Chapter 9 Global Markets in Action | Test Bank 9e - Foundations of Microeconomics 9e | Test Bank with Answer Key by Robin Bade by Robin Bade. DOCX document preview.
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Foundations of Microeconomics, 9e (Bade)
Chapter 9 Global Markets in Action
9.1 How Global Markets Work
1) Goods and services that the United States buys from other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.
Topic: International trade
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
2) Imports are defined as the goods and services that we
A) produce and consume in the United States.
B) sell to other countries.
C) buy from other countries.
D) partially produce in both the United States and another country.
E) produce abroad using U.S. owned factories and then consume in the United States.
Topic: International trade
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
3) Goods and services that the United States sells to other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.
Topic: International trade
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
4) If you buy a television produced in Japan, a
A) good was exported by Japan and imported by the United States.
B) good was imported by Japan and by the United States.
C) service was imported by Japan and exported by the United States.
D) service was exported by Japan and imported by the United States.
E) good was exported by Japan and by the United States.
Topic: International trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Revised
AACSB: Reflective thinking
5) The United States exports
A) goods only.
B) services only.
C) manufactured goods only.
D) goods and services.
E) only agricultural products and high-tech goods.
Topic: Patterns of trade
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
6) All of the following statements about the United States are true EXCEPT
A) The largest imports are services like royalties, license fees, and financial services, and the largest exports are goods like crude oil, automobiles, and clothing.
B) The United States is the world's largest international trader.
C) The United States imports more than it exports.
D) Services account for a larger portion of U.S. exports than U.S. imports.
E) Imports are a larger percentage of total expenditure than exports are a percentage of total production.
Topic: Patterns of trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
7) The fundamental force that generates international trade is
A) the need for more goods and services.
B) absolute advantage.
C) the sea rule.
D) comparative advantage.
E) the existence of tariffs.
Topic: Comparative advantage
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
8) The fundamental force that drives trade between nations is
A) the government.
B) NAFTA.
C) absolute advantage.
D) comparative advantage.
E) legal treaties.
Topic: Comparative advantage
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
9) One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost compared with firms in other nations in the production of such aircraft.
A) a higher
B) an unrelated
C) a lower
D) a nonexistent
E) an identical
Topic: Opportunity cost
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
10) A nation has a comparative advantage in a good when it has a
A) lower absolute cost of producing the good.
B) higher opportunity cost of producing the good.
C) lower opportunity cost of producing the good.
D) higher absolute cost of producing the good.
E) tariff in place protecting the producers of the good.
Topic: Comparative advantage
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
11) The United States buys shoes from China and China buys wheat from the United States. This trade can be explained by
A) comparative advantage.
B) absolute advantage.
C) the law of supply.
D) the law of demand.
E) the price elasticity of demand.
Topic: International trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Application of knowledge
12) Consider the market for Good X in the country Xenon. Which of the following statements regarding international trade in Good X is correct?
A) If Xenon imports Good X, the world price of X must be lower than Xenon's pre-trade price of Good X.
B) If Xenon exports Good X, the world price of X must be lower than Xenon's pre-trade price of Good X.
C) If Xenon has a comparative advantage in Good X, it will import more of Good X after trade.
D) If Xenon has a comparative advantage in Good X, Xenon will produce less of Good X after trade.
E) If Xenon imports Good X, the world price of Good X must fall.
Topic: International trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Application of knowledge
13) How can a domestic producer determine whether or not it has a comparative advantage in the production of a good or service?
A) It cannot.
B) by comparing the price it receives in the domestic market to the prices of other domestic producers
C) by comparing the price it receives in the domestic market to the world price
D) by comparing the quantity it produces in the domestic market to the quantity produced in the world
E) by comparing the total domestic quantity to the total world quantity
Topic: Comparative advantage
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Revised
AACSB: Reflective thinking
14) A country exports the goods
A) for which its domestic prices are very high compared to the world prices.
B) that the economy can produce the most of.
C) that the economy can produce at relatively lowest opportunity cost.
D) that it cannot sell domestically.
E) in which it has a comparative disadvantage.
Topic: Comparative advantage
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
15) If a nation can produce a good or service at the lowest opportunity cost, then it
A) can sell the product at a lower price than other nations.
B) does not want to export the good because the low cost means it makes only a low profit.
C) is best for the nation to not trade the good internationally.
D) will definitely import the good because it can beat other countries' prices.
E) might export or import the good, depending on whether or not it has a comparative advantage in the production of the good.
Topic: Comparative advantage
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
16) The country with a comparative advantage in the production of a good has a
A) lower opportunity cost of production.
B) higher opportunity cost of production.
C) horizontal production possibilities frontier.
D) vertical production possibilities frontier.
E) linear production possibilities frontier.
Topic: Comparative advantage
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
17) The United States imports t-shirts because
A) it is a dangerous job to produce them.
B) foreign nations have a lower opportunity cost of production.
C) the United States has a lower opportunity cost of production.
D) foreign economies have an absolute advantage in their production.
E) the United States must import goods and services from other countries so that they can develop economically.
Topic: Comparative advantage
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
18) If the United States starts to import a good that had previously been produced in the United States, the market price of the good in the United States
A) rises.
B) falls.
C) remains constant.
D) either remains constant or rises, depending on how whether the supply of the good stays the same or increases.
E) There is not enough information to answer the question because we need to know if the market price in the United States had been above or below the world market price before trade began.
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
19) If the United States imports purses, then the quantity of purses produced in the United States will ________ and the quantity of purses purchased by consumers in the United States will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; increase
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
20) Most t-shirts bought by Americans are made in Asia. As a result of free trade, the production of t-shirts in America
A) has increased.
B) has stayed the same.
C) has decreased.
D) has been taken over by the government.
E) might change, but more information about what else the United States imports is needed to determine if U.S. production increased, decreased, or did not change.
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
21) The United States imports t-shirts from Asia. As a result, U.S. consumers pay ________ otherwise and Asian producers receive ________ otherwise.
A) a higher price than; a higher price than
B) a higher price than; a lower price than
C) a lower price than; a higher price than
D) a lower price than; a lower price than
E) the same price as; the same price as
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
22) If the world price of a good is below the no-trade domestic price, a country
A) will benefit from exporting the good.
B) will benefit from importing the good.
C) cannot benefit from trade.
D) has a comparative advantage in the production of that good.
E) will not engage in trade for that good.
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
23) Suevania opens its doors to trade with Barvania. Barvania has a comparative advantage in the production of machinery. Hence, once trade occurs Suevania's consumers will buy ________ machinery and pay ________ before.
A) more; a higher price than
B) more; a lower price than
C) less; a higher price than
D) less; a lower price than
E) the same amount of; the same price as
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
24) If a nation imports a good that before had been only domestically produced, what happens to the quantity consumed of the good and why?
A) The quantity consumed increases because the market price decreases.
B) The quantity consumed decreases because the market price increases.
C) The quantity consumed remains constant because the price is unchanged.
D) The quantity consumed increases because the nation produces more of the good.
E) The quantity consumed decreases because the market price decreases.
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Revised
AACSB: Analytical thinking
25) A country will export a good if it
A) can sell the good to a foreigner at a higher price than the no-trade domestic price.
B) can sell the good to a foreigner at a lower price than the no-trade domestic price.
C) can dump the good on the world market.
D) has a high opportunity cost of production.
E) is impossible to import the good.
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
26) A country exports a good if
A) it has a high opportunity cost of production.
B) the world price of the good is below the country's no-trade equilibrium price.
C) the world price of the good is above the country's no-trade equilibrium price.
D) the quantity demanded of the good in the country is greater than the quantity supplied at the world price.
E) it cannot import the good.
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
27) A nation will export a good if its
A) no-trade, domestic price is equal to the world price.
B) no-trade, domestic price is less than the world price
C) no-trade, domestic price is greater than the world price.
D) no-trade, domestic quantity is less than the world quantity.
E) no-trade, domestic quantity is greater than the world quantity.
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
28) As a result of importing a good, domestic consumers ________ the quantity consumed and the price of the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) increase; does not change
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
29) As a result of importing a good, domestic producers ________ the quantity produced and the price of the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) decrease; does not change
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
30) The above figure shows the U.S. market for flip-flops. When there is no international trade, the U.S. price is ________ per flip-flop and the U.S. quantity is ________ flip-flops.
A) $12; 300,000
B) $14; 500,000
C) $12; 700,000
D) $14; 300,000
E) $14; 700,000
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
31) The above figure shows the U.S. market for flip-flops. With international trade, the price in the United States is ________ and the United States ________ flip-flops.
A) $12; imports
B) $12; does not trade
C) $12; exports
D) $14; imports
E) $14; does not trade
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
32) The above figure shows the U.S. market for flip-flops. With international trade, the United States imports ________ flip-flops.
A) 300,000
B) 500,000
C) 700,000
D) 0 because the United States exports flip-flops
E) 400,000
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
33) The above figure shows the U.S. market for flip-flops. With international trade, U.S. consumers buy ________ flip-flops and U.S. producers produce ________ flip-flops.
A) 500,000; 500,000
B) 300,000; 700,000
C) 500,000; 300,000
D) 700,000; 300,000
E) 700,000; 500,000
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
34) The above figure shows the U.S. market for flip-flops. With no international trade, the price in the United States for flip-flops is ________. With international trade, the price in the United States for flip-flops is ________.
A) $12; $14
B) $500; $300
C) $14; $12
D) $700; $300
E) $500; $700
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
35) With no international trade, the U.S. price of wheat is lower than the world price of wheat. This indicates that the United States ________ a comparative advantage in the production of wheat and with international trade, the United States will ________ wheat.
A) has; export
B) has; not trade
C) has; import
D) does not have; export
E) might have; export
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
36) Once international trade occurs, a country with a comparative advantage in the production of a good will ________ production of the good and ________.
A) decrease; import the good
B) increase; export the good
C) not change; import the good
D) increase; import the good
E) decrease; export the good
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
37) Airlines in other countries buy airplanes from Boeing because
A) it is illegal to produce airplanes in many other countries.
B) Boeing's prices are less than what the airlines would pay for planes built in their own country.
C) trade treaties require such purchases.
D) these nations must buy something from the United States.
E) None of the above answers is correct.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
38) When a country exports a good because the world price is higher than the no-trade domestic price, domestic purchases of the good ________ and domestic production of the good ________.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
E) do not change; increases
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
39) The table above has the domestic demand and domestic supply schedules for a good. According to the table, the domestic price of the good is
A) $4.
B) $6.
C) $8.
D) $10.
E) $2.
Topic: Trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Revised
AACSB: Analytical thinking
40) The table above has the domestic demand and domestic supply schedules for a good. If the world price of the good is $10 and international trade occurs, then according to the table
A) domestic production is higher before trade than after trade.
B) the country imports 16 units a day.
C) the country imports 6 units a day.
D) the country exports 6 units a day.
E) the country exports 22 units a day.
Topic: Trade
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
41) According to the above table, the country will import the good if the world price is less than ________ and will export the good if the world price is more than ________.
A) $4; $4
B) $6; $6
C) $8; $4
D) $10; $10
E) $4; $8
Topic: Trade
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
42) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of international trade, cherry farmers would receive ________ per pound of cherries.
A) $0.50
B) $1.50
C) $2.50
D) $2.00
E) $1.00
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
43) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of international trade, how many pounds of cherries would U.S. farmers produce?
A) 200,000 pounds
B) 400,000 pounds
C) 600,000 pounds
D) 800,000 pounds
E) 0 pounds
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
44) The figure above shows the U.S. demand and U.S. supply curves for cherries. Suppose the world price of cherries is $2 per pound. At this price, U.S. consumption of cherries will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
45) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound once international trade occurs, the production of cherries in the United States will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
46) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound once international trade occurs, the total exports of cherries from the United States to other nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
47) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound once international trade occurs, the total imports of cherries to the United States from other nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
48) The above figure shows the U.S. market for wheat. When there is no international trade, the U.S. price of wheat is ________ per ton and the U.S. equilibrium quantity is ________ tons.
A) $14; 300,000
B) $14; 500,000
C) $16; 500,000
D) $16; 300,000
E) $16; 700,000
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
49) The above figure shows the U.S. market for wheat. With international trade, the price of wheat in the United States is ________ per ton and the United States ________ wheat.
A) $16; exports
B) $14; exports
C) $14; imports
D) $16; imports
E) $14; does not trade
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
50) The above figure shows the U.S. market for wheat. With international trade, the United States exports ________ of wheat.
A) 300,000 tons
B) 500,000 tons
C) 700,000 tons
D) 400,000 tons
E) None of the above answers is correct because the United States imports wheat.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
51) The above figure shows the U.S. market for wheat. With international trade, U.S. consumers buy ________ tons of wheat and U.S. producers produce ________ tons of wheat.
A) 700,000; 300,000
B) 500,000; 500,000
C) 300,000; 500,000
D) 300,000; 700,000
E) 500,000; 700,000
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
52) The above figure shows the U.S. market for wheat. With no international trade, the price of wheat in the United States is ________ per ton. With international trade, the price of wheat in the United States is ________ per ton.
A) $16; $14
B) $500; $300
C) $14; $16
D) $700; $300
E) $500; $700
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
53) Goods and services that we buy from firms in other countries are called our
A) imports.
B) exports.
C) inputs.
D) raw materials.
E) obligations.
Topic: International trade
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
54) If the United States exports planes to Brazil and imports ethanol from Brazil, the price received by U.S. producers of planes ________, and the price received by Brazilian producers of ethanol ________.
A) does not change; does not change
B) rises; rises
C) rises; falls
D) falls; rises
E) falls; falls
Topic: Opportunity cost
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
55) When Italy buys Boeing jets, the price Italy pays is ________ if it produced its own jets and the price Boeing receives is ________ than it could receive from an additional U.S. buyer.
A) lower than; lower
B) higher than; higher
C) lower than; higher
D) higher than; lower
E) the same as; higher
Topic: Opportunity cost
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
56) A nation will import a good if its no-trade, domestic
A) price is equal to the world price.
B) price is less than the world price.
C) price is greater than the world price.
D) quantity is less than the world quantity.
E) quantity is greater than the world quantity.
Topic: Trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
57) When a good is imported, the domestic production of it ________ and the domestic consumption of it ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) increases; does not change
Topic: Trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
58) The United States exports a good if its no-trade U.S. price is ________ its world price. With international trade, U.S. production of the good ________ compared to the level of no-trade production.
A) higher than; does not change
B) higher than; increases
C) lower than; increases
D) the same as; increases
E) the same as; does not change
Topic: Trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
59) The graph shows the market for running shoes in the United States. With no international trade, the price of running shoes in the United States is ________ and ________ pairs are produced and bought.
A) $100; 2 million
B) $100; 1 million
C) $40; 1 million
D) $40; 2 million
E) $40; 4 million
Topic: International trade
Skill: Level 4: Applying models
Section: Checkpoint 9.1
Status: Old
AACSB: Application of knowledge
60) The graph shows the market for running shoes in the United States. If the world price is $40 per pair of running shoes, then with international trade, the price of running shoes in the United States is ________ and ________ pairs are imported.
A) $40; 3 million
B) $40; 2 million
C) $100; 1 million
D) $100; 2 million
E) $60; 3 million
Topic: International trade
Skill: Level 4: Applying models
Section: Checkpoint 9.1
Status: Revised
AACSB: Application of knowledge
61) The graph shoes the market for running shoes in the United States. If the world price is $40 per pair of running shoes, as a result of international trade, which of the following occur?
i. The price of running shoes in the United States falls by $60 per pair.
ii. The United States imports 3 million pairs of running shoes.
iii. The United States produces 1 million pairs of running shoes.
A) i, ii and iii
B) i only
C) i and ii only
D) i and iii only
E) ii and iii only
Topic: International trade
Skill: Level 4: Applying models
Section: Checkpoint 9.1
Status: Revised
AACSB: Application of knowledge
62) The graph shows the market for car batteries in the United States. If the world price of a battery is $40, then prior to international trade, the quantity of car batteries produced in the United States equals ________ and with trade, production in the United States equals ________.
A) 1.0 million; 1.0 million
B) 1.0 million; 1.5 million
C) 0.5 million; 1.0 million
D) 1.5 million; 1.0 million
E) 1.0 million; 0.5 million
Topic: International trade
Skill: Level 4: Applying models
Section: Checkpoint 9.1
Status: Revised
AACSB: Application of knowledge
63) The figure shows the market for car batteries in the United States. If the world price of a battery is $40, then prior to international trade, the price of batteries in the United States is ________. After trade, the price of car batteries in the United States equals ________.
A) $100; $40 and the quantity consumed increases
B) $100; $100 and the quantity produced increases
C) $100; $50 and the United States exports 0.5 million batteries
D) $50; $100 and the United States exports 1.0 million batteries
E) $100; $100 and the United States imports 1.0 million batteries
Topic: International trade
Skill: Level 4: Applying models
Section: Checkpoint 9.1
Status: Revised
AACSB: Application of knowledge
9.2 Winners, Losers, and Net Gains from Trades
1) International trade benefits
A) only the exporter.
B) only the importer.
C) both the exporter and the importer.
D) neither the exporter nor the importer.
E) the exporter at all times and sometimes also the importer.
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
2) Who gains from international trade?
A) only the exporting nation
B) only the importing nation
C) both the importing and the exporting nations
D) neither the importing nor the exporting nations
E) The gains depends on which nation gets to keep the total revenue from the sale.
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
3) Most t-shirts bought by Americans are made in Asia. U.S. consumers of t-shirts buy these t-shirts because
A) they pay a higher price for t-shirts made in Asia than they would for similar shirts made in the United States.
B) they pay a lower price for t-shirts made in Asia than they would for similar shirts made in the United States.
C) they must buy some goods or services produced in Asia.
D) by so doing they are helping preserve U.S. jobs producing t-shirts.
E) they know that the United States has a comparative advantage in wearing t-shirts.
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
4) After a nation starts importing a good from overseas, the domestic price of the good
A) falls.
B) stays the same.
C) rises.
D) might change, but more information about what the country exports is needed to determine if the price rises, falls, or does not change.
E) might change, but more information about what else the country imports is needed to determine if the price rises, falls, or does not change.
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
5) When a nation starts importing a good or service, domestic employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country imports is needed to determine if employment increases, decreases, or does not change.
E) might change, but more information about what the country exports is needed to determine if employment increases, decreases, or does not change.
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
6) When a nation imports a good or service, the nation's consumer surplus ________, its producer surplus ________, and its total surplus ________.
A) increases; decreases; increases
B) increases; decreases; decreases
C) increases; increases; increases
D) decreases; decreases; decreases
E) decreases; decreases; increases
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
7) When a nation imports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
8) When a nation imports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; total
E) total; consumer
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
9) When a nation imports a good, its ________ surplus increases and its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; total
E) total; consumer
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
10) When a nation imports a good, its consumer surplus ________, and its producer surplus ________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; increases
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
11) When a nation starts importing a good or service, the domestic production of the good or service
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what the country exports is needed to determine if production increases, decreases, or does not change.
E) might change, but more information about what else the country imports is needed to determine if production increases, decreases, or does not change.
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
12) If Country A opens up their corn market to trade with the rest of the world and the global price of corn is lower than the equilibrium price of corn in Country A, then Country A will ________ corn, which will ________ consumer surplus, ________ producer surplus, and ________ total surplus.
A) import; increase; decrease; increase
B) import; decrease; increase; increase
C) export; increase; decrease; increase
D) export; decrease; increase; increase
E) export; decrease; increase; decrease
Topic: Gains from imports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
13) The above figure shows the U.S. market for chocolate. With no international trade, consumer surplus is equal to
A) area A + area B + area C + area D.
B) area A.
C) area B + area C + area D.
D) area C + area D.
E) area E.
Topic: Gains from imports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
14) The above figure shows the U.S. market for chocolate. With international trade, consumer surplus is equal to
A) area A + area B + area C + area D.
B) area A.
C) area B + area C + area D.
D) area C + area D.
E) area E.
Topic: Gains from imports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
15) The above figure shows the U.S. market for chocolate. With no international trade, producer surplus is equal to
A) area A + area B + area C + area D.
B) area B + area C + area D + area E.
C) area B + area C + area D.
D) area C + area D.
E) area E.
Topic: Gains from imports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
16) The above figure shows the U.S. market for chocolate. With international trade, the gain in total surplus is equal to
A) area B.
B) area A + area B + area C + area D.
C) area B + area C + area D + area E.
D) area C + area D.
E) area B + area C + area D.
Topic: Gains from imports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
17) The above figure shows the U.S. market for chocolate. With no international trade, consumer surplus is equal to ________ and producer surplus is equal to ________.
A) area A + area B + area C + area D; area E
B) area B + area C + area D; area A + area E
C) area A; area E
D) area C + area D; area B + area E
E) area E; area A + area B + area C + area D
Topic: Gains from imports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
18) The above figure shows the U.S. market for chocolate. With international trade, ________ is the transfer of surplus from producers to consumers.
A) area B +area C + area D
B) area B
C) area C + area D
D) area A
E) area E
Topic: Gains from imports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
19) When a nation exports a good or service in which it has a comparative advantage, employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country exports is needed to determine if employment increases, decreases, or does not change.
E) might change, but more information about what the country imports is needed to determine if employment increases, decreases, or does not change.
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
20) When a nation exports a good or service in which it has a comparative advantage, production of the good or service
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what the country imports is needed to determine if production increases, decreases, or does not change.
E) might change, but more information about what else the country exports is needed to determine if production increases, decreases, or does not change.
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
21) When a nation exports a good or service, employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country exports is needed to determine if employment increases, decreases, or does not change.
E) might change, but more information about what the country imports is needed to determine if employment increases, decreases, or does not change.
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
22) When a nation exports a good, its consumer surplus ________, and its producer surplus ________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; increases
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
23) When a nation exports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
24) When a nation exports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; total
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
25) When a nation exports a good, its ________ surplus increases and its ________ surplus increases.
A) consumer; total
B) consumer; consumer
C) producer; producer
D) producer; total
E) total; consumer
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
26) When a nation exports a good or service, the nation's consumer surplus ________, its producer surplus ________, and its total surplus ________.
A) increases; decreases; increases
B) increases; decreases; decreases
C) increases; increases; increases
D) decreases; decreases; decreases
E) decreases; increases; increases
Topic: Gains from exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
27) If Country A opens up their corn market to trade with the rest of the world and the global price of corn is higher than the equilibrium price of corn in Country A, then Country A will ________ corn, which will ________ consumer surplus, ________ producer surplus, and ________ total surplus.
A) import; increase; decrease; increase
B) import; decrease; increase; increase
C) export; increase; decrease; increase
D) export; decrease; increase; increase
E) export; decrease; increase; decrease
Topic: Gains from exports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
28) The above figure shows the U.S. market for wheat. When there is no international trade, consumer surplus is equal to
A) area A + area B + area C.
B) area A.
C) area E + area F.
D) area B + area C + area D.
E) area A + area B + area C + area D.
Topic: Gains from exports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
29) The above figure shows the U.S. market for wheat. With international trade, consumer surplus is equal to
A) area A + area B + area C.
B) area E + area F.
C) area B + area C + area D.
D) area A + area B + area C + area D.
E) area A.
Topic: Gains from exports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
30) The above figure shows the U.S. market for wheat. Without international trade, producer surplus is equal to
A) area B + area C + area E + area F.
B) area A.
C) area B + area C +area D + area E + area F.
D) area E + area F.
E) area A + area B + area C + area D.
Topic: Gains from exports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
31) The above figure shows the U.S. market for wheat. With international trade, the gain in total surplus is equal to
A) area A.
B) area B + area C.
C) area D.
D) area C + area F.
E) area C + area D + area F.
Topic: Gains from exports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
32) The above figure shows the U.S. market for wheat. With no international trade, consumer surplus is equal to ________ and producer surplus is equal to ________.
A) area A; area B + area C + area E + area F
B) area A + area B + area C; area E + area F
C) area E + area F; area A
D) area B + area C + area D; area E + area F
E) area A + area B + area C + area D; area E + area F
Topic: Gains from exports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
33) The above figure shows the U.S. market for wheat. With international trade, ________ is the transfer of surplus from consumers to producers.
A) area B + area C
B) area D
C) area C + area F
D) area C + area D
E) area B + area C + area D
Topic: Gains from exports
Skill: Level 3: Using models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
34) When a nation exports a good, its total surplus ________, and when it imports a good, its total surplus ________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; does not change
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
35) When a nation exports a good, its ________ surplus increases, and when it imports a good, its ________ surplus increases.
A) total; total
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
36) When a nation exports a good, its ________ surplus increases, and when it imports a good, its ________ surplus increases.
A) consumer; total
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
37) When a nation exports a good, its ________ surplus increases, and when it imports a good, its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
38) When a nation exports a good, its ________ surplus decreases, and when it imports a good, its ________ surplus decreases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
39) International trade is definitely in the social interest if
A) consumer surplus increases.
B) producer surplus increases.
C) consumer surplus does not decreases.
D) producer surplus does not decreases.
E) total surplus increases.
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
40) Imports ________ consumer surplus, ________ producer surplus, and ________ total surplus.
A) decrease; decrease; decrease
B) increase; increase; increase
C) increase; decrease; decrease
D) increase; decrease; increase
E) decrease; increase; increase
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
41) When a country imports a good, the ________ in consumer surplus is ________ the ________ in producer surplus.
A) decrease; larger than; increase
B) decrease; smaller than; increase
C) increase; smaller than; decrease
D) increase; equal to; decrease
E) increase; larger than; decrease
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
42) When a country exports a good, the country's producer surplus ________, consumer surplus ________, and the country ________ from the trade.
A) increases; increases; gains
B) decreases; increases; gains
C) increases; decreases; gains
D) decreases; decreases; loses
E) increases; decreases; loses
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
43) Which of the following is correct?
i. U.S. total surplus decreases when the United States exports a good.
ii. U.S. total surplus decreases when the United States imports a good.
iii. U.S. total surplus increases when the United States imports a good and when it exports a good.
A) i only
B) iii only
C) i and ii
D) ii only
E) None of the above because the U.S. total surplus does not change as a result of trade
Topic: Gains from imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Reflective thinking
44) Consider the U.S. market for running shoes shown above. With no international trade, area W represents ________ and area X + Y represents ________.
A) consumer surplus; producer surplus.
B) producer surplus; consumer surplus.
C) the total surplus; producer surplus.
D) consumer surplus; a deadweight loss.
E) deadweight loss; producer surplus.
Topic: Gains from trade
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Application of knowledge
45) Consider the U.S. market for running shoes shown above. As a result of international trade, the price of running shoes in the United States ________ and consumer surplus ________.
A) rises from $60 to $80; equals area W
B) falls from $80 to $60; increases to area W + X + V + Z
C) rises from $60 to $80; shrinks by area V + Z
D) falls from $80 to $60; increases by area Y
E) falls from $80 to $60; increases by area X + Y
Topic: Gains from trade
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Application of knowledge
46) Suppose the United States engage in less international trade, decreasing both imports and exports. As a result of this policy, U.S. consumer surplus would ________, U.S. producer surplus would ________ and U.S. total surplus would ________.
A) decrease; decrease; decrease
B) decrease; increase; increase
C) increase; increase; increase
D) increase; decrease; not change
E) decrease; increase; not change
Topic: Gains from trade
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Application of knowledge
47) Suppose the United States restricts imports. As a result of this policy, which of the following will occur?
i. U.S. consumer surplus will decrease.
ii. U.S. producer surplus will increase.
iii. U.S. total surplus will decease.
A) i and ii only
B) i and iii only
C) i, ii and iii
D) iii only
E) i only
Topic: Gains from trade
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Application of knowledge
48) Suppose North Korea decides to open its borders to trade. As a result, which of the following will occur.
i. North Korean consumer surplus in all markets will increase.
ii. North Korean producer surplus in all markets will decrease.
iii. North Korean total surplus in all markets will increase.
A) i, ii and iii
B) i only
C) ii only
D) iii only
E) ii and iii only
Topic: Gains from trade
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Revised
AACSB: Application of knowledge
9.3 International Trade Restrictions
1) A tariff is
A) a tax imposed on imports.
B) any non-tax action used to restrict trade.
C) a tax imposed on exports.
D) any non-subsidy used to increase trade.
E) a subsidy granted to imports.
Topic: Trade restrictions
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
2) A tariff is a tax
A) on an exported good.
B) on an imported good.
C) imposed on all traded goods.
D) imposed on people's income.
E) imposed on the difference between the value of the goods a firm imports and the value of the goods it exports.
Topic: Trade restrictions
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
3) A tax on a good that is imposed by the importing country is called a
A) tariff.
B) nontariff barrier.
C) quantitative restriction.
D) licensing regulation.
E) trade constraint.
Topic: Trade restrictions
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
4) Since the mid-1970s until 2017, the average U.S. tariff rate was
A) less than 5 percent.
B) between 6 percent and 15 percent.
C) between 16 percent and 25 percent.
D) between 26 percent and 35 percent.
E) larger than 36 percent.
Topic: Eye on the past, the history of the U.S. tariff
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
5) Looking at the average tariff rate in the United States since 1930, we see that
A) at first tariffs declined, but have recently risen.
B) tariffs have trended downward for most of the period.
C) tariff levels have remained high, at over 50 percent throughout the period.
D) while we talk about free trade, tariff levels have risen over the last 30 years.
E) tariffs were made illegal in the United States in 1955.
Topic: Eye on the past, the history of the U.S. tariff
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
6) During the past 70 years, the peak average tariff rate in the United States stemmed from the
A) creation of GATT in the middle of the 1940s.
B) Kennedy Administration in the early 1960s.
C) Uruguay round of GATT in the 1980s.
D) Smoot-Hawley Tariff Act in the early 1930s.
E) Clinton-Bush tariff of 2000-2001.
Topic: Eye on the past, the history of the U.S. tariff
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
7) Given job losses in U.S. manufacturing, President Trump increased tariffs on Chinese products coming into America. If higher tariffs are imposed on clothing produced in China, the price of clothing in America will
A) decrease.
B) increase.
C) not change.
D) first increase then decrease.
E) first decrease then increase.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
8) After a tariff is imposed on a good, the price of the good
A) does not change.
B) falls.
C) rises.
D) rises only if the domestic demand for the good does not change.
E) might rise, fall, or not change depending on whether the government did or did not simultaneously impose a quota.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
9) After a tariff is imposed, consumers must pay a price equal to the
A) world market price.
B) domestic equilibrium price when there is no trade.
C) world market price plus the tariff.
D) world market price less the tariff.
E) domestic equilibrium price when there is no trade plus the tariff.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
10) Suppose the world price of widgets is $5 each. If a widget-importing country imposed a $2 per widget tariff, what price would that country's consumers pay for widgets?
A) $10
B) $7
C) $5
D) $3
E) A price that is greater than $5 and less than $7
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
11) Which of the following chain of events occurs when a tariff is imposed on a good?
A) Domestic prices rise, shifting the domestic supply curve rightward.
B) Domestic prices fall, shifting the demand curve rightward, and consumers buy more of the good.
C) Domestic prices fall, decreasing the domestic quantity supplied and increasing the quantity demanded.
D) Domestic prices rise, decreasing the quantity demanded and increasing the domestic quantity supplied.
E) Domestic prices rise, shifting the demand curve leftward and the domestic supply curve rightward.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
12) The imposition of tariffs on Korean steel has led to ________ in imports of Korean steel to the United States and ________ the price of steel in the United States.
A) no change; raised
B) a decrease; raised
C) an increase; lowered
D) a decrease; no change in
E) an increase; raised
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
13) As a result of U.S. tariffs imposed on appliances from China, the quantity of imported appliances has
A) decreased.
B) increased a little.
C) not changed.
D) increased a lot.
E) changed but whether it has increased or decreased is ambiguous.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
14) Imposing a tariff on a good leads to a ________ in the price of the product and ________ in imports.
A) rise; an increase
B) rise; a decrease
C) fall; an increase
D) fall; a decrease
E) rise; no change
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
15) As a result of U.S. tariffs on fishnets produced in other nations, the quantity of fishnets purchased in the United States has
A) not been affected.
B) increased.
C) decreased but not to zero.
D) fallen to zero.
E) probably changed, but whether it has increased or decreased is ambiguous.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
16) If the United States imposes a tariff on foreign chocolate, how are U.S. buyers of chocolate affected?
A) The price they pay for chocolate rises.
B) Their demand for chocolate increases because the U.S. production chocolate increases.
C) The quantity they consume is unchanged.
D) The price they pay for chocolate falls but they consume less chocolate because less is imported.
E) The price they pay for chocolate falls and they consume more chocolate.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
17) If the United States imposes a tariff on a good, then
A) domestic consumption of the good decreases.
B) foreign consumption of the good decreases.
C) foreign production of the good increases.
D) domestic production of the good decreases.
E) the government makes less revenue than it would have gained if it imposed a quota.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
18) When the United States imposes a tariff on an imported good, the
A) price of the good in the United States falls.
B) quantity of the good purchased in the United States decreases.
C) quantity of the good produced in the United States decreases.
D) outcome becomes more efficient.
E) amount imported increases.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
19) U.S. tariffs on steel led to ________ production of steel within the United States.
A) no change in
B) an increase in
C) the elimination of
D) a decrease in
E) making illegal the
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
20) If the government decides to impose a new tariff on orange juice from Brazil, the tariff would lead to ________ the tariff revenue collected by the U.S. government.
A) no change in
B) an increase in
C) a decrease in
D) an elimination of
E) making illegal
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
21) The imposition of a tariff will typically ________ government revenue and ________ domestic production of the good.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
22) Country A imports 1,000 cars per month. After imposing a $50 per car tariff, imports fall to 800 cars per month. How much does Country A's government collect in tariff revenue?
A) $90,000
B) $50,000
C) $40,000
D) $10,000
E) $60,000
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
23) Of the following, which group is hurt by a tariff?
A) domestic producers of the good
B) foreign consumers of the good
C) domestic consumers of the good
D) domestic government
E) foreign government
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
24) Of the following, who is harmed by a tariff?
A) domestic buyers of the good or service
B) the overall domestic economy
C) the foreign exporter of the good or service
D) domestic producers of the good or service
E) Both answers A and B are correct.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
25) Relative to free trade, domestic consumers of a good are ________ off with a tariff because of the ________.
A) better; higher price and greater quantity sold
B) better; higher price and smaller quantity sold
C) better; lower price and greater quantity sold
D) worse; lower price and smaller quantity sold
E) worse; higher price and greater quantity sold
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
26) If a tariff is imposed on shrimp imported into the United States, U.S. consumer surplus from shrimp will ________ and U.S. producer surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
27) If a tariff is imposed on shrimp imported into the United States, U.S. consumer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
28) If a tariff is imposed on shrimp imported into the United States, U.S. producer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of tariffs, inefficiency
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
29) A tariff makes the total economy
A) better off because it increases the domestic production of the good.
B) better off because it decreases the deadweight loss from international trade.
C) worse off because it creates a deadweight loss.
D) worse off because it creates revenue for the government.
E) worse off because it decreases both domestic consumer surplus and domestic producer surplus.
Topic: Effects of tariffs, inefficiency
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
30) Relative to free trade, when a tariff is imposed in a market for an imported good
A) the consumer surplus in that market increases.
B) the producer surplus in that market decreases.
C) the total surplus in that market decreases.
D) tariff revenue decreases.
E) deadweight loss decreases.
Topic: Effects of tariffs, inefficiency
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
31) Of the following, who gains because of tariffs and why?
A) domestic producers of protected goods because they can sell at a higher price
B) domestic buyers because they can be sure of buying high-quality products
C) foreign producers because they earn more total revenue
D) foreign government because they gain more revenue
E) domestic buyers because they pay a lower price
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
32) Relative to free trade, domestic producers of a good are ________ off with a tariff because of the ________.
A) better; higher price and greater quantity sold
B) better; higher price and smaller quantity sold
C) better; lower price and greater quantity sold
D) worse; lower price and smaller quantity sold
E) worse; higher price and greater quantity sold
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
33) If the United States imposes a tariff on foreign chocolate, how are U.S. producers of chocolate affected?
A) The quantity of chocolate they sell decreases because U.S. consumption of chocolate decreases.
B) The quantity of chocolate they produce increases.
C) The price at which they sell their chocolate falls.
D) They are harmed because foreign exporters of chocolate increase their supply in response to the higher price.
E) They are unaffected because the tariff applies to foreign producers, not to U.S. producers.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
34) If the United States imposes a tariff on foreign chocolate, how are foreign producers of chocolate affected?
A) Their supply increases because they have to pay the tariff.
B) They export less to the United States.
C) They earn more profit because their chocolate sells for a higher price.
D) Their supply is unaffected because the tariff must be paid by U.S. producers.
E) The tariff has no effect on foreign producers because U.S. consumers must pay the higher price.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
35) The above figure shows the U.S. market for replacement cell phone batteries. When there is no international trade, the equilibrium price is ________ per battery and when there is international trade the equilibrium price is ________ per battery.
A) $16; $14
B) $14; $12
C) $12; $14
D) $12; $16
E) $16; $12
Topic: Tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
36) The above figure shows the U.S. market for replacement cell phone batteries. With free international trade, the United States
A) exports 300,000 batteries.
B) imports 400,000 batteries.
C) imports 500,000 batteries.
D) imports 800,000 batteries.
E) exports 700,000 batteries.
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
37) The above figure shows the U.S. market for replacement cell phone batteries. Suppose the U.S. government imposes the tariff illustrated in the figure. The tariff is equal to ________ and the price U.S. consumers pay ________ compared to the price paid when there was free trade.
A) $2; decreases
B) $14; decreases
C) $2; increases
D) $12; increases
E) $14; increases
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
38) The above figure shows the U.S. market for replacement cell phone batteries. With free trade, the United States imports ________ batteries and once the tariff illustrated in the figure is imposed, the United States imports ________ batteries.
A) 900,000; 700,000
B) 800,000; 400,000
C) 300,000; 100,000
D) 700,000; 300,000
E) 900,000; 100,000
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
39) The above figure shows the U.S. market for replacement cell phone batteries. With free trade, U.S. production is equal to ________ batteries per year. When a $2 tariff is in place, U.S. production is equal to ________ batteries per year.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
40) The above figure shows the U.S. market for replacement cell phone batteries. The U.S. government collects tariff revenue of ________ on each battery imported.
A) $4
B) $14
C) $12
D) $6
E) $2
Topic: Effects of tariffs, government revenue
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
41) The above figure shows the U.S. market for replacement cell phone batteries. Area C is the
A) deadweight loss from tariff.
B) decrease in consumer surplus due to the tariff.
C) increase in producer surplus due to the tariff.
D) tariff revenue.
E) loss in total surplus because of the tariff.
Topic: Effects of tariffs, government revenue
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
42) The above figure shows the U.S. market for replacement cell phone batteries. Area B + area D is the
A) tariff revenue.
B) decrease in consumer surplus due to the tariff.
C) deadweight loss from tariff.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
Topic: Effects of tariffs, inefficiency
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
43) The above figure shows the U.S. market for replacement cell phone batteries. Area A + area E is the
A) consumer surplus when there is a tariff.
B) producer surplus when there is a tariff.
C) tariff revenue.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
Topic: Tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
44) The above figure shows the U.S. market for replacement cell phone batteries. Area E is the
A) producer surplus when there is free trade.
B) deadweight loss from tariff.
C) tariff revenue.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
Topic: Tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
45) Of the following, who gains with a tariff?
A) domestic buyers of the good or service
B) the importer of the good or service
C) the foreign exporter of the good or service
D) the government of the importing nation
E) the government of the exporting nation
Topic: Effects of tariffs, government revenue
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
46) If the U.S. government imposes a tariff on imported steel, who else besides U.S. steel producers gains from the tariff?
A) U.S. steel consumers
B) the U.S. government
C) U.S. importers of steel
D) foreign exporters of steel
E) the foreign government
Topic: Effects of tariffs, government revenue
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
47) Of the following, who gains from a tariff?
A) the government of the importing country
B) the government of the exporting country
C) consumers in the importing country
D) producers in the exporting country
E) both the government of the exporting country and the government of the importing country
Topic: Effects of tariffs, government revenue
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
48) Which type of policy raises the most revenue for the government?
A) tariff
B) quota
C) voluntary export restraints
D) If they are set at the same level, all of the above raise the same amount of revenue.
E) None of the above answers is correct because none of the policies raises revenue for the government.
Topic: Effects of tariffs, government revenue
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
49) The difference between a tariff and a quota is that the revenue from the tariff goes to the
A) domestic consumer.
B) domestic producer.
C) domestic government.
D) foreign producers.
E) foreign government.
Topic: Effects of tariffs, government revenue
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
50) The table above gives the domestic demand and supply schedules for a good. Suppose the world price of the good is $40 and the government imposes a $20 per unit tariff. How much will the government collect as tariff revenue?
A) $160
B) $320
C) $80
D) $240
E) $360
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
51) A quota is
A) a tax on imports.
B) a specified minimum amount that must be imported.
C) a specified maximum amount that can be imported.
D) a tariff on exports.
E) the minimum amount that domestic firms can dump.
Topic: Quotas
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
52) A quota is a
A) quantitative restriction on an import imposed by the importing country.
B) quantitative restriction on an import imposed by the exporting country.
C) restriction on how much a customer can buy of a scarce good imposed by the seller.
D) tax that is imposed on a good when it crosses an international boundary.
E) trade barrier that does not harm domestic consumers of the good or service.
Topic: Quotas
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
53) When governments specify the maximum amount of a good that may be imported in a given period of time, they are establishing a
A) tariff.
B) quota.
C) dynamic tariff.
D) tax.
E) dumping limit.
Topic: Quotas
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
54) A specified maximum amount of the good that may be imported in a given period of time is a
A) forcible limit.
B) quota.
C) tariff.
D) sanction.
E) dumping limit.
Topic: Quotas
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
55) The imposition of a quota ________ domestic production, ________ imports, and ________ domestic purchases.
A) increases; decreases; decreases
B) increases; decreases; increases
C) decreases; increases; decreases
D) decreases; decreases; decreases
E) increases; increases; increases
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
56) Of the following, who gains with a quota?
A) domestic buyers of the good or service
B) the importer of the good or service
C) the foreign exporter of the good or service
D) the government of the importing nation
E) the government of the exporting nation
Topic: Effects of quotas
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
57) If the United States imposed a quota on the amount of salmon imported from Chile, the result would be ________ salmon prices in the United States and ________ in the quantity of salmon demanded in the United States.
A) higher; an increase
B) higher; a decrease
C) lower; an increase
D) lower; a decrease
E) higher; no change
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
58) If a quota is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp will ________ and U.S. producer surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of quotas
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
59) If an import quota is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of quotas
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
60) If an import quota is imposed on imports of shrimp into the United States, U.S. producer surplus from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
Topic: Effects of quotas
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
61) A quota ________ a deadweight loss and a tariff ________ a deadweight loss.
A) creates; creates
B) creates; does not create
C) does not create; creates
D) does not create; does not create
E) might create; might create
Topic: Effects of quotas
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
62) The above figure shows the U.S. market for 1 carat diamonds. With free trade, Americans buy ________ diamonds and pay a price of ________ per diamond.
A) 500,000; $4,000
B) 300,000; $3,000
C) 700,000; $3,000
D) 300,000; $4,000
E) 900,000; $2,000
Topic: International trade
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
63) The above figure shows the U.S. market for 1 carat diamonds. With free trade, the United States produces ________ diamonds and imports ________ diamonds.
A) 300,000; 600,000
B) 0; 900,000
C) 100,000; 900,000
D) 100,000; 800,000
E) 500,000; 400,000
Topic: International trade
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
64) The above figure shows the U.S. market for 1 carat diamonds. Suppose the United States imposes the import quota shown in the figure. With the import quota, how many diamonds can be imported?
A) 500,000
B) 700,000
C) 400,000
D) 900,000
E) 300,000
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
65) The above figure shows the U.S. market for 1 carat diamonds. The free trade, the price in the United States for diamonds is equal to ________ and with the quota illustrated in the figure, the price in the United States is equal to ________.
A) $4,000; $2,000
B) $2,000; $3,000
C) $4,000; $3,000
D) $2,000; $2,000
E) $2,000; $4,000
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
66) The above figure shows the U.S. market for 1 carat diamonds. With free trade, U.S. production of diamonds is equal to ________ diamonds. When the quota illustrated in the figure is in place, U.S. production is equal to ________ diamonds.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
67) The above figure shows the U.S. market for 1 carat diamonds. Area B + area D is the
A) decrease in consumer surplus due to the import quota.
B) importers' profit from the quota.
C) gain in total surplus due to the import quota.
D) deadweight loss from the import quota.
E) increase in producer surplus due to the import quota.
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
68) The above figure shows the U.S. market for 1 carat diamonds. Area A + area B + area C + area D is the
A) deadweight loss from the import quota.
B) importers' profit from the quota.
C) decrease in consumer surplus due to the import quota.
D) gain in total surplus due to the import quota.
E) increase in producer surplus due to the import quota.
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
69) The above figure shows the U.S. market for 1 carat diamonds. Area C is the
A) decrease in consumer surplus due to the import quota.
B) importers' profit from the quota.
C) deadweight loss from the import quota.
D) increase in producer surplus due to the import quota.
E) gain in total surplus due to the import quota.
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
70) The above figure shows the U.S. market for 1 carat diamonds. Area A is the
A) increase in producer surplus due to the import quota.
B) importers' profit from the import quota.
C) decrease in consumer surplus due to the import quota.
D) deadweight loss from the import quota.
E) gain in total surplus due to the import quota.
Topic: Effects of quotas
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
71) If the United States negotiates a voluntary export restraint with international sugar producing nations, then
A) U.S. sugar buyers pay a lower price for sugar.
B) U.S. sugar producers produce a smaller quantity.
C) imports of sugar increase.
D) the U.S. government collects less revenue than if it imposed a tariff on sugar.
E) the foreign governments collect more revenue than if a tariff is imposed on sugar.
Topic: Voluntary export restraint
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
72) Which of the following methods of restricting trade does NOT create a deadweight loss?
A) a tariff
B) a quota
C) a voluntary export restraint
D) Both answers A and B are correct.
E) None of the above answers is correct because all the methods create a deadweight loss.
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
73) Economists argue for free trade in import markets because
A) all consumers and producers benefit from importing goods.
B) the gains to the U.S. producers outweigh the losses to the U.S. consumers.
C) the gains to the U.S. consumers outweigh the losses to the U.S. producers.
D) no one is made worse off by importing goods.
E) importing goods decreases total surplus.
Topic: Gains from trade
Skill: Level 5: Critical thinking
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
74) Economists argue for free trade in export markets because
A) all consumers and producers benefit from exporting goods.
B) the gains to the U.S. producers outweigh the losses to the U.S. consumers.
C) the gains to the U.S. consumers outweigh the losses to the U.S. producers.
D) no one is made worse off by exporting goods.
E) exporting goods decreases total surplus.
Topic: Gains from trade
Skill: Level 5: Critical thinking
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
75) A tax on a good that is imposed when it is imported is called
A) an import quota.
B) a VER.
C) a tariff.
D) a sanction.
E) a border tax.
Topic: Trade restrictions
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
76) The average U.S. tariff was highest in the
A) 1930s.
B) 1990s.
C) 1970s.
D) 2000s.
E) 2010s.
Topic: Eye on the past, the history of the U.S. tariff
Skill: Level 1: Definition
Section: Checkpoint 9.3
Status: Revised
AACSB: Reflective thinking
77) Suppose the world price of a shirt is $10. If the United States imposes a tariff of $5 a shirt, then the price of a shirt in the
A) United States falls to $5.
B) United States rises to $15.
C) world falls to $5.
D) world rises to $5.
E) world rises to $15
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
78) When a tariff is imposed on a good, the ________ increases.
A) domestic quantity purchased
B) domestic quantity produced
C) quantity imported
D) quantity exported
E) world price
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
79) When a tariff is imposed on a good, domestic consumers of the good ________ and domestic producers of the good ________.
A) win; lose
B) lose; win
C) win; win
D) lose; lose
E) lose; neither win nor lose
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
80) Which of the following parties benefits from an import quota but not from a tariff?
A) the domestic government
B) domestic producers
C) domestic consumers
D) the person with the right to import the good
E) the foreign government
Topic: Effects of quotas
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
81) Consider the market for running shoes shown above. Before a tariff is imposed, if the United States trades with the world, then the United States produces ________ running shoes at a price of ________.
A) 1 million; $40
B) 5 million; $40
C) 3 million; $80
D) 5 million; $80
E) 3 million; $40
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Application of knowledge
82) Consider the market for running shoes shown above. A tariff of ________ is imposed and causes the amount of shoes imported to ________ pairs.
A) $40; decrease from 4 million to 2 million
B) $20; decrease from 4 million to 3 million
C) $40; decrease from 5 million to 2 million
D) $20; decrease from 4 million to 2 million
E) $60; decrease from 4 million to 2 million
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Application of knowledge
83) Consider the market for running shoes shown above. As a result of the tariff imposed, ________ collect(s) tariff revenue of ________.
A) the government; $40 million
B) firms; $40 million
C) the government; $80 million
D) firms; $80 million
E) the government; $120 million
Topic: Effects of tariffs
Skill: Level 4: Applying models
Section: Checkpoint 9.3
Status: Old
AACSB: Application of knowledge
84) Suppose the Chinese government helps Chinese textile firms pay the cost of producing textiles. This payment is considered a(n)
A) export subsidy and increases producer surplus in the United States.
B) tariff and creates a deadweight loss in the United States.
C) tariff and increases consumer surplus in the United States.
D) export subsidy and creates a deadweight loss in China.
E) quota and creates a deadweight loss in China.
Topic: Export subsidy
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
85) The U.S. government provides payments to U.S. cotton producers to help defray the cost of cotton production. This ________ results in ________ of cotton in the United States and ________ in other countries.
A) export subsidy; overproduction; underproduction
B) export subsidy; underproduction; overproduction
C) tariff; overproduction; underproduction
D) tariff; underproduction; overproduction
E) quota; overproduction; underproduction
Topic: Export subsidy
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Application of knowledge
9.4 The Case Against Protection
1) If supporters of restrictions on imports argue that protection is needed to preserve a strategic industry, which of the following is being used?
A) save domestic jobs argument
B) national security argument
C) dumping argument
D) infant-industry argument
E) protecting national culture argument
Topic: National security argument
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
2) Which of the following is the national security argument against free trade?
A) A country must protect industries that produce defense equipment and armaments.
B) A country must protect new industries to give them a chance to mature before facing foreign competition.
C) A country must protect firms from dumping by foreign companies.
D) A country must protect its consumers from foreign influences.
E) A country must preserve its jobs.
Topic: National security argument
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
3) What is the national security argument to support protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Topic: National security argument
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
4) What is the infant-industry argument for protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Topic: Infant industry
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
5) When protection is encouraged to protect a growing domestic industry; which of the following is being used?
A) save domestic jobs argument
B) national security argument
C) anti-dumping argument
D) infant-industry argument
E) diversity and stability argument
Topic: Infant industry
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
6) The infant-industry argument is used by those who assert they want to
A) limit imports to protect new industries.
B) increase exports to encourage growth of new industries.
C) limit exports.
D) increase imports to earn money to support new industries.
E) encourage foreign firms to dump in the United States.
Topic: Infant industry
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
7) The infant-industry argument for protection is based on the idea of
A) learning-by-doing.
B) dumping.
C) absolute advantage.
D) quotas are the least harmful method of protecting domestic firms.
E) saving jobs in the U.S. economy.
Topic: Infant industry
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
8) What is the dumping argument for protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Topic: Dumping
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
9) When a tariff supporter argues that foreign producers are selling their products for prices below the costs of production, which of the following is being used?
A) save domestic jobs argument
B) national security argument
C) dumping argument
D) infant-industry argument
E) diversity and stability argument
Topic: Dumping
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
10) Dumping is defined as the situation in which
A) domestic producers sell a product at prices below the cost of production.
B) foreign producers sell a product at a price below the cost of production.
C) foreign producers sell a product at a price above a fair level.
D) domestic producers cut production to drive up domestic prices.
E) domestic producers are protected by tariffs.
Topic: Dumping
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
11) Which of the following is NOT a major argument for restricting international trade?
A) the promotion of dumping in America
B) the national security argument
C) the infant industry argument
D) the prevention of dumping argument
E) saves U.S. jobs argument
Topic: Dumping
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
12) Suppose the United States subsidizes domestic chicken production and then sells surpluses on the world market at a price below the cost of production. In foreign countries, the argument that would made to restrict chicken trade with the United States would be the
A) penalizes lax environmental standards argument.
B) saves jobs argument.
C) infant-industry argument.
D) dumping argument.
E) national security argument.
Topic: Dumping
Skill: Level 3: Using models
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
13) A flawed argument for protection from foreign trade is that
i. tariffs save domestic jobs.
ii. tariffs protect the national culture.
iii. quotas bring about diversity and stability.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
Topic: Protection
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
14) Which of the following is an argument that is used for protection from free trade?
i. the national security argument
ii. the infant-industry argument
iii. the dumping argument
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Topic: Protection
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
15) When politicians debate trade agreements, some who oppose the agreement tell stories of U.S. workers whose jobs would be moved abroad. Which of the following arguments in favor of protection was being used?
A) save domestic jobs argument
B) national security argument
C) anti-dumping argument
D) infant-industry argument
E) diversity and stability argument
Topic: Saving jobs
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Revised
AACSB: Reflective thinking
16) The argument that jobs are lost to free trade is
A) totally false because no jobs are lost to free trade.
B) correct because jobs are lost but foreign countries are helped and we can afford losses.
C) incorrect because no jobs are lost and new jobs are created by trade.
D) correct because some jobs are lost but incorrect because new jobs also are created.
E) true only when tariffs are imposed on the goods being imported.
Topic: Saving jobs
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
17) International trade decreases the demand for workers in domestic industries that
A) produce goods that are exported from the country.
B) produce goods that are imported into the country.
C) help businesses import and export.
D) service imported goods.
E) produce the goods in which the nation has a comparative advantage.
Topic: Saving jobs
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
18) What is an effective counter against the argument that international trade should be restricted to protect domestic jobs?
A) A more effective policy would be to support the industry with subsidies.
B) The more diversified the economy, the more stable it is.
C) Free trade increases the number of jobs in which workers earn higher incomes.
D) Rent seeking behavior should be encouraged.
E) Free trade in "green" goods will increase jobs.
Topic: Saving jobs
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
19) The typical relationship between a worker's productivity and the worker's wage rate is
A) high productivity workers receive low wage rates.
B) low productivity workers receive low wage rates.
C) no link between productivity and wages earned.
D) high productivity workers find that their jobs are often outsourced.
E) that workers with high productivity need to have their high wages protected by tariffs.
Topic: Cheap foreign labor
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
20) While high-paid American workers fear competition with low-paid foreign workers, low-paid foreign workers fear competition with high-paid American workers. Why?
A) It is completely irrational and unfounded.
B) Because America has such a large market it can protect its workers.
C) Because high wages reflect high worker productivity and the low-paid foreign workers are not as productive.
D) Because high wages are the result of extensive tariff and other trade restrictions.
E) Because high wages mean that U.S. workers can buy more goods and services.
Topic: Cheap foreign labor
Skill: Level 5: Critical thinking
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
21) The ________ are hurt by importing a good.
A) domestic consumers of the good
B) domestic producers of the good
C) domestic governments
D) foreign producers of the good
E) foreign governments
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
22) When the United States imports goods from the rest of the world, which of the following parties is harmed?
i. domestic producers of the good
ii. domestic consumers of the good
iii. foreign producers of the good
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
23) The two main reasons why international trade is restricted is because restricting trade means that governments can ________ and because domestic businesses ________.
A) create jobs; earn profits
B) obtain revenue; rent seek
C) rent seek; want to dump
D) prevent dumping; want to dump
E) rent seek; obtain revenue
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
24) Comparing developed and developing nations in their use of tariffs, we see that
A) the developing nations' governments get very little revenue from tariffs.
B) both governments get large amounts of revenue from tariffs.
C) many developing nations' governments get a large portion of their revenue from tariffs.
D) developing nations almost never impose tariffs because they want their people to obtain goods and services at the lowest possible price.
E) developed nations rely much more than developing nations on tariff revenue.
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
25) A major reason why it is difficult to lower the barriers to free trade is
A) that total benefits are less than total costs from free trade.
B) the uneven distribution of gains and losses from free trade.
C) the loss of jobs without any gain of jobs from free trade.
D) the inability to compensate losers from free trade.
E) that the barriers allow us to compete with cheap foreign labor.
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
26) What is rent seeking with respect to restricting international trade?
A) The rent on factory buildings increases if trade is restricted.
B) The government avoids paying rent on buildings when importers pay the tariff.
C) An attempt to capture the gains from trade by imposing a tariff.
D) The government's efforts to capture tariff rents.
E) The attempt by importers to avoid paying a tariff.
Topic: Rent seeking
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
27) Which of the following groups gain from international trade?
i. producers of exported goods
ii. domestic consumers of imported goods
iii. workers in exporting firms
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
28) Why are the losers from free international trade not fully compensated for their losses?
A) The amount of compensation needed would bankrupt the government.
B) The people who claim to lose are also the same ones who benefit.
C) Identifying all losers and the size of their losses is extremely difficult.
D) No one actually loses from international trade.
E) The losers are foreigners.
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
29) Trade is often restricted because the
A) total gain to all producers is larger than the total loss to all consumers.
B) total gain to all producers is smaller than the total loss to all consumers.
C) gain per producer is larger than the loss per consumer.
D) gain per producer is less than the loss per consumer.
E) gain per consumer is larger than the loss per producer.
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
30) The national security argument is used by those who assert they want to
A) increase imports as a way of strengthening their country.
B) increase exports as a way of earning money to strengthen their country.
C) limit imports that compete with domestic producers important for national defense.
D) limit exports to control the flow of technology to third world nations.
E) limit all imports.
Topic: National security argument
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
31) The argument that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets is known as the
A) national security argument.
B) diversity argument.
C) infant-industry argument.
D) environmental protection argument.
E) national youth protection argument.
Topic: Infant industry
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
32) ________ occurs when a foreign firm sells its exports at a lower price than its cost of production.
A) Dumping
B) The trickle-down effect
C) Rent seeking
D) Tariff avoidance
E) Nontariff barrier protection
Topic: Dumping
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
33) The United States
A) needs tariffs to allow us to compete with cheap foreign labor.
B) does not need tariffs to allow us to compete with cheap foreign labor.
C) should not trade with countries that have cheap labor.
D) will not benefit from trade with countries that have cheap labor.
E) avoids trading with countries that have cheap labor.
Topic: Cheap foreign labor
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
34) Why do governments in less-developed nations impose tariffs?
A) The government gains revenue from the tariff.
B) The government's low-paid workers are protected from high-paid foreign workers.
C) The nation's total income will be increased.
D) The national security of the country definitely is improved.
E) The government diversifies its economy.
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
35) What is a major reason international trade is restricted?
A) rent seeking
B) to allow competition with cheap foreign labor
C) to save jobs
D) to prevent dumping
E) to eliminate monopolies
Topic: Why is trade restricted?
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
9.5 Chapter Figures
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of a T-shirt is $5.
1) In the figure above, with international trade U.S. consumers buy ________ million T-shirts per year at ________ per T-shirt.
A) 60; $5
B) 40; $8
C) 20; $5
D) 40; $5
E) 60; $11
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
2) Based on the figure above, as a result of international trade, U.S. domestic production ________ million T-shirts per year.
A) decreases by 20
B) increases by 20
C) decreases by 10
D) increases by 40
E) increases by 10
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
3) In the figure above, with international trade the United States ________ million T-shirts per year.
A) imports 40
B) exports 40
C) exports 20
D) imports 20
E) imports 60
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
4) Based on the figure above, as a result of international trade, consumer surplus
A) increases by $150 million.
B) decreases by $150 million.
C) increases by $90 million.
D) decreases by $90 million.
E) remains unchanged.
Topic: Gains from imports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
5) Based on the figure above, as a result of international trade, producer surplus
A) increases by $150 million.
B) decreases by $150 million.
C) increases by $90 million.
D) decreases by $90 million.
E) remains unchanged.
Topic: Gains from imports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
6) Based on the figure above, international trade leads to
A) a net gain of surplus of $60 million.
B) a net loss of surplus of $60 million.
C) a net gain of surplus of $90 million.
D) a net loss of surplus of $90 million.
E) no net gain or loss of surplus.
Topic: Gains from imports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of an airplane is $150 million.
7) Based on the figure above, as a result of international trade, U.S. domestic production ________ airplanes per year.
A) decreases by 200
B) increases by 300
C) decreases by 100
D) increases by 500
E) increases by 200
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
8) In the figure above, U.S. consumers buy ________ airplanes per year at ________ million per airplane.
A) 200; $150
B) 400; $100
C) 700; $150
D) 400; $150
E) 200; $100
Topic: International trade
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
9) In the figure above, the United States ________ airplanes per year.
A) imports 500
B) exports 500
C) exports 400
D) imports 400
E) exports 200
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
10) Based on the figure above, as a result of international trade, consumer surplus
A) increases by $15 billion.
B) decreases by $15 billion.
C) increases by $27.5 billion.
D) decreases by $12.5 billion.
E) remains unchanged.
Topic: Gains from exports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
11) Based on the figure above, as a result of international trade, producer surplus
A) increases by $15 billion.
B) decreases by $15 billion.
C) increases by $27.5 billion.
D) decreases by $12.5 billion.
E) remains unchanged.
Topic: Gains from exports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
12) Based on the figure above, international trade leads to
A) a net gain in surplus of $12.5 billion.
B) a net loss of surplus of $12.5 billion.
C) a net gain in surplus of $27.5 billion.
D) a net loss of surplus of $15 billion.
E) no net gain or loss of surplus.
Topic: Gains from exports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government imposes a $2 per unit tariff on imported T-shirts.
13) The figure above shows that as a result of the tariff, the price of a T-shirt in the United States ________, and the quantity of T-shirts bought ________.
A) rises by $2; decreases by 15 million per year
B) rises by $2; increases by 15 million per year
C) falls by $2; increases by 5 million per year
D) does not change; decreases by 5 million per year
E) does not change; does not change
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
14) The figure above shows that as a result of the tariff, the quantity of T-shirts produced in the United States ________, and the quantity of T-shirts imported ________.
A) increases by 15 million per year; decreases by 30 million per year
B) increases by 15 million per year; increases by 15 million per year
C) decreases by 15 million per year; decreases by 30 million per year
D) decreases by 30 million per year; increases by 30 million per year
E) does not change; decreases by 15 million per year
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
15) The figure above shows that as a result of the tariff, consumer surplus in the United States
A) decreases by $105 million per year.
B) increases by $55 million per year.
C) decreases by $30 million per year.
D) decreases by $20 million per year.
E) remains unchanged.
Topic: Effects of tariffs, inefficiency
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
16) The figure above shows that as a result of the tariff, producer surplus in the United States
A) decreases by $105 million per year.
B) increases by $55 million per year.
C) decreases by $30 million per year.
D) decreases by $20 million per year.
E) remains unchanged.
Topic: Effects of tariffs, inefficiency
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
17) The figure above shows that the government revenue from the tariff is
A) $20 million per year.
B) $30 million per year.
C) $15 million per year.
D) $55 million per year.
E) zero.
Topic: Effects of tariffs, government revenue
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
18) The figure above shows that the deadweight loss from the tariff is
A) $20 million per year.
B) $30 million per year.
C) $15 million per year.
D) $55 million per year.
E) zero.
Topic: Effects of tariffs, inefficiency
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
19) The figure above shows that the U.S. net ________ surplus from the tariff is ________.
A) loss of; 30 million per year
B) gain in; $20 million per year
C) loss of; $10 million per year
D) gain in; $55 million per year
E) gain in; zero
Topic: Effects of tariffs, inefficiency
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
9.6 Integrative Questions
1) Assume that the state of Missouri decided to place a tariff on every product produced outside the state in an effort to increase the state's revenue and increase employment in the state. If Missouri did so
A) the state's total output would definitely increase.
B) workers with jobs in new firms replacing out-of-state imports would earn high income.
C) the standard of living within Missouri would decrease.
D) other states would begin to dump in Missouri.
E) the prices of goods imported into Missouri would fall.
Topic: Integrative
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Reflective thinking
2) During the 1980s, Harley-Davidson, the American motorcycle maker asked Congress for tariff protection from large motorcycles imported from Japan. Harley-Davidson argued that their company needed protection so the company could reorganize and, after some time had passed, could become more competitive. Harley-Davidson's argument is similar to the ________ argument for protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) bring diversity and stability
Topic: Integrative
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Reflective thinking
3) In the 1950s, crude oil and natural gas imports were restricted to keep the domestic industries viable in case of a war. The rationale for this protection is the ________ argument for protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) penalizing lax environmental standards
Topic: Integrative
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Reflective thinking
4) In the 1980s, the U.S. government forced Japanese automakers to limit their exports to the United States. The union representing the autoworkers (UAW), argued that otherwise the U.S. auto industry would have contracted. The UAW's argument is the ________ argument for protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) bringing diversity and stability
Topic: Integrative
Skill: Level 4: Applying models
Section: Integrative
Status: Old
AACSB: Reflective thinking
5) In 2017, President Trump imposed a tariff on imported steel. He did so in response to rent seeking by
A) domestic steel consumers.
B) domestic steel producers.
C) foreign steel consumers.
D) foreign steel producers.
E) foreign politicians.
Topic: Integrative
Skill: Level 4: Applying models
Section: Integrative
Status: Revised
AACSB: Reflective thinking
6) If the opportunity cost of producing a T-shirt is ________ in China than in the United States, China has ________ advantage in producing T-shirts.
A) lower; a comparative
B) lower; an absolute
C) higher; a comparative
D) higher; an absolute
E) higher; no
Topic: Comparative advantage
Skill: Level 5: Critical thinking
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
7) Because the United States has ________ advantage compared to China in producing airplanes, China can buy airplanes from the United States at a ________ opportunity cost than that at which China can produce them.
A) comparative; lower
B) comparative; higher
C) absolute; lower
D) absolute; higher
E) None of the above because China will produce airplanes and sell them to the United States.
Topic: Comparative advantage
Skill: Level 5: Critical thinking
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
8) Which of the following is TRUE?
i. Comparative advantage drives international trade.
ii. Compared to a no-trade situation, in a market with imports, producer surplus is larger.
iii. Tariffs lower the domestic price of imported goods.
A) only i
B) only ii
C) only iii
D) i and ii
E) i and iii
Topic: Integrative
Skill: Level 2: Using definitions
Section: Integrative
Status: Old
AACSB: Reflective thinking
9) Which of the following is TRUE?
i. When the world price of a good is lower than the price that balances domestic supply and demand, a country gains from exporting the good.
ii. Compared to a no-trade situation, in a market with imports, consumer surplus is larger.
iii. Quotas raise the domestic price of imported goods.
A) only i
B) only ii
C) only iii
D) i and ii
E) ii and iii
Topic: Integrative
Skill: Level 2: Using definitions
Section: Integrative
Status: Old
AACSB: Analytical thinking
10) Which of the following is TRUE?
i. Compared to a no-trade situation, in a market with exports, consumer surplus is larger.
ii. Tariffs decrease consumer surplus.
iii. Trade is restricted because protection brings small losses to a large number of people and large gains to a small number of people.
A) only i
B) only ii
C) only iii
D) i and iii
E) ii and iii
Topic: Integrative
Skill: Level 2: Using definitions
Section: Integrative
Status: Old
AACSB: Analytical thinking
11) We find that the world price of sugar is 20 cents a pound, the U.S. does not trade internationally, and the U.S. equilibrium price of sugar is 30 cents a pound. If the U.S. begins to trade internationally, the price of sugar in the U.S. ________ to the world price and U.S. consumers buy ________ sugar.
A) falls; more
B) falls; less
C) rises; more
D) rises; less
E) falls; no
Topic: Imports
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
12) The world price of steel is $100 a ton. Before international trade, the price of steel in India is $60 a ton. If India begins trading internationally, the price of steel in India ________ and steel mills in India ________ the quantity they produce.
A) rises; increase
B) falls; increase
C) does not change; increase
D) rises; decrease
E) falls; decease
Topic: International trade
Skill: Level 4: Applying models
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
13) Imports ________ society's total surplus because of the ________ in price and ________ in consumption.
A) increase; rise; increase
B) increase; rise; decrease
C) decrease; fall; increase
D) decrease; fall; decrease
E) increase; fall; increase
Topic: Exports
Skill: Level 5: Critical thinking
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
14) Exports ________ society's total surplus because of the ________ in price and ________ in production.
A) increase; rise; increase
B) increase; rise; decrease
C) decrease; fall; increase
D) decrease; fall; decrease
E) increase; fall; increase
Topic: Exports
Skill: Level 5: Critical thinking
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
9.7 Essay: How Global Markets Work
1) How can a nation and its producers determine whether or not it has a comparative advantage in producing a particular good or service?
Topic: Gains from trade
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Written and oral communication
2) After NAFTA was signed, the United States allowed more tomatoes to be imported from Mexico. What happened to the price of tomatoes in the United States when the United States allowed more tomatoes to be imported?
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
3) A few years ago, as oil and gas prices continued to increase, a growing number of Americans called for the United States to become less reliant on Middle-Eastern oil. Would it make sense for the United States to try to become totally self-reliant in the production of oil? Why or why not?
Topic: Imports
Skill: Level 5: Critical thinking
Section: Checkpoint 9.1
Status: Old
AACSB: Written and oral communication
4) The United States imports television sets from Japan. The table above contains the U.S. demand and U.S. supply schedules for television sets. The world price of a television set is $600 per set.
a. With no trade, what is the domestic price and quantity of television sets?
b. At the world price, what is the quantity of sets demanded in the United States?
c. At the world price, how many sets are produced in the United States?
d. At the world price, how many sets are imported into the United States?
e. What is the opportunity cost of producing the 4-millionth television set in the United States? In Japan?
a. In the absence of trade, the price is $1,000 per television set and the quantity is 4 million sets.
b. At the world price, 8 million sets are demanded in the United States.
c. At the world price, 2 million sets are produced in the United States.
d. At the world price, the quantity of sets imported is 6 million.
e. The opportunity cost in the United States to produce the 4-millionth set is $1,000. The opportunity cost in Japan is $600.
Topic: Imports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
5) Merck, an American pharmaceutical company, produces a vaccination that is used against chicken pox. The table shows the domestic demand for, and supply of, this medication, measured in thousands of doses per day. The world price of this medicine is $24 per dose.
a. With no trade, what is the U.S. price and quantity of the vaccine?
b. At the world price, how many doses are demanded in the United States?
c. At the world price, how many doses are produced in the United States?
d. At the world price, how many doses are exported?
a. With no trade, the U.S. price is $20 a dose and the quantity is 10,000 doses per day.
b. At the world price, 8,000 doses per day are demanded in the United States.
c. At the world price, 13,000 doses per day are produced in the United States.
d. At the world price, 5,000 doses per day are exported.
Topic: Exports
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
6) The table above has the domestic supply and domestic demand schedules for a product. What is the equilibrium price with no trade? Over what range of prices will the country export the good? Over what range will it import the good? Suppose the world price is $20. What is the quantity demanded, the quantity supplied, and the amount of the good exported or imported?
Topic: Trade
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
7) The figure above shows the U.S. demand and the U.S. supply curves of canned peaches.
a. In the absence of trade, what is price of canned peaches in the United States?
b. In the absence of trade, what is the level of production in the United States?
c. If the world price of canned peaches is $1 a can and the United States engages in trade, does the United States import or export canned peaches?
d. If the world price of canned peaches is $1 a can and the United States engages in trade, what is the quantity produced in the United States and what is the quantity consumed? What is the quantity imported or exported?
e. If the world price of canned peaches is $2 a can and the United States engages in trade, does the United States import or export canned peaches?
f. If the world price of canned peaches is $2 a can and the United States engages in trade, what is the quantity produced in the United States and what is the quantity consumed? What is the quantity imported or exported?
a. In the absence of trade, the price is $1.50 per can of peaches.
b. In the absence of trade, 4 million cans are produced.
c. The United States imports canned peaches.
d. The quantity produced in the United States is 2 million cans and the quantity consumed is 6 million cans. The quantity imported is 4 million cans.
e. The United States exports canned peaches.
f. The quantity produced in the United States is 6 million cans and the quantity consumed is 2 million cans. The quantity exported is 4 million cans.
Topic: Trade
Skill: Level 3: Using models
Section: Checkpoint 9.1
Status: Old
AACSB: Analytical thinking
9.8 Essay: Winners, Losers, and Net Gains from Trade
1) Who gains from imports? How do they gain? Who loses? How do they lose? Does the overall economy gain or lose from imports?
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Written and oral communication
2) How do imports affect buyers' consumer surplus?
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
3) How do imports affect sellers' producer surplus?
Topic: Imports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
4) Who gains from exports? How do they gain? Who loses? How do they lose? Does the overall economy gain or lose from exports?
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
5) How do exports affect buyers' consumer surplus?
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
6) How do exports affect sellers' producer surplus?
Topic: Exports
Skill: Level 2: Using definitions
Section: Checkpoint 9.2
Status: Old
AACSB: Analytical thinking
9.9 Essay: International Trade Restrictions
1) Briefly define a tariff and a quota. Do any of these methods restrict trade without harming domestic consumers?
Topic: Trade restrictions
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Written and oral communication
2) "Tariffs today in the United States are much higher than in the past." Is the previous statement correct or incorrect?
Topic: Eye on the past, the history of the U.S. tariff
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
3) How does a tariff affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Written and oral communication
4) The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime and the production of limes in the United States?
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Written and oral communication
5) How does a tariff affect the consumer surplus and the producer surplus from the imported good? Is the overall economy helped or harmed by tariffs? Briefly explain your answers.
Topic: Effects of tariffs
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
6) Currently, the United States has a quota on the amount of sugar that is allowed to be imported into the United States. What would happen to the price of sugar in the United States if the quota was removed? What would happen to U.S. consumption and U.S. production of sugar?
Topic: Effects of quotas
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Reflective thinking
7) How does a quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?
Topic: Effects of quotas
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
8) How does a quota affect the consumer surplus and the producer surplus from the imported good? Is the overall economy helped or harmed by quotas? Briefly explain your answers.
Topic: Effects of quotas
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
9) The United States imports cheese from a variety of countries. The table above gives the domestic supply of, and demand for, cheese in the United States. The world price of cheese is $12 per pound, and trade is unrestricted.
a. How many pounds of cheese are consumed in the United States?
b. How many pounds of cheese are produced in the United States?
c. How many pounds of cheese are imported into the United States?
If a $3 per pound tariff is imposed,
d. How many pounds of cheese are consumed in the United States?
e. How many pounds of cheese are produced in the United States?
f. How many pounds of cheese are imported into the United States?
g. How much will the U.S. government collect in tariff revenue?
h. Who benefits from the tariff? Who loses?
a. 180,000 pounds of cheese are consumed.
b. 60,000 pounds of cheese are produced.
c. 120,000 pounds of cheese are imported.
d. 140,000 pounds of cheese are consumed.
e. 80,000 pounds of cheese are produced.
f. 60,000 pounds of cheese are imported.
g. The government collects $3 per pound × 60,000 pounds = $180,000.
h. U.S. producers and the U.S. government gain while U.S. consumers and foreign producers lose.
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
10) The above figure shows the domestic supply of and domestic demand for an imported good. The world price is $15 per unit.
a. At the world price of $15 per unit, what is the domestic consumption and domestic production?
b. At the world price of $15 per unit, what is the quantity imported?
c. If the government imposes a tariff of $5 per unit, what is the domestic consumption and domestic production?
d. With the $5 per unit tariff, what is the quantity imported?
e. How much revenue does the government collect with a tariff of $5 per unit?
a. Domestic consumption is 8 million units per year and domestic production is 0.
b. The quantity imported is 8 million units per year.
c. Domestic consumption is 6 million units per year and domestic production is 2 million units per year.
d. The quantity imported is 4 million units per year.
e. The government collects $5 per unit imported and 4 million units are imported, so the government's revenue from the tariff is $5 × 4 million = $20 million per year.
Topic: Effects of tariffs
Skill: Level 3: Using models
Section: Checkpoint 9.3
Status: Old
AACSB: Analytical thinking
9.10 Essay: The Case Against Protection
1) Three arguments used to promote trade barriers are the national security argument, the infant-industry argument, and the dumping argument. Explain each of these arguments and evaluate whether each one has any flaws.
The infant-industry argument is that it is necessary to protect a new industry to enable it to grow into a mature industry that can compete in world markets. The problem with this argument is that if an industry can eventually compete, then its backers should be willing to fund it until that time. In addition, if the industry has benefits that spill over to other industries, then the more efficient government policy is to subsidize the industry rather than protect it from competition.
Finally, the dumping argument asserts that protection is needed to protect domestic industries from foreign dumping practices designed to eliminate competition. (Dumping is selling a good for a price that is less than its cost of production.) The problems with this argument are two-fold. First, it is extremely difficult to determine if a firm is dumping because determining the cost of production is difficult. Second, even if a firm is dumping, its success in establishing a monopoly is in doubt and its success in maintaining its global (!) monopoly is even more doubtful. Hence dumping to obtain a monopoly is likely a very uncommon practice.
Topic: Case against protection
Skill: Level 3: Using models
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
2) What is the national security argument for restricting international trade? What is its flaw?
Topic: National security
Skill: Level 3: Using models
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
3) What is dumping?
Topic: Dumping
Skill: Level 1: Definition
Section: Checkpoint 9.4
Status: Old
AACSB: Reflective thinking
4) Because wage rates are so low in Africa, why don't Microsoft, Cisco and other major corporations close down their American operations and move to Africa?
Topic: Cheap foreign labor
Skill: Level 5: Critical thinking
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
5) Explain how governments restrict international trade and who benefits as well as who loses from the restrictions.
Topic: Why is trade restricted?
Skill: Level 3: Using models
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
6) What is "rent seeking"? How does it apply to restricting imports?
Topic: Rent seeking
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
7) Economics demonstrates that opening up unrestricted free international trade is beneficial to all nations. However, are there any losers from such a policy change?
Topic: Why is trade restricted?
Skill: Level 3: Using models
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
8) How does the United States attempt to compensate losers from lower trade restrictions?
Topic: Compensating losers
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Status: Old
AACSB: Written and oral communication
9) Suppose that elimination of tariffs on agricultural products means that 1,000 farm workers lose jobs that pay an average of $20,000 per year. At the same time, because of the importation of relatively cheaper foreign vegetables, 150 million consumers save $2 per year on their grocery bills.
a. What is the total income lost by farm workers because of the free trade?
b. What is the total dollar amount saved by all consumers combined?
c. Which is greater, the lost income or the consumer savings? Do the benefits of free trade outweigh the costs in this simple example?
d. Which group is most likely to become politically involved over the issue of removing the tariffs, the farm workers or the consumers? Why?
a. The total income lost by farm workers is 1,000 × $20,000 = $20,000,000.
b. The total saving by all consumers is 150,000,000 × $2 = $300,000,000.
c. The consumer savings is much larger than the lost income, so the benefits of free trade outweigh the costs.
d. The farm workers are more likely to become involved, because their individual loss is much greater than an individual consumer's gain.
Topic: Rent seeking
Skill: Level 3: Using models
Section: Checkpoint 9.4
Status: Old
AACSB: Analytical thinking
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Foundations of Microeconomics 9e | Test Bank with Answer Key by Robin Bade
By Robin Bade