in Canada is P₀, implying that P₀is the

The effect of a tariff on a specific imported good on (domestic) consumer and producer surplus can be summarized as follows:

Which of the following actions (all of which affect international trade) would be taken by a private firm as opposed to a national government?

Suppose five countries in Central America agree that products are to be freely traded across their borders, they will share a common set of import duties, and that the flow of people will continue to be restricted. This is an example of a

When a firm sells its product abroad for less than the price at which it sells it in its domestic market, it is often accused of

Suppose a national government chooses to impose barriers to trade in an effort to promote a more diversified economy. This objective would be particularly important to, for example, an economy largely dependent on one or two agricultural products because

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is P_W. Assume that all jeans are identical. FIGURE 34- 2 -Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

Suppose the Canadian government imposed more stringent environmental regulations on U.S.- owned pulp and paper mills than on Canadian- owned mills. This practice would be a violation of

Countervailing duties are designed to offset

The main difference between a tariff and an "equivalent" voluntary export restriction (VER) is that

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. Suppose that P₀is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P₀to P₁, the consequence would be that

In the past few decades, an example of the infant- industry argument at work has been the

Quiz 34: Trade Policy

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. The free- market equilibrium price of refrigerators in Canada is P0, implying that P0 is the

The effect of a tariff on a specific imported good on (domestic) consumer and producer surplus can be summarized as follows:

Which of the following actions (all of which affect international trade) would be taken by a private firm as opposed to a national government?

Suppose five countries in Central America agree that products are to be freely traded across their borders, they will share a common set of import duties, and that the flow of people will continue to be restricted. This is an example of a

When a firm sells its product abroad for less than the price at which it sells it in its domestic market, it is often accused of

Suppose a national government chooses to impose barriers to trade in an effort to promote a more diversified economy. This objective would be particularly important to, for example, an economy largely dependent on one or two agricultural products because

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical. FIGURE 34- 2 -Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

Suppose the Canadian government imposed more stringent environmental regulations on U.S.- owned pulp and paper mills than on Canadian- owned mills. This practice would be a violation of

Countervailing duties are designed to offset

The main difference between a tariff and an "equivalent" voluntary export restriction (VER) is that

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. Suppose that P0 is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P0 to P1, the consequence would be that

In the past few decades, an example of the infant- industry argument at work has been the

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. The free- market equilibrium price of refrigerators in Canada is P₀, implying that P₀is the

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is P_W. Assume that all jeans are identical. FIGURE 34- 2 -Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1. Suppose that P₀is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P₀to P₁, the consequence would be that