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Exam 9: Application: International Trade

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Question 51

True/False

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​There are only increases in total surplus when a country exports a good, since more units of the country's output of that good are produced.

A) True
B) False

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Question 52

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Figure 9-6 -When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

A) consumer surplus increases and total surplus increases in the market for that good.
B) consumer surplus increases and total surplus decreases in the market for that good.
C) consumer surplus decreases and total surplus increases in the market for that good.
D) consumer surplus decreases and total surplus decreases in the market for that good.

E) B) and C)
F) A) and D)

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Question 53

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Figure 9-7 The following diagram shows the domestic demand and domestic supply curves in a market. ​ -Refer to Figure 9-7. With no trade allowed, how much are consumer surplus, producer surplus, and total surplus in this market?

Figure 9-10 The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit. ​ -Refer to Figure 9-10. Suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much is the deadweight loss caused by the tariff?

William and Jamal live in the country of Dumexia. When Dumexia legalized international trade in bananas, the price of bananas in Dumexia increased. As a result, William became better off and Jamal became worse off. It follows that William is a seller, and Jamal is a buyer, of bananas.

Figure 9-3 -Refer to Figure 9-3. The size of the tariff on roses is

Figure 9-10 The following diagram shows the domestic demand and domestic supply curves in a market. Assume that the world price in this market is $1 per unit. ​ -Refer to Figure 9-10. Suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much are consumer surplus and producer surplus?

For Country A, the world price of textiles exceeds the domestic equilibrium price of textiles. As a result, international trade allows sellers of textiles in Country A to experience greater producer surplus than they otherwise would experience.

Figure 9-6 -Refer to Figure 9-6. The tariff

Figure 9-3 -Refer to Figure 9-3. The imposition of a tariff on roses

The results of a 2008 Los Angeles Times poll suggest that a significant majority of Americans believe that free international trade helps the American economy.

Figure 9-5 -Refer to Figure 9-5. Consumer surplus in this market after trade is

Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.

Scenario 9-2 Suppose domestic demand and domestic supply in a market are given by the following equations: $\begin{array} { l } Q ^ { D } = 20 - P \\Q ^ { S } = P\end{array}$ ​ -Refer to Scenario 9-2. Suppose the world price in this market is $8 per unit, and suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much is the deadweight loss caused by the tariff?

Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

​Imposing a quota on the import of a good is preferable to a tariff because a tariff creates a deadweight loss while a quota does not.

The world price of cotton is the highest price of cotton observed anywhere in the world.

The small-economy assumption is necessary to analyze the gains and losses from international trade.

The results of a 2008 Los Angeles Times poll suggest that the percentage of Americans who believe trade is harmful to the economy exceeds the percentage of Americans who believe trade is beneficial to the economy.

Figure 9-4 -Refer to Figure 9-4. Total surplus in this market after trade is