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Exam 9: Application: International Trade

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Question 51

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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.

A) True
B) False

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Question 52

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

A) A + B.
B) A + B + C.
C) A + B + C + D.
D) B + C + D.

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

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Question 53

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

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?

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.

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

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

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 9-10 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?

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

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

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?

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?

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

​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.

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.

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

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

​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.