Chapter 9/Application: International Trade 51 Chapter 9 Application: International Trade Nations would gain from trade if a(n) exists a absolute advantage b specialization c comparative advantage d infant industry ANSWER: c comparative advantage SECTION: 1 OBJECTIVE: 1 If Canada has a comparative advantage over Denmark in the production of wood, this implies that a it requires fewer resources in Canada than in Denmark to produce wood b the opportunity cost of producing wood in Canada is lower than in Denmark c Denmark does not benefit by trading with Canada d Canada should buy wood from Denmark ANSWER: b the opportunity cost of producing wood in Canada is lower than in Denmark SECTION: 1 OBJECTIVE: 1 If two countries specialize a the other countries trading with them cannot specialize b everyone in both countries benefits c the total of goods produced increases d all goods will be produced in both countries ANSWER: c the total of goods produced increases SECTION: 1 OBJECTIVE: 1 As a result of free trade in a commodity, the a price of the commodity must be the same in all countries b total quantity imported will exceed the total quantity exported c price of the commodity will be higher in the producing country d price of the commodity will be lower in the producing country ANSWER: a price of the commodity must be the same in all countries SECTION: 1 OBJECTIVE: 1 If at the world equilibrium price the U.S. quantity demanded is greater than the U.S. quantity supplied, then the a United States will import the good b United States will export the good c world price will fall d world price will rise ANSWER: a United States will import the good SECTION: 1 OBJECTIVE: 1 52 Chapter 9/Application: International Trade Consider this diagram of the market for pocket calculators in Venezuela. In the absence of trade, the price and quantity of calculators sold are a $3.00 and 10 calculators b $3.00 and 60 calculators c $8.00 and 60 calculators d $8.00 and 80 calculators ANSWER: c $8.00 and 60 calculators SECTION: 1 OBJECTIVE: 1 Consider this diagram of the market for pocket calculators in Venezuela. With free trade, Venezuela produces , consumes , and imports a 10 calculators; 80 calculators; 70 calculators b 10 calculators; 110 calculators; 100 calculators c 40 calculators; 40 calculators; 20 calculators d 80 calculators; 110 calculators; 30 calculators ANSWER: b 10 calculators; 110 calculators; 100 calculators SECTION: 1 OBJECTIVE: 1 Consider this diagram of the market for pocket calculators in Venezuela. With free trade, consumer surplus a increases by 300 b increases by 425 c decreases by 125 d None of the above are correct ANSWER: b increases by 425 SECTION: 1 OBJECTIVE: 2 Chapter 9/Application: International Trade 53 Consider this diagram of the market for pocket calculators in Venezuela. A tariff would completely eliminate imports of calculators if it equaled a $2.00 b $3.00 c $4.00 d $5.00 ANSWER: d $5.00 SECTION: 2 OBJECTIVE: 4 10 Consider this diagram of the market for pocket calculators in Venezuela. With a perunit tariff of $3.00, the Venezuelan government collects tariff revenues of a $80.00 b $100.00 c $120.00 d $140.00 ANSWER: c $120.00 SECTION: 2 OBJECTIVE: 4 11 If the opportunity cost of a television set equals 20 cameras in China, but 10 cameras in Japan, then we know a China has a comparative advantage in producing cameras b Japan has a comparative advantage in producing TV sets c market exchange of 1 TV set for 15 cameras would produce not only mutually beneficial trade, but would also split the gains from trade equally between the two countries d All of the above are correct ANSWER: d All of the above are correct SECTION: 2 OBJECTIVE: 2 12 When customers are free to buy at the lowest prices, they will a purchase goods from the country that has a comparative advantage in producing it b purchase only goods produced in their own country c purchase only goods produced in their own local area d prefer to purchase only wellmade, foreignproduced goods ANSWER: a purchase goods from the country that has a comparative advantage in producing it SECTION: 2 OBJECTIVE: 2 13 With international trade a producers and consumers in both countries must gain; otherwise, there would be no trade b producers in both countries must gain c consumers in both countries must gain d consumer surplus in the country that imports the good rises ANSWER: d consumer surplus in the country that imports the good rises SECTION: 2 OBJECTIVE: 2 54 Chapter 9/Application: International Trade 14 The United States is the world’s leading grain producing nation. Exporting U.S. grain causes the a domestic consumption of grain to rise because of the added foreign demand b price of grain in the domestic market to fall because foreigners are now taking some of the domestic demand c price of grain to domestic consumers to rise because of the added foreign demand d U.S. standard of living to improve but reduces the standard of living of foreigners ANSWER: c price of grain to domestic consumers to rise because of the added foreign demand SECTION: 2 OBJECTIVE: 2 15 If the United States imports shoes in a freetrade situation, we can infer that a the domestic production of shoes in a notrade situation is lower than if there is free trade b domestic consumption of shoes is higher in a notrade situation than if there is free trade c the domestic price of shoes in a notrade situation is higher than the freetrade world price d the domestic price of shoes in a notrade situation is lower than the freetrade world price ANSWER: c the domestic price of shoes in a notrade situation is higher than the freetrade world price SECTION: 2 OBJECTIVE: 2 16 Domestic producers gain from the opportunity to export goods to foreign countries because a the freetrade price of the good is higher than the domestic price in the absence of trade b producers are able to reach a wider market c although the freetrade price is lower than in the absence of trade, producers are able to sell a greater quantity d production rises, although there is no change in the price of the good compared to the notrade situation ANSWER: a the freetrade price of the good is higher than the domestic price in the absence of trade SECTION: 2 OBJECTIVE: 2 17 Consider this diagram of the market for tea in China. If the world price is $20, consumer surplus is a $60 b $600 c $900 d $1800 ANSWER: c $900 SECTION: 2 OBJECTIVE: 2 Chapter 9/Application: International Trade 55 18 Consider this diagram of the market for tea in China. If the government imposes a quota of 10 units of tea per day, the consumer surplus will a $50 b $625 c $900 d $1250 ANSWER b $625 SECTION: 2 OBJECTIVE: 4 19 Consider this diagram of the market for tea in China. If the government imposes a quota of 10 units of tea per day, the import license holders receive a $50 b $100 c $625 d $225 ANSWER: b $100 SECTION: 2 OBJECTIVE: 4 20 Consider this diagram of the market for tea in China. If the government imposes a quota of 10 units of tea per day, the deadweight loss will be a $50 b $100 c $225 d $275 ANSWER: a $50 SECTION: 2 OBJECTIVE: 4 56 Chapter 9/Application: International Trade 21 One big difference between tariffs and quotas is that tariffs a raise the price of a good while quotas lower it b generate tax revenues while quotas do not c stimulate international trade while quotas inhibit it d hurt domestic producers while quotas help them ANSWER: b generate tax revenues while quotas do not SECTION: 3 OBJECTIVE: 5 22 Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of a a tariff b a subsidy c comparative disadvantage d a quota ANSWER: a a tariff SECTION: 3 OBJECTIVE: 5 23 The U.S. military aircraft industry sought protection from foreign competition by using the argument to persuade Congress to impose trade restrictions a infant industries b national security c unfair competition d protectionasbargainingchip ANSWER: b national security SECTION: 3 OBJECTIVE: 5 24 A lessdeveloped country would probably use to argue for trade restrictions a national security b infant industry c increased efficiency d unfair competition ANSWER: b infant industry SECTION: 3 OBJECTIVE: 5 25 Many U.S. producers complain about limited access to the Japanese market. They say that they cannot export to Japan because Japanese import restrictions are so severe. Who gains? Who loses? a Everyone loses b Japanese producers gain, U.S. producers and Japanese consumers lose c Japanese producers and consumers gain, U.S. producers and consumers lose d Japanese consumers and U.S. consumers gain, Japanese producers lose ANSWER: b Japanese producers gain, U.S. producers and Japanese consumers lose SECTION: 3 OBJECTIVE: 5 26 Textile workers in the U.S. complain that they cannot compete with lowcost, foreign textile producers. While some U.S. textile workers may lose their jobs, an advantage is a the United States gets cheaper textiles b U.S. imports will become more expensive so U.S. domestic producers gain c workers in other countries will buy more U.S. clothing d the United States can retaliate with punishing trade policies ANSWER: a the United States gets cheaper textiles SECTION: 3 OBJECTIVE: 5 Chapter 9/Application: International Trade 57 ...52 Chapter 9/Application: International Trade Consider this diagram of the market for pocket calculators in Venezuela. In the absence of trade, the... decreases by 125 d None of the above are correct ANSWER: b increases by 425 SECTION: 1 OBJECTIVE: 2 Chapter 9/Application: International Trade 53 Consider this diagram of the market for pocket calculators in Venezuela. A tariff would completely ... ANSWER: d consumer surplus in the country that imports the good rises SECTION: 2 OBJECTIVE: 2 54 Chapter 9/Application: International Trade 14 The United States is the world’s leading grain producing nation. Exporting U.S. grain causes the