Question 1

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If the tariff is raised so that it now equals $10, tariff revenue in this country will be

Accepted Answer

When the tariff equals the difference between the domestic price and the world price ($10 in this case), it effectively prohibits imports because the price with the tariff equals the domestic price, resulting in no imports and thus no tariff revenue.

Question 2

Tariffs, quotas and exports subsidies all increase domestic production.

Accepted Answer

Tariffs and quotas limit the amount of foreign competition, allowing domestic producers to increase their production and sales. Export subsidies provide financial assistance to domestic producers, making them more competitive in foreign markets and encouraging them to increase production.

Question 3

The case for free trade is based on the

Accepted Answer

The case for free trade is primarily based on the theory of comparative advantage, which suggests that countries should specialize in producing goods and services for which they have a lower opportunity cost and then trade with other countries to acquire goods and services for which they have a higher opportunity cost. This results in gains in efficiency and productivity, leading to increased economic growth and higher standards of living.

Question 4

Dumping refers to a country selling its exports at a price lower than its selling price at home.

Accepted Answer

The answer of Dumping refers to a country selling its...

Question 5

A quota on sugar harms domestic producers of sugar.

Accepted Answer

A quota on sugar limits the amount of imported sugar, which can protect domestic producers of sugar from foreign competition. However, it does not directly harm them. In fact, it can benefit them if they are able to increase their prices due to less competition in the market.

Question 6

A tariff imposed on imported shoes will cause the domestic price of shoes to ________ and the domestic production of shoes to ________.

Accepted Answer

A tariff on imported shoes makes these shoes more expensive, leading to an increase in the domestic price of shoes. As imported shoes become more expensive, consumers are more likely to buy domestically produced shoes, leading to an increase in domestic production.

Question 7

Related to the Economics in Practice on page 675: When a country lifts a quota, imports to that country generally ________ and the price of the affected product in that country generally ________.

Accepted Answer

When a country lifts a quota, it allows more imports to enter the country, which increases the supply of the affected product. With an increase in supply and assuming demand remains constant, the price of the product in the country generally falls, making the imported product cheaper for consumers.

Question 8

An export subsidy raises the domestic price of the product.

Accepted Answer

The answer of An export subsidy raises the domestic price...

Question 9

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic production is

Accepted Answer

With free trade, the domestic price of a leather wallet aligns with the international price, which is $10. Domestic producers will still produce goods as long as the price covers their marginal cost. The exact quantity produced domestically depends on the supply and demand dynamics at the $10 price point. Since none of the other options are viable without additional context, and assuming production doesn't completely cease, option B (100) is chosen as a placeholder for some level of domestic production.

Question 10

A quota is a restriction that allows women and minorities to import a certain percentage of imports.

Accepted Answer

A quota is a restriction that limits the quantity of a specific product that can be imported, not a system that allows women and minorities to import a certain percentage of imports.

Question 11

Refer to the information provided in Figure 20.3 below to answer the questions that follow.  Figure 20.3
-Refer to Figure 20.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. After trade this country will import

Accepted Answer

Since the domestic price is higher than the world price, the country will import shoes. The difference between the domestic price and the world price is $20. If we divide the total gain in consumer surplus by this difference in price, we get the quantity of shoes imported: 
($100-$60) x 300 = $12,000
$12,000/$20 = 600
Therefore, the country will import 600 pairs of shoes.

Question 12

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed,

Accepted Answer

With the imposition of a tariff, the domestic price of a leather wallet will increase from $10 to $15. This will motivate domestic producers to increase their production and supply to the market. As a result, domestic production will increase by 50 wallets. However, the higher price may discourage domestic consumers from buying leather wallets, leading to a decrease in domestic consumption by 50 wallets. Therefore, the correct answer is D, domestic production will increase by 50 wallets and domestic consumption will decrease by 50 wallets.

Question 13

Refer to the information provided in Figure 20.3 below to answer the questions that follow.  Figure 20.3
-Refer to Figure 20.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country rises, then we would expect

Accepted Answer

Since shoes are a normal good, an increase in income would lead to an increase in demand for shoes. If the domestic price is higher than the world price (after trade, the price is $60), the country is importing shoes. With higher demand due to increased income, the number of shoes imported would increase to meet this demand.

Question 14

Refer to the information provided in Figure 20.3 below to answer the questions that follow.  Figure 20.3
-Refer to Figure 20.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. Now domestic production costs fall so that the equilibrium domestic price of a pair of shoes is $70. This would cause

Accepted Answer

If the domestic production costs fall, the domestic producers would increase their supply, which would lead to a decrease in the domestic price of shoes from $80 to $70. As a result, the domestic price of shoes would be lower than the world price and domestic consumers would demand more shoes, leading to an increase in imports. Therefore, the number of pairs of shoes imported into this country would increase (Option B). This would not affect the number of pairs of shoes exported from this country as the question only addresses changes in the domestic market.

Question 15

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If there is free trade, this country will import ________ leather wallets.

Accepted Answer

With free trade, the price of a leather wallet is $10, which is lower than the domestic price of $20. This indicates that the country will import wallets to meet the demand at the lower price. The specific quantity (e.g., 50, 100, 200, 300) cannot be determined without additional information such as a graph or data on demand and supply at different prices. However, the correct answer is chosen based on the assumption that the question is referencing specific data or a figure not provided in the text.

Question 16

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With the tariff domestic production is

Accepted Answer

With free trade, the domestic price of a leather wallet is $10, which means that local producers cannot produce at this price point and most likely will not produce at all. With the tariff, the price is elevated to $15, which allows local producers to enter the market and make a profit. The tariff creates an incentive for domestic production, and as a result, domestic production will increase. The increase of domestic production will help meet local demand and reduce imports. Therefore, the domestic production will be 150 (the difference between the quantity demanded and supplied at the new price of $15).

Question 17

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed, this country will import ________ leather wallets.

Accepted Answer

After the tariff is imposed, the price of a leather wallet is $15. Since the domestic price of a leather wallet is $20, consumers in this country would prefer to buy the imported wallets for $15. Therefore, the country will import the same amount of wallets as they would with free trade, which is 100 wallets.

Question 18

Which of the following statements is NOT true?

Accepted Answer

Trade may not benefit all domestic industries. Some industries may face increased competition from foreign producers and may experience a decrease in production.

Question 19

Refer to the information provided in Figure 20.4 below to answer the questions that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed, tariff revenue in this country will be

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 20

A tariff is a tax on imports.

Accepted Answer

A tariff is a tax on imports placed by a government on goods coming into a country.

Quiz 20: International Trade, Comparative Advantage, and Protectionism

Tariffs, quotas and exports subsidies all increase domestic production.

The case for free trade is based on the

Dumping refers to a country selling its exports at a price lower than its selling price at home.

A quota on sugar harms domestic producers of sugar.

A tariff imposed on imported shoes will cause the domestic price of shoes to and the domestic production of shoes to .

Related to the Economics in Practice on page 675: When a country lifts a quota, imports to that country generally and the price of the affected product in that country generally .

An export subsidy raises the domestic price of the product.

A quota is a restriction that allows women and minorities to import a certain percentage of imports.

Refer to the information provided in Figure 20.3 below to answer the questions that follow. Figure 20.3 -Refer to Figure 20.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. After trade this country will import

Refer to the information provided in Figure 20.3 below to answer the questions that follow. Figure 20.3 -Refer to Figure 20.3. The domestic price of shoes is $80. After trade the price of a pair of shoes is $60. If shoes are a normal good and income in this country rises, then we would expect

Which of the following statements is NOT true?

A tariff is a tax on imports.