Question 1

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.With trade,total surplus in the Guatemalan coffee market amounts to

Accepted Answer

The total surplus with trade is the sum of consumer surplus, producer surplus, and the gains from trade. In Figure 9-1, consumer surplus is represented by the area below the demand curve and above the world price line, which is $1 per pound, and producer surplus is represented by the area above the supply curve and below the world price line. The gains from trade are the additional surplus that accrues to both consumers and producers due to trade, and are represented by the triangle formed by the vertical distance between the world price and the domestic equilibrium price (i.e., $3 per pound) and the quantity traded (i.e., 1,000 pounds). Adding up these areas yields a total surplus of $1,870.

Question 2

Suppose Iceland goes from being an isolated country to being an exporter of coats.As a result,

Accepted Answer

If Iceland becomes an exporter of coats, it means that it can produce coats at a lower cost than before. This implies that the producer surplus of Icelandic coat producers will increase. However, it is not necessary that consumer surplus or total surplus in the coat market will increase or remain unchanged. It depends on the relative changes in the price and quantity of coats in the market, which are not specified in the question. Moreover, it is also not necessary to infer that other countries have a comparative advantage in coat production, as this depends on the specific factors that led to Iceland becoming an exporter of coats.

Question 3

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.From the figure it is apparent that

Accepted Answer

Guatemala having a comparative advantage in producing coffee suggests that it can produce coffee at a lower opportunity cost than other countries, which is why it would be apparent from the figure.

Question 4

Assume,for Colombia,that the domestic price of coffee without international trade is higher than the world price of coffee.This suggests that

Accepted Answer

Colombia's higher domestic price compared to the world price suggests that other countries can produce coffee more efficiently, indicating they have a comparative advantage.

Question 5

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.In the absence of trade,the equilibrium price of coffee in Guatemala is

Accepted Answer

The answer of Figure 9-1
The figure illustrates the market for...

Question 6

Which of the following statements is true?

Accepted Answer

Free trade benefits a country both when it exports and when it imports. When a country engages in free trade, it allows for the importation of goods and services that it may not have the ability to produce domestically or where it may be more expensive to produce domestically. This allows consumers to purchase these goods and services at a lower price, which, in turn, raises their standard of living. Similarly, when a country is able to export, it can earn foreign exchange, which can be invested in the country, further promoting economic growth.

Question 7

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.Relative to the no-trade situation,trade with the rest of the world results in

Accepted Answer

The answer of Figure 9-1
The figure illustrates the market for...

Question 8

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.With trade,Guatemala will

Accepted Answer

With trade, Guatemala will export 22 units of coffee because the world price is higher than the domestic price, making it profitable for Guatemala to export coffee.

Question 9

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.In the absence of trade,total surplus in the Guatemalan coffee market amounts to

Accepted Answer

The answer of Figure 9-1
The figure illustrates the market for...

Question 10

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.When trade is allowed,

Accepted Answer

When trade is allowed, Guatemalan producers can sell coffee at higher world prices, benefiting them, while consumers face higher prices, making them worse off.

Question 11

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.When trade in coffee is allowed,consumer surplus in Guatemala

Accepted Answer

The answer of Figure 9-1
The figure illustrates the market for...

Question 12

Suppose Iceland goes from being an isolated country to being an importer of coats.As a result,

Accepted Answer

When Iceland becomes an importer of coats, it means that they can now purchase coats from other countries which may be produced at a lower cost or of better quality. This leads to an increase in consumer surplus because consumers now have access to a wider variety of coats at cheaper prices. Producer surplus, on the other hand, would decrease because there is now increased competition from foreign suppliers, and they may have to lower their prices to remain competitive. Total surplus in the coat market does not necessarily remain unchanged but may instead increase or decrease, depending on the specifics of the situation. It is not reasonable to infer that Iceland has a comparative advantage over other countries in coat production based solely on the fact that they have become an importer.

Question 13

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.From the figure it is apparent that

Accepted Answer

Guatemala will export coffee if trade is allowed because the domestic price is lower than the world price, indicating a comparative advantage in coffee production.

Question 14

Within a country,the domestic price of a product will equal the world price if

Accepted Answer

The domestic price of a product will equal the world price only if the country allows free trade. In this scenario, there are no trade restrictions imposed on the product, and the country is open to both importing and exporting the product.

Question 15

Suppose a country begins to allow international trade in steel.Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

Accepted Answer

Allowing international trade in steel will increase the total supply of steel in the domestic market, leading to a decrease in the price of steel. As a result, the consumers of steel will benefit from lower prices, and the producers of steel will benefit from an increased quantity sold (even if at a lower price). This increase in consumer and producer surplus will always occur regardless of whether the country is importing or exporting steel. B and C may or may not occur depending on the specifics of the situation, and D is not necessarily true.

Question 16

When a country allows international trade and becomes an importer of a good,

Accepted Answer

When a country becomes an importer of a good, domestic consumers benefit from lower prices, while domestic producers may suffer from increased competition. However, the gains to consumers from lower prices usually exceed the losses to producers, resulting in a net gain for the country overall (i.e. gains of winners exceed the losses of losers). Therefore, option C is the correct answer. Option A is incorrect, as domestic producers may suffer from increased competition. Option B is incorrect, as domestic consumers benefit from lower prices. Option D is incorrect, as options A and B are not both correct.

Question 17

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Accepted Answer

When a country allows trade in coffee with other countries, the domestic price of coffee will eventually equal the world price of coffee through the process of arbitrage. If the domestic price of coffee is higher than the world price, then domestic producers will find it profitable to export coffee, which will increase the global supply of coffee and lower the world price. Conversely, if the domestic price of coffee is lower than the world price, then the country will import coffee, which will decrease the global supply of coffee and raise the world price. Eventually, these forces will converge to make the domestic price of coffee equal the world price.

Question 18

When a country allows international trade and becomes an exporter of a good,

Accepted Answer

When a country exports a good, domestic producers benefit from access to larger markets and potentially higher prices, while domestic consumers may face higher prices. However, the overall gains from trade, such as increased economic efficiency and growth, typically outweigh the losses, making all statements correct.

Question 19

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.In the absence of trade,total surplus in Guatemala is represented by the area

Accepted Answer

Total surplus in the absence of trade is the sum of consumer surplus and producer surplus, which is represented by the area A + B + C + D + F.

Question 20

Figure 9-1
The figure illustrates the market for coffee in Guatemala. 
-Refer to Figure 9-1.When trade in coffee is allowed,producer surplus in Guatemala

Accepted Answer

When trade is allowed, the domestic price in Guatemala will increase to the world price level. This will result in an increase in producer surplus from area B to area B + D + G.

Quiz 9: Application International Trade: The Winners and Losers From Trade

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.With trade,total surplus in the Guatemalan coffee market amounts to

Suppose Iceland goes from being an isolated country to being an exporter of coats.As a result,

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.From the figure it is apparent that

Assume,for Colombia,that the domestic price of coffee without international trade is higher than the world price of coffee.This suggests that

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.In the absence of trade,the equilibrium price of coffee in Guatemala is

Which of the following statements is true?

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.Relative to the no-trade situation,trade with the rest of the world results in

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.With trade,Guatemala will

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.In the absence of trade,total surplus in the Guatemalan coffee market amounts to

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.When trade is allowed,

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.When trade in coffee is allowed,consumer surplus in Guatemala

Suppose Iceland goes from being an isolated country to being an importer of coats.As a result,

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.From the figure it is apparent that

Within a country,the domestic price of a product will equal the world price if

Suppose a country begins to allow international trade in steel.Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

When a country allows international trade and becomes an importer of a good,

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

When a country allows international trade and becomes an exporter of a good,

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.In the absence of trade,total surplus in Guatemala is represented by the area

Figure 9-1 The figure illustrates the market for coffee in Guatemala. -Refer to Figure 9-1.When trade in coffee is allowed,producer surplus in Guatemala