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Chapter 9 Application: International Trade
MULTIPLE CHOICE
1. An important factor in the decline of the U.S. textile industry over the past 100 or so years is
a. foreign competitors that can produce quality textile goods at low cost.
b. lower prices of goods that are substitutes for clothing.
c. a decrease in Americans’ demand for clothing, due to increased incomes and the fact that clothing
is an inferior good.
d. the fact that the minimum wage in the U.S. has failed to keep pace with the cost of living.
ANS: A PTS: 1 DIF: 1 REF: 9-0
NAT: Analytic LOC: Gains from trade, specialization and trade
TOP: International trade MSC: Interpretive
2. With which of the Ten Principles of Economics is the study of international trade most closely connected?
a. People face tradeoffs.
b. Trade can make everyone better off.
c. Governments can sometimes improve market outcomes.
d. Prices rise when the government prints too much money.
ANS: B PTS: 1 DIF: 1 REF: 9-0
3. Which of the following tools and concepts is useful in the analysis of international trade?
a. total surplus
b. domestic supply
c. equilibrium price
d. All of the above are correct.
ANS: D PTS: 1 DIF: 1 REF: 9-0
4. A logical starting point from which the study of international trade begins is
a. the recognition that not all markets are competitive.
b. the recognition that government intervention in markets sometimes enhances the economic welfare
of the society.
c. the principle of absolute advantage.
d. the principle of comparative advantage.
TOP: International trade | Comparative advantage MSC: Interpretive
5. Which of the following is not an important question for economic policy raised by the experience of the textile
industry?
a. How does international trade affect consumer well-being?
b. Who gains and who loses from free trade among countries?
c. How do the gains from trade compare to the losses?
d. Which argument for restricting free trade is politically feasible?
1
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2 ❖ Chapter 9/Application: International Trade
THE DETERMINANTS OF TRADE
1. What is the fundamental basis for trade among nations?

a. shortages or surpluses in nations that do not trade
b. misguided economic policies
c. absolute advantage
d. comparative advantage
2. Patterns of trade among nations are primarily determined by

a. cultural considerations.
b. political considerations.
c. comparative advantage.
d. differences in the income elasticity of demand among nations.
ANS: C PTS: 1 DIF: 1 REF: 9-1
3. The market for corn in Wheatland consists solely of domestic buyers of corn and domestic sellers of corn if
a. consumer surplus equals producer surplus in the Wheatland corn market.
b. total surplus exceeds consumer surplus in the Wheatland corn market.
c. Wheatland permits international trade in corn.
d. Wheatland forbids international trade in corn.
TOP: Equilibrium MSC: Interpretive
4. The nation of Pineland forbids international trade. In Pineland, you can buy 1 pound of fish for 2 pounds of
pineapples. In other countries, you can buy 1 pound of fish for 1.5 pounds of pineapples. These facts indicate
that
a. Pineland has a comparative advantage, relative to other countries, in producing fish.
b. other countries have a comparative advantage, relative to Pineland, in producing pineapples.
c. the price of pineapples in Pineland exceeds the world price of pineapples.
d. if Pineland were to allow trade, it would import fish.
TOP: Comparative advantage | World price MSC: Applicative
5. The nation of Falconia forbids international trade. In Falconia, you can obtain a computer by trading 3 bicy-
cles. In other countries, you can obtain a computer by trading 5 bicycles. These facts indicate that
a. if Falconia were to allow trade, it would export computers.
b. Falconia has an absolute advantage, relative to other countries, in producing computers.
c. Falconia has a comparative advantage, relative to other countries, in producing bicycles.
TOP: Comparative advantage MSC: Applicative
Chapter 9/Application: International Trade ❖ 3
6. The principle of comparative advantage asserts that

a. not all countries can benefit from trade with other countries.
b. the world price of a good will prevail in all countries, regardless of whether those countries allow
international trade in that good.
c. countries can become better off by exporting goods, but they cannot become better off by importing
goods.
d. countries can become better off by specializing in what they do best.
TOP: Comparative advantage MSC: Interpretive
7. A tax on an imported good is called a

a. quota.
b. tariff.
c. supply tax.
d. trade tax.
TOP: Tariffs MSC: Definitional
8. A tariff is a
a. limit on how much of a good can be exported.
b. limit on how much of a good can be imported.
c. tax on an exported good.
d. tax on an imported good.
9. The price of a good that prevails in a world market is called the

a. absolute price.
b. relative price.
c. comparative price.
d. world price.
TOP: Price | International trade MSC: Definitional
10. The price of sugar that prevails in international markets is called the
a. export price of sugar.
b. import price of sugar.
c. comparative-advantage price of sugar.
d. world price of sugar.
TOP: Price | International trade MSC: Definitional
11. If a country allows trade and, for a certain good, the domestic price without trade is higher than the world
price,
a. the country will be an exporter of the good.
b. the country will be an importer of the good.
c. the country will be neither an exporter nor an importer of the good.
d. Additional information is needed about demand to determine whether the country will be an
exporter of the good, an importer of the good, or neither.
TOP: Prices | Imports MSC: Interpretive
12. If a country allows trade and, for a certain good, the domestic price without trade is lower than the world price,
a. the country will be an exporter of the good.
b. the country will be an importer of the good.
c. the country will be neither an exporter nor an importer of the good.
d. Additional information is needed about demand to determine whether the country will be an
exporter of the good, an importer of the good, or neither.
TOP: Prices | Exports MSC: Interpretive
13. For any country, if the world price of zinc is higher than the domestic price of zinc without trade, that country
should
a. export zinc, since that country has a comparative advantage in zinc.
b. import zinc, since that country has a comparative advantage in zinc.
c. neither export nor import zinc, since that country cannot gain from trade.
d. neither export nor import zinc, since that country already produces zinc at a low cost compared to
other countries.
TOP: Exports | Comparative advantage MSC: Applicative
14. If the world price of textiles is higher than Vietnam’s domestic price of textiles without trade, then Vietnam
a. should import textiles.
b. has a comparative advantage in textiles.
c. should produce just enough textiles to meet its domestic demand.
d. should refrain altogether from producing textiles.
TOP: Prices | Comparative advantage MSC: Interpretive
15. Assume, for Singapore, that the domestic price of soybeans without international trade is higher than the world
price of soybeans. This suggests that, in the production of soybeans,
a. Singapore has a comparative advantage over other countries and Singapore will import soybeans.
b. Singapore has a comparative advantage over other countries and Singapore will export soybeans.
c. other countries have a comparative advantage over Singapore and Singapore will import soybeans.
d. other countries have a comparative advantage over Singapore and Singapore will export soybeans.
TOP: Prices | Comparative advantage MSC: Applicative
16. Assume, for the U.S., that the domestic price of pineapples without international trade is lower than the world
price of pineapples. This suggests that, in the production of pineapples,
a. the U.S. has a comparative advantage over other countries and the U.S. will export pineapples.
b. the U.S. has a comparative advantage over other countries and the U.S. will import pineapples.
c. other countries have a comparative advantage over the U.S. and the U.S. will export pineapples.
d. other countries have a comparative advantage over the U.S. and the U.S. will import pineapples.
TOP: Prices | Comparative advantage MSC: Applicative
17. Suppose England exports cars to Australia and imports cheese from Mexico. This situation suggests that
a. England has a comparative advantage relative to Mexico in producing cheese, and Australia has a
comparative advantage relative to England in producing cars.
b. England has a comparative advantage relative to Australia in producing cars, and Mexico has a
comparative advantage relative to England in producing cheese.
c. England has an absolute advantage relative to Mexico in producing cheese, and Australia has an
absolute advantage relative to England in producing cars.
d. England has an absolute advantage relative to Australia in producing cars, and Mexico has an
absolute advantage relative to England in producing cheese.
18. Trade among nations is ultimately based on

a. absolute advantage.
b. strategic advantage.
c. comparative advantage.
d. technical advantage.
19. A country has a comparative advantage in a product if the world price is

a. lower than that country’s domestic price without trade.
b. higher than that country’s domestic price without trade.
c. equal to that country’s domestic price without trade.
d. not subject to manipulation by organizations that govern international trade.
TOP: Price | Comparative advantage MSC: Interpretive
20. Suppose Guatemala has an absolute advantage over other countries in producing sugar, but other countries
have a comparative advantage over Guatemala in producing sugar. If trade in sugar is allowed, Guatemala
a. will import sugar.
b. will export sugar.
c. will either export sugar or export sugar, but it is not clear from the given information.
d. would have nothing to gain either from exporting or importing sugar.
TOP: Comparative advantage | Absolute advantage MSC: Interpretive
21. Suppose Haiti has an absolute advantage over other countries in producing oranges, but other countries have a
comparative advantage over Haiti in producing oranges. If trade in oranges is allowed, Haiti
a. will import oranges.
b. will export oranges.
c. will either export oranges or export oranges, but it is not clear from the given information.
d. would have nothing to gain either from exporting or importing oranges.
TOP: Comparative advantage | Absolute advantage MSC: Interpretive
22. Assume, for Taiwan, that the domestic price of soybeans without international trade is lower than the world
price of soybeans. This suggests that, in the production of soybeans,
a. Taiwan has a comparative advantage over other countries and Taiwan will import soybeans.
b. Taiwan has a comparative advantage over other countries and Taiwan will export soybeans.
c. other countries have a comparative advantage over Taiwan and Taiwan will import soybeans.
d. other countries have a comparative advantage over Taiwan and Taiwan will export soybeans.
TOP: Prices|Comparative advantage MSC: Applicative
23. Assume, for Canada, that the domestic price of tomatoes without international trade is higher than the world
price of tomatoes. This suggests that, in the production of tomatoes,
a. Canada has a comparative advantage over other countries and Canada will export tomatoes.
b. Canada has a comparative advantage over other countries and Canada will import tomatoes.
c. other countries have a comparative advantage over Canada and Canada will export tomatoes.
d. other countries have a comparative advantage over Canada and Canada will import tomatoes.
24. Assume, for the U.S., that the domestic price of wheat without international trade is higher than the world
price of wheat. This suggests that, in the production of wheat,
a. the U.S. has a comparative advantage over other countries and the U.S. will export wheat.
b. the U.S. has a comparative advantage over other countries and the U.S. will import wheat.
c. other countries have a comparative advantage over the U.S. and the U.S. will export wheat.
d. other countries have a comparative advantage over the U.S. and the U.S. will import wheat.
25. Assume, for Canada, that the domestic price of wheat without international trade is lower than the world price
of wheat. This suggests that, in the production of wheat,
a. Canada has a comparative advantage over other countries and Canada will export wheat.
b. Canada has a comparative advantage over other countries and Canada will import wheat.
c. other countries have a comparative advantage over Canada and Canada will export wheat.
d. other countries have a comparative advantage over Canada and Canada will import wheat.
26. If the world price of sugar is lower than Brazil’s domestic price of sugar without trade, then Brazil
a. should import sugar.
b. has a comparative advantage in sugar.
c. should produce just enough sugar to satisfy domestic demand.
d. should produce no sugar domestically.
TOP: Price|Comparative advantage MSC: Applicative
27. If a country is an exporter of a good, then it must be the case that

a. the world price is less than its domestic price.
b. consumer surplus is higher than a no trade situation.
c. the world price is greater than its domestic price.
d. they used an infant-industry argument to protect its producers.
TOP: Price|Comparative advantage MSC: Interpretive
28. Suppose the United States exports cars to Switzerland and imports cheese from France. This situation suggests
a. the United States has a comparative advantage relative to France in producing cheese, and
Switzerland has a comparative advantage to the United States in producing cars.
b. the United States has a comparative advantage relative to Switzerland in producing cars, and France
has a comparative advantage relative to the United States in producing cheese.
c. the United States has an absolute advantage relative to Switzerland in producing cars, and France
has an absolute advantage relative to the United States in producing cheese.
d. the United States has an absolute advantage relative to France in producing cheese, and Switzerland
has an absolute advantage relative to the United States in producing cars.
TOP: International trade|Comparative advantage MSC: Interpretive
29. Suppose the United States exports cars to Canada and imports bananas from Mexico. This situation suggests
a. the United States has a comparative advantage relative to Canada in producing cars, and Mexico
has a comparative advantage relative to the United States in producing bananas.
b. the United States has a comparative advantage relative to Canada in producing bananas, and
Mexico has a comparative advantage relative to the United States in producing cars.
c. the United States has an absolute advantage relative to Canada in producing cars, and Mexico has
an absolute advantage relative to the United States in producing bananas.
d. the United States has an absolute advantage relative to Mexico in producing bananas, and Canada
has an absolute advantage relative to the United States in producing cars.
TOP: International trade|Comparative advantage MSC: Interpretive
30. Assume the nation of Cropland does not trade with the rest of the world. By comparing the world price of
corn to the price of corn in Cropland, we can determine whether
a. consumer surplus exceeds producer surplus in Cropland.
b. Cropland has an absolute advantage in producing corn.
c. Cropland has a comparative advantage in producing corn.
TOP: Comparative advantage | World price MSC: Interpretive
31. By comparing the world price of horseradish to Cropland’s domestic price of horseradish, we can determine
whether Cropland
a. will export horseradish (assuming trade is allowed).
b. will import horseradish (assuming trade is allowed).
c. has a comparative advantage in producing horseradish.
TOP: Comparative advantage | World price MSC: Interpretive
32. Finland allows trade with the rest of the world. We can determine whether Finland has a comparative ad-
vantage in producing pork if we
a. know whether Finland imports or exports pork.
b. compare the world price of pork to the price of pork that would prevail in Finland if trade with the
rest of the world were not allowed.
c. compare the quantity of pork consumed in Finland with the quantity of pork that would be
consumed in Finland if trade with the rest of the world were not allowed.
TOP: Trade | Comparative advantage MSC: Applicative
33. Chile allows trade with the rest of the world. We know that Chile has a comparative advantage in producing
lemons if we know that
a. Chile imports lemons.
b. the world price of lemons is higher than the price of lemons that would prevail in Chile if trade with
other countries were not allowed.
c. consumer surplus in Chile would exceed producer surplus in Chile if trade with other countries
were not allowed.
TOP: Trade | Comparative advantage MSC: Applicative
34. The nation of Woodland forbids international trade. In Woodland, you can exchange 1 pound of chicken for 5
pounds of salt. In other countries, you can exchange 1 pound of chicken for 7 pounds of salt. These facts in-
dicate that
a. Woodland has a comparative advantage, relative to other countries, in producing chicken.
b. other countries have an absolute advantage, relative to Woodland, in producing chicken.
c. the price of chicken in Woodland exceeds the world price of chicken.
d. if Woodland were to allow trade, it would export salt.
35. The nation of Fastbrooke forbids international trade. In Fastbrooke, you can exchange 1 television for 3 com-
puters. In other countries, you can exchange 1 television for 2 computers. These facts indicate that
a. other countries have an absolute advantage, relative to Fastbrooke, in producing televisions.
b. Fastbrooke has a comparative advantage, relative to other countries, in producing televisions.
c. if Fastbrooke were to allow trade, it would import computers.
d. the world price of computers exceeds the price of computers in Fastbrooke.
THE WINNERS AND LOSERS FROM TRADE (PART I)
1. When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
a. producer surplus increases and total surplus increases in the market for that good.
b. producer surplus increases and total surplus decreases in the market for that good.
c. producer surplus decreases and total surplus increases in the market for that good.
d. producer surplus decreases and total surplus decreases in the market for that good.
TOP: International trade | Producer surplus | Total surplus MSC: Interpretive
2. When, in our analysis of the gains and losses from international trade, we assume that a country is small, we
are in effect assuming that the country
a. cannot experience significant gains or losses by trading with other countries.
b. cannot have a significant comparative advantage over other countries.
c. cannot affect world prices by trading with other countries.
TOP: Prices | International trade MSC: Interpretive
3. When, in our analysis of the gains and losses from international trade, we assume that a particular country is
small, we are
a. assuming the domestic price before trade will continue to prevail once that country is opened up to
trade with other countries.
b. assuming there is no demand for that country’s domestically-produced goods by other countries.
c. assuming international trade can benefit producers, but not consumers, in that country.
d. making an assumption that is not necessary to analyze the gains and losses from international trade.
TOP: Assumptions | International trade MSC: Interpretive
4. In analyzing international trade, we often focus on a country whose economy is small relative to the rest of the
world. We do so
a. because it is impossible to analyze the gains and losses from international trade without making this
assumption.
b. because then we can assume that world prices of goods are unaffected by that country’s
participation in international trade.
c. in order to rule out the possibility of tariffs or quotas.
TOP: Assumptions | International trade MSC: Interpretive
5. In analyzing the gains and losses from international trade, to say that Moldova is a small country is to say that
a. Moldova can only import goods; it cannot export goods.
b. Moldova’s choice of which goods to export and which goods to import is not based on the principle
of comparative advantage.
c. only the domestic price of a good is relevant for Moldova; the world price of a good is irrelevant.
d. Moldova is a price taker.
TOP: Prices | International trade MSC: Interpretive
6. When a country allows trade and becomes an exporter of a good,

a. domestic producers gain and domestic consumers lose.
b. domestic producers lose and domestic consumers gain.
c. domestic producers and domestic consumers both gain.
d. domestic producers and domestic consumers both lose.
TOP: Exports | Gains from trade MSC: Interpretive
7. Trade enhances the economic well-being of a nation in the sense that

a. both domestic producers and domestic consumers of a good become better off with trade,
regardless of whether the nation imports or exports the good in question.
b. the gains of domestic producers of a good exceed the losses of domestic consumers of a good,
regardless of whether the nation imports or exports the good in question.
c. trade results in an increase in total surplus.
d. trade puts downward pressure on the prices of all goods.
TOP: Gains from trade MSC: Interpretive
8. When a country allows trade and becomes an importer of a good,

a. both domestic producers and domestic consumers become better off.
b. domestic producers become better off, and domestic consumers become worse off.
c. domestic producers become worse off, and domestic consumers become better off.
d. both domestic producers and domestic consumers become worse off.
TOP: Imports | Gains from trade MSC: Interpretive

a. everyone in the country benefits.
b. the gains of the winners exceed the losses of the losers.
c. the losses of the losers exceed the gains of the winners.
d. everyone in the country loses.
10. When the nation of Worldova allows trade and becomes an exporter of silk,
a. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk
become better off; and the economic well-being of Worldova rises.
b. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk
become better off; and the economic well-being of Worldova falls.
c. residents of Worldova who produce silk become better off; residents of Worldova who buy silk
become worse off; and the economic well-being of Worldova rises.
d. residents of Worldova who produce silk become better off; residents of Worldova who buy silk
become worse off; and the economic well-being of Worldova falls.
TOP: Exports | Economic welfare MSC: Applicative
11. When the nation of Duxembourg allows trade and becomes an importer of software,
a. residents of Duxembourg who produce software become worse off; residents of Duxembourg who
buy software become better off; and the economic well-being of Duxembourg rises.
b. residents of Duxembourg who produce software become worse off; residents of Duxembourg who
buy software become better off; and the economic well-being of Duxembourg falls.
c. residents of Duxembourg who produce software become better off; residents of Duxembourg who
buy software become worse off; and the economic well-being of Duxembourg rises.
d. residents of Duxembourg who produce software become better off; residents of Duxembourg who
buy software become worse off; and the economic well-being of Duxembourg falls.
TOP: Imports | Economic welfare MSC: Applicative
12. When a nation first begins to trade with other countries and the nation becomes an importer of corn,
a. this is an indication that the world price of corn exceeds the nation’s domestic price of corn in the
absence of trade.
b. this is an indication that the nation has a comparative advantage in producing corn.
c. the nation’s consumers of corn become better off and the nation’s producers of corn become worse
off.
13. When a nation first begins to trade with other countries and the nation becomes an exporter of soybeans,
a. this is an indication that the world price of soybeans exceeds the nation’s domestic price of
soybeans in the absence of trade.
b. this is an indication that the nation has a comparative advantage in producing soybeans.
c. the nation’s consumers of soybeans become worse off and the nation’s producers of soybeans
become better off.
TOP: Exports | Comparative advantage | Economic welfare MSC: Applicative
14. Trade raises the economic well-being of a nation in the sense that
a. the gains of the winners exceed the losses of the losers.
b. everyone in an economy gains from trade.
c. since countries can choose what products to trade, they will pick those products that are most
beneficial to society.
d. the nation joins the international community when it begins to engage in trade.
TOP: International trade | Economic welfare MSC: Interpretive

a. the gains of the domestic producers of the good exceed the losses of the domestic consumers of the
good.
b. the gains of the domestic consumers of the good exceed the losses of the domestic producers of the
good.
c. the losses of the domestic producers of the good exceed the gains of the domestic consumers of the
good.
d. the losses of the domestic consumers of the good exceed the gains of the domestic producers of the
good.
16. When a country allows trade and becomes an importer of coal,

a. the losses of the domestic producers of coal exceed the gains of the domestic consumers of coal.
b. the losses of the domestic consumers of coal exceed the gains of the domestic producers of coal.
c. the gains of the domestic producers of coal exceed the losses of the domestic consumers of coal.
d. the gains of the domestic consumers of coal exceed the losses of the domestic producers of coal.
17. When a country allows trade and becomes an exporter of a good, which of the following is not a consequence?
a. The price paid by domestic consumers of the good increases.
b. The price received by domestic producers of the good increases.
c. The losses of domestic consumers of the good exceed the gains of domestic producers of the good.
d. The gains of domestic producers of the good exceed the losses of domestic consumers of the good.
18. When a country allows trade and becomes an importer of bottled water, which of the following is not a conse-
quence?
a. The gains of domestic consumers of bottled water exceed the losses of domestic producers of
bottled water.
b. The losses of domestic producers of bottled water exceed the gains of domestic consumers of
bottled water.
c. The price paid by domestic consumers of bottled water decreases.
d. The price received by domestic producers of bottled water decreases.

a. consumer surplus and producer surplus both increase.
b. consumer surplus and producer surplus both decrease.
c. consumer surplus increases and producer surplus decreases.
d. consumer surplus decreases and producer surplus increases.
TOP: Exports | Consumer surplus | Producer surplus MSC: Interpretive

a. consumer surplus and producer surplus both increase.
b. consumer surplus and producer surplus both decrease.
c. consumer surplus increases and producer surplus decreases.
d. consumer surplus decreases and producer surplus increases.
TOP: Imports | Consumer surplus | Producer surplus MSC: Interpretive
Figure 9-1
The figure illustrates the market for wool in Scotland.

Price
75
70
65
Domestic supply
60 A
55 World
price
50 B G
D
45 H
40 F
35 C
Domestic demand
30
25
20
15
10
5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Quantity
21. Refer to Figure 9-1. From the figure it is apparent that

a. Scotland will experience a shortage of wool if trade is not allowed.
b. Scotland will experience a surplus of wool if trade is not allowed.
c. Scotland has a comparative advantage in producing wool, relative to the rest of the world.
d. foreign countries have a comparative advantage in producing wool, relative to Scotland.

a. Scotland will export wool if trade is allowed.
b. Scotland will import wool if trade is allowed.
c. Scotland has nothing to gain either by importing or exporting wool.
d. the world price will fall if Scotland begins to allow its citizens to trade with other countries.
23. Refer to Figure 9-1. With trade, Scotland will

a. export 11 units of wool.
b. export 5 units of wool.
c. import 15 units of wool.
d. import 6 units of wool.
TOP: Exports MSC: Interpretive
24. Refer to Figure 9-1. In the absence of trade, the equilibrium price of wool in Scotland is
a. $15.
b. $45.
c. $55.
d. $70.
TOP: Equilibrium MSC: Interpretive
25. Refer to Figure 9-1. In the absence of trade, total surplus in Scotland is represented by the area
a. A + B + C.
b. A + B + C + D + F.
c. A + B + C + D + F + G.
d. A + B + C + D + F + G + H.
TOP: Total surplus MSC: Interpretive
26. Refer to Figure 9-1. When trade in wool is allowed, consumer surplus in Scotland
a. increases by the area B + D.
b. increases by the area C + F.
c. decreases by the area B + D.
d. decreases by the area D + G.
TOP: Consumer surplus MSC: Interpretive
27. Refer to Figure 9-1. When trade in wool is allowed, producer surplus in Scotland
a. increases by the area B + D.
b. increases by the area B + D + G.
c. decreases by the area C + F.
d. decreases by the area G.
TOP: Producer surplus MSC: Interpretive
28. Refer to Figure 9-1. When trade is allowed,

a. Scotland producers of wool become better off and Scotland consumers of wool become worse off.
b. Scotland consumers of wool become better off and Scotland producers of wool become worse off.
c. both Scotland producers and consumers of wool become better off.
d. both Scotland producers and consumers of wool become worse off.
TOP: Economic welfare MSC: Interpretive
29. Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in
a. Scotland consumers paying a higher price for wool.
b. a decrease in producer surplus in Scotland.
c. a decrease in total surplus in Scotland.
TOP: Price MSC: Interpretive
30. Refer to Figure 9-1. In the absence of trade, total surplus in the Scotland wool market amounts to
a. 187.5
b. 275.0
c. 378.5
d. 412.5
TOP: Total surplus MSC: Applicative
31. Refer to Figure 9-1. With trade, total surplus in the Scotland wool market amounts to
a. 312.5.
b. 367.0.
c. 467.5.
d. 495.0.
32. Which of the following statements is true?

a. Free trade benefits a country when it exports but harms it when it imports.
b. "Voluntary" limits on Canadian exports of hogs are better for the United States than U.S. tariffs
placed on Canadian hog exports.
c. Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses,
whereas quotas do not impose deadweight losses.
d. Free trade benefits a country both when it exports and when it imports.
TOP: Gains from trade MSC: Applicative
33. When a country allows international trade and becomes an exporter of a good,
a. domestic producers of the good become better off.
b. domestic consumers of the good become worse off.
c. the gains of the winners exceed the losses of the losers.
34. Suppose New Zealand goes from being an isolated country to being an exporter of wool. As a result,
a. consumer surplus increases for consumers of wool in New Zealand.
b. producer surplus increases for producers of wool in New Zealand.
c. total surplus remains unchanged in the wool market in New Zealand.
d. it is reasonable to infer that other countries have a comparative advantage over New Zealand in
wool production.
35. When a country allows international trade and becomes an importer of a good,
b. domestic consumers of the good become worse off.
c. the gains of the winners exceed the losses of the losers.
36. Assume, for the U.S., that the domestic price of tea without international trade is higher than the world price of
tea. This suggests that
a. other countries have a comparative advantage over the U.S. in producing tea.
b. the U.S. has an absolute advantage over other countries in producing tea.
c. the U.S. will export tea if international trade is allowed.
d. American tea buyers will become worse off if international trade is allowed.
TOP: Comparative advantage | Prices MSC: Applicative
37. Suppose a country begins to allow international trade in steel. Which of the following outcomes will be ob-
served regardless of whether the country finds itself importing steel or exporting steel?
a. The sum of consumer surplus and producer surplus for domestic traders of steel increases.
b. The quantity of steel demanded by domestic consumers increases.
c. Domestic producers of steel receive a higher price for steel.
d. The losses of the losers exceed the gains of the winners.
TOP: International trade | Economic welfare MSC: Applicative
38. After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with
other countries,
a. the domestic price of coffee will be greater than the world price of coffee.
b. the domestic price of coffee will be lower than the world price of coffee.
c. the domestic price of coffee will equal the world price of coffee.
d. The world price of coffee does not matter; the domestic price of coffee prevails.
TOP: International trade | Prices MSC: Interpretive
39. Within a country, the domestic price of a product will equal the world price if
a. trade restrictions are imposed on the product.
b. the country allows free trade.
c. the country chooses to import, but not export, the product.
d. the country chooses to export, but not import, the product.
40. The world price of a simple electronic calculator is $5.00. Before Zimbabwe allowed trade in calculators, the
price of a calculator there was $7.50. Once Zimbabwe began allowing trade in calculators with other countries,
Zimbabwe began
a. importing calculators and the price of a calculator in Zimbabwe decreased to $5.00.
b. importing calculators and the price of a calculator in Zimbabwe remained at $7.50.
c. exporting calculators and the price of a calculator in Zimbabwe decreased to $5.00.
d. exporting calculators and the price of a calculator in Zimbabwe remained at $7.50.
TOP: Exports | Prices MSC: Applicative
41. The world price of a pound of T-bone steak is $9.00. Before Latvia allowed trade in beef, the price of a pound
of T-bone steak there was $7.50. Once Latvia began allowing trade in beef with other countries, Latvia began
a. exporting T-bone steak and the price per pound in Latvia remained at $7.50.
b. exporting T-bone steak and the price per pound in Latvia increased to $9.00.
c. importing T-bone steak and the price per pound in Latvia remained at $7.50.
d. importing T-bone steak and the price per pound in Latvia increased to $9.00.
TOP: Exports | Prices MSC: Applicative
42. Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price
of beans increases to equal the world price of beans, then
a. that country becomes an exporter of beans.
b. that country has a comparative advantage in producing beans.
c. at the world price, the quantity of beans supplied in that country exceeds the quantity of beans
demanded in that country.
43. Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price
of pistachios decreases to equal the world price of pistachios, then
a. that country becomes an exporter of pistachios.
b. that country has a comparative advantage in producing pistachios.
c. at the world price, the quantity of pistachios demanded in that country exceeds the quantity of
pistachios supplied in that country.
TOP: Imports | Prices MSC: Applicative
Figure 9-2
44. Refer to Figure 9-2. Without trade, consumer surplus is

a. $210.
b. $245.
c. $455.
d. $490.
TOP: Consumer surplus MSC: Applicative
45. Refer to Figure 9-2. Without trade, producer surplus is

a. $210.
b. $245.
c. $455.
d. $490.
TOP: Producer surplus MSC: Applicative
46. Refer to Figure 9-2. With free trade, this country will
a. import 40 baskets.
b. import 70 baskets.
c. export 35 baskets.
d. export 65 baskets.
TOP: Exports MSC: Applicative
47. Refer to Figure 9-2. If this country chooses to trade, the price of baskets in this country will be
a. $10 and 40 baskets will be sold domestically.
b. $10 and 105 baskets will be sold domestically.
c. $7 and 70 baskets will be sold domestically.
d. $7 and 40 baskets will be sold domestically.
TOP: Price | Quantity demanded MSC: Applicative
48. Refer to Figure 9-2. With free trade, consumer surplus is

a. $45.
b. $80.
c. $210.
d. $245.
TOP: International trade | Consumer surplus MSC: Applicative
49. Refer to Figure 9-2. With free trade, producer surplus is

a. $80.00.
b. $210.00.
c. $245.50.
d. $472.50.
TOP: International trade | Producer surplus MSC: Applicative
50. Refer to Figure 9-2. As a result of trade, total surplus increases by

a. $80.
b. $97.50.
c. $162.50.
d. $495.50.
TOP: International trade | Total surplus MSC: Applicative
51. Refer to Figure 9-2. This country

a. has a comparative advantage in baskets.
b. should export baskets.
c. is a price taker in the world economy.
52. Refer to Figure 9-2. The world price for baskets represents
a. the demand for baskets from the rest of the world.
b. the supply of baskets from the rest of the world.
c. the level of inefficiency in the domestic market caused by trade.
d. the gap between domestic quantity demanded and domestic quantity supplied and the resulting
shortage.
TOP: International trade | Price MSC: Interpretive
53. Refer to Figure 9-2. At the world price and with free trade,
a. the domestic quantity of baskets demanded is greater than the domestic quantity of baskets
supplied.
b. the basket market is in equilibrium.
c. the domestic demand for baskets is perfectly inelastic.
d. both domestic producers of baskets and domestic consumers of baskets are better off than they were
without free trade.
TOP: Trade | Equilibrium MSC: Interpretive
Figure 9-3. The domestic country is China.
54. Refer to Figure 9-3. With no international trade,

a. the equilibrium price is $12 and the equilibrium quantity is 300.
b. the equilibrium price is $16 and the equilibrium quantity is 200.
c. the equilibrium price is $16 and the equilibrium quantity is 300.
d. the equilibrium price is $16 and the equilibrium quantity is 450.
TOP: Equilibrium price | Equilibrium quantity MSC: Interpretive
55. Refer to Figure 9-3. If China were to abandon a no-trade policy in favor of a free-trade policy,
a. Chinese producers of pencil sharpeners would become worse off.
b. Chinese consumers of pencil sharpeners would become better off.
c. total surplus in the Chinese economy would increase.
56. Refer to Figure 9-3. With trade, China will

a. import 100 pencil sharpeners.
b. import 250 pencil sharpeners.
c. export 150 pencil sharpeners.
d. export 250 pencil sharpeners.
57. Refer to Figure 9-3. With trade, producer surplus in China is

a. $800.
b. $1,200.
c. $1,800.
d. $2,700.
58. Refer to Figure 9-3. Relative to a no-trade situation, which of the following comes with trade?
a. Consumer surplus increases by $1,800 and producer surplus increases by $1,600.
b. Consumer surplus decreases by $1,000 and producer surplus increases by $1,500.
c. Consumer surplus decreases by $1,000 and producer surplus increases by $1,750.
d. Total surplus increases by $400.
TOP: Consumer surplus | Producer surplus MSC: Applicative
59. Refer to Figure 9-3. The increase in total surplus in China when trade is allowed is
a. $400.
b. $500.
c. $600.
d. $750.
Figure 9-4. The domestic country is Nicaragua.
60. Refer to Figure 9-4. With trade, Nicaragua

a. imports 150 calculators.
b. imports 250 calculators.
c. exports 100 calculators.
d. exports 250 calculators.
TOP: Imports MSC: Applicative
61. Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

a. $375.
b. $2,000.
c. $2,250.
d. $8,700.
62. Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is
a. $625, and this is an increase in total surplus.
b. $750, and this is an increase in total surplus.
c. $625, and this is a decrease in total surplus.
d. $750, and this is a decrease in total surplus.
63. Refer to Figure 9-4. Which of the following statements is accurate?

a. Consumer surplus with trade is $3,200.
b. Producer surplus with trade is $375.
c. The gains from trade amount to $800.
d. The gains from trade are represented on the graph by the area bounded by the points (0, $12), (300,
$12), (300, $7) and (0, $7).
Scenario 9-1
The before-trade domestic price of peaches in the United States is $40 per bushel. The world price of peaches
is $52 per bushel. The U.S. is a price-taker in the market for peaches.
64. Refer to Scenario 9-1. If trade in peaches is allowed, the United States
a. will become an importer of peaches.
b. will become an exporter of peaches.
c. may become either an importer or an exporter of peaches, but this cannot be determined.
d. will experience increases in both consumer surplus and producer surplus.
65. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States
a. will increase, and this will cause consumer surplus to decrease.
b. will decrease, and this will cause consumer surplus to increase.
c. will be unaffected, and consumer surplus will be unaffected as well.
d. could increase or decrease or be unaffected; this cannot be determined.
TOP: International trade | Prices | Consumer surplus MSC: Applicative
66. Refer to Scenario 9-1. If trade in peaches is allowed, the price of peaches in the United States
a. will be greater than the world price.
b. will be equal to the world price.
c. will be less than the world price.
d. could be greater than, equal to, or less than the world price; this cannot be determined.
67. Refer to Scenario 9-1. If trade in peaches is allowed, U.S. producers of peaches
a. will be better off.
b. will be worse off.
c. will be unaffected.
d. will experience a decrease in their collective producer surplus.
TOP: Producer surplus MSC: Interpretive
68. Refer to Scenario 9-1. If trade in peaches is allowed, the

a. price paid by American consumers of peaches is unchanged relative to the no-trade situation.
b. total well-being of American producers of peaches is diminished relative to the no-trade situation.
c. total well-being of American consumers of peaches is enhanced relative to the no-trade situation.
d. total well-being of the United States is enhanced relative to the no-trade situation.
Figure 9-5
69. Refer to Figure 9-5. The horizontal line at the world price of wagons represents the
a. demand for wagons from the rest of the world.
b. supply of wagons from the rest of the world.
c. level of inefficiency in the domestic market caused by trade.
d. surplus in the domestic wagon market.
70. Refer to Figure 9-5. With trade, this country

a. exports 20 wagons.
b. exports 50 wagons.
c. imports 30 wagons.
d. imports 50 wagons.
71. Refer to Figure 9-5. Without trade, consumer surplus amounts to

a. $210.50.
b. $245.50.
c. $367.50.
d. $607.50.
72. Refer to Figure 9-5. Without trade, producer surplus amounts to

a. $210.
b. $245.
c. $450.
d. $455.
73. Refer to Figure 9-5. Without trade, total surplus amounts to

a. $122.50.
b. $245.
c. $367.50.
d. $612.50.
74. Refer to Figure 9-5. With trade, the price of wagons in this country is
a. $8, with 70 wagons produced in this country, 20 of which are exported.
b. $8, with 90 wagons produced in this country, 50 of which are exported.
c. $5, with 40 wagons produced in this country and another 30 wagons imported.
d. $5, with 40 wagons produced in this country and another 50 wagons imported.
75. Refer to Figure 9-5. With trade, consumer surplus is

a. $245.
b. $362.50.
c. $367.50.
d. $607.50.
76. Refer to Figure 9-5. With trade, producer surplus is

a. $80.
b. $150.
c. $210.
d. $245.
77. Refer to Figure 9-5. With trade, total surplus is

a. $245.
b. $367.50.
c. $607.50.
d. $687.50.
78. Refer to Figure 9-5. Total surplus with trade exceeds total surplus without trade by
a. $60.
b. $75.
c. $135.
d. $210.
79. Refer to Figure 9-5. The increase in total surplus resulting from trade is
a. $60, since producer surplus increases by $180 and consumer surplus falls by $240.
b. $60, since consumer surplus increases by $180 and producer surplus falls by $240.
c. $75, since consumer surplus increases by $240 and producer surplus falls by $165.
d. $75, since consumer surplus increases by $300 and producer surplus falls by $225.
80. Refer to Figure 9-5. If this country allows free trade in wagons,
a. consumers will gain and producers will lose.
b. consumers will lose and producers will gain.
c. both consumers and producers will gain.
d. both consumers and producers will lose.
81. Refer to Figure 9-5. If this country allows free trade in wagons,
a. consumers will gain more than producers will lose.
b. producers will gain more than consumers will lose.
c. producers and consumers will both gain equally.
d. producers and consumers will both lose equally.
82. Refer to Figure 9-5. Bearing in mind that this country is “small,” which of the following events conceivably
could cause the country to switch from being an importer of wagons to an exporter of wagons?
a. Incomes of domestic citizens increase, and wagons are a normal good.
b. Within this country, the price of a substitute for wagons decreases.
c. Within this country, the price of a complement to wagons decreases.
d. Wages increase for domestic workers who produce wagons.
TOP: Substitutes | Imports | Exports MSC: Analytical
83. Refer to Figure 9-5. Bearing in mind that this country is “small,” what would happen if there were a decrease
in the price of horses within this country, given that wagons and horses are complements?
a. The quantity of wagons that this country imports would increase.
b. The quantity of wagons that this country imports would decrease, but the country would still be an
importer of wagons.
c. This country would switch from being an importer of wagons to an exporter of wagons.
d. The domestic price without trade would move closer to the world price.
TOP: Complements | Imports MSC: Analytical
Figure 9-6
84. Refer to Figure 9-6. Without trade, the equilibrium price of carnations is
a. $8 and the equilibrium quantity is 300.
b. $6 and the equilibrium quantity is 200.
c. $6 and the equilibrium quantity is 400.
d. $4 and the equilibrium quantity is 500.
85. Refer to Figure 9-6. With trade and without a tariff,

a. the domestic price is equal to the world price.
b. carnations are sold at $8 in this market.
c. there is a shortage of 400 carnations in this market.
d. this country imports 200 carnations.
86. Refer to Figure 9-6. Before the tariff is imposed, this country
a. imports 200 carnations.
b. imports 400 carnations.
c. exports 200 carnations.
d. exports 400 carnations.
87. Refer to Figure 9-6. The size of the tariff on carnations is

a. $8 per dozen.
b. $6 per dozen.
c. $4 per dozen.
d. $2 per dozen.
TOP: Tariffs MSC: Interpretive
88. Refer to Figure 9-6. The imposition of a tariff on carnations

a. increases the number of carnations imported by 100.
b. increases the number of carnations imported by 200.
c. decreases the number of carnations imported by 200.
d. decreases the number of carnations imported by 400.
TOP: Tariffs | Imports MSC: Applicative
89. Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is
a. $200.
b. $400.
c. $500.
d. $600.
TOP: Tariffs | Government MSC: Applicative
90. Refer to Figure 9-6. When a tariff is imposed in the market, domestic producers
a. gain by $100.
b. gain by $200.
c. gain by $300.
d. lose by $100.
TOP: Tariffs | Producer surplus MSC: Applicative
91. Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals
a. $100.
b. $200.
c. $400.
d. $500.
TOP: Tariffs | Deadweight loss MSC: Applicative
92. Refer to Figure 9-6. When the tariff is imposed, domestic consumers
a. lose by $500.
b. lose by $900.
c. gain by $500.
d. gain by $900.
TOP: Tariffs | Consumer surplus MSC: Applicative
93. The before-trade price of fish in Germany is $8.00 per pound. The world price of fish is $6.00 per pound.
Germany is a price-taker in the fish market. If Germany allows trade in fish, then Germany will become an
a. importer of fish and the price of fish in Germany will be $6.00.
b. importer of fish and the price of fish in Germany will be $8.00.
c. exporter of fish and the price of fish in Germany will be $6.00.
d. exporter of fish and the price of fish in Germany will be $8.00.
94. The before-trade price of fish in Denmark is $10.00 per pound. The world price of fish is $6.00 per pound.
Denmark is a price-taker in the fish market. If Denmark begins to allow trade in fish, its consumers of fish will
become
a. better off, its producers of fish will become better off, and on balance the citizens of Denmark will
become better off.
b. worse off, its producers of fish will become better off, and on balance the citizens of Denmark will
become worse off.
c. worse off, its producers of fish will become better off, and on balance the citizens of Denmark will
become worse off.
d. better off, its producers of fish will become worse off, and on balance the citizens of Denmark will
become better off.
TOP: Imports | Prices | Economic welfare MSC: Applicative
Figure 9-7. The figure applies to the nation of Wales and the good is cheese.
95. Refer to Figure 9-7. The equilibrium price and the equilibrium quantity of cheese in Wales before trade are
a. P1 and Q2.
b. P1 and Q1.
c. P0 and Q0.
d. P0 and Q1.
96. Refer to Figure 9-7. With trade, the Welsh price of cheese and the Welsh quantity of cheese demanded are
a. P1 and Q2.
b. P1 and Q1.
c. P0 and Q0.
d. P3 and Q1.
TOP: International trade | Equilibrium MSC: Interpretive
97. Refer to Figure 9-7. With trade, Wales

a. imports Q2 - Q1 units of cheese.
b. exports Q2 - Q1 units of cheese.
c. imports Q2 - Q0 units of cheese.
d. exports Q2 - Q0 units of cheese.
98. Refer to Figure 9-7. Which of the following is a valid equation for Welsh consumer surplus with trade?
a. Consumer surplus with trade = (1/2)(Q0)(P1 - P0).
b. Consumer surplus with trade = (1/2)(Q0)(P3 - P0).
c. Consumer surplus with trade = (1/2)(Q1)(P3 - P1).
d. None of the above is correct.
TOP: International trade | Consumer surplus MSC: Analytical
99. Refer to Figure 9-7. Which of the following is a valid equation for Welsh producer surplus with trade?
a. Producer surplus with trade = (1/2)P0Q0.
b. Producer surplus with trade = (1/2)P1Q1.
c. Producer surplus with trade = (1/2)P1Q2.
TOP: International trade | Producer surplus MSC: Analytical
100. Refer to Figure 9-7. Which of the following is a valid equation for the gains from trade?
a. Gains from trade = (1/2)(P1 - P0)(Q2 - Q1).
b. Gains from trade = (1/2)(P1 - P0)(Q2 - Q0)
c. Gains from trade = (1/2)(P1 - P0)(Q1 + Q2).
d. Gains from trade = (1/2)(Q1)(P3 - P1).
TOP: Gains from trade MSC: Analytical
Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars.
101. Refer to Figure 9-8. The price corresponding to the horizontal dotted line on the graph represents the price of
cars
a. after trade is allowed.
b. before trade is allowed.
c. that maximizes total surplus when trade is allowed.
d. that minimizes the well-being of domestic car producers when trade is allowed.
TOP: Prices MSC: Interpretive
102. Refer to Figure 9-8. The country for which the figure is drawn
a. has a comparative advantage relative to other countries in the production of cars and it will export
cars.
b. has a comparative advantage relative to other countries in the production of cars and it will import
cars.
c. has a comparative disadvantage relative to other countries in the production of cars and it will
export cars.
d. has a comparative disadvantage relative to other countries in the production of cars and it will
import cars.
TOP: Comparative advantage | Imports MSC: Applicative
103. Refer to Figure 9-8. When the country for which the figure is drawn allows international trade in cars,
a. consumer surplus increases by the area B.
b. producer surplus decreases by the area B + D.
c. total surplus increases by the area D.
104. Refer to Figure 9-8. In the country for which the figure is drawn, total surplus with international trade in cars
a. is represented by the area A + B + C.
b. is represented by the area A + B + D.
c. is smaller than producer surplus without international trade in cars.
d. is larger than total surplus without international trade in cars.
Figure 9-9
105. Refer to Figure 9-9. Consumer surplus in this market before trade is
a. A.
b. A + B.
c. A + B + D.
d. C.
106. Refer to Figure 9-9. Consumer surplus in this market after trade is
a. A.
b. A + B.
c. A + B + D.
d. C.
107. Refer to Figure 9-9. Producer surplus in this market before trade is
a. A.
b. A + B.
c. B + C + D.
d. C.
108. Refer to Figure 9-9. Producer surplus in this market after trade is
a. A.
b. A + B.
c. B + C + D.
d. C.
109. Refer to Figure 9-9. Total surplus in this market before trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
110. Refer to Figure 9-9. Total surplus in this market after trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
111. Refer to Figure 9-9. The change in total surplus in this market because of trade is
a. D, and this area represents a loss of total surplus because of trade.
b. D, and this area represents a gain in total surplus because of trade.
c. B + D, and this area represents a loss of total surplus because of trade.
d. B + D, and this area represents a gain in total surplus because of trade.
Figure 9-10. The figure applies to Mexico and the good is rifles.
112. Refer to Figure 9-10. The price and quantity of rifles in Mexico before trade is
a. P0 and Q0.
b. P1 and Q1.
c. P2 and Q2.
d. P1 and Q0.
113. Refer to Figure 9-10. With trade, the equilibrium price of rifles and the equilibrium quantity of rifles de-
manded in Mexico are
a. P1 and Q1.
b. P1 and Q2.
c. P2 and Q2.
d. P0 and Q0.
TOP: International trade | Equilibrium price | Equilibrium quantity
MSC: Interpretive
114. Refer to Figure 9-10. When trade takes place, the quantity Q2 - Q1 is
a. the number of rifles bought and sold in Mexico.
b. the number of rifles produced in Mexico.
c. the number of rifles exported by Mexico.
d. the number of rifles imported by Mexico.
115. Refer to Figure 9-10. Mexico’s gains from trade are represented by the area that is bounded by the points
a. (0, P0), (Q0, P0), (Q2, P1), and (0, P1).
b. (0, P1), (0, P2), (Q0, P0), and (Q1, P1).
c. (Q0, P0), (Q2, P1), and (Q1, P1).
d. (0, P0), (0, P2), and (Q0, P0).
116. Refer to Figure 9-10. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents
a. Mexico’s gains from trade.
b. the amount by which Mexico’s gain in consumer surplus exceeds its loss in producer surplus due to
trade.
c. Mexico’s gain in total surplus due to trade.
117. Refer to Figure 9-10. The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents
a. Mexico’s gains from trade.
b. the amount by which Mexico’s gain in producer surplus exceeds its loss in consumer surplus due to
trade.
c. Mexico’s loss in total surplus due to trade.
Figure 9-11
118. Refer to Figure 9-11. Consumer surplus in this market before trade is
a. A.
b. B + C.
c. A + B + D.
d. C.
119. Refer to Figure 9-11. Consumer surplus in this market after trade is
a. A.
b. C + B.
c. A + B + D.
d. B + C + D.
120. Refer to Figure 9-11. Producer surplus in this market before trade is
a. C.
b. B + C.
c. A + B + D.
d. B + C + D.
121. Refer to Figure 9-11. Producer surplus in this market after trade is
a. C.
b. C + B.
c. A + B + D.
d. B + C + D.
122. Refer to Figure 9-11. Producer surplus plus consumer surplus in this market before trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
123. Refer to Figure 9-11. Producer surplus plus consumer surplus in this market after trade is
a. A + B.
b. A + B + C.
c. B + C + D.
d. A + B + C + D.
124. Refer to Figure 9-11. The change in total surplus in this market because of trade is
a. A, and this area represents a loss of total surplus.
b. B, and this area represents a gain in total surplus.
c. C, and this area represents a loss of total surplus.
d. D, and this area represents a gain in total surplus.
Figure 9-12
Price
42
39 Domestic Supply
36
33
30
27 World Price
24
21
18
15
12
9
6
3 Domestic Demand
200 400 600 800 1000 1200 1400 Quantity
125. Refer to Figure 9-12. Equilibrium price and equilibrium quantity without trade are
a. $27 and 400.
b. $27 and 800.
c. $21 and 400.
d. $21 and 600.
126. Refer to Figure 9-12. With trade, the domestic price and domestic quantity demanded are
a. $27 and 400.
b. $27 and 800.
c. $21 and 400.
d. $21 and 600.
TOP: International trade | Equilibrium MSC: Interpretive
127. Refer to Figure 9-12. With trade, domestic production and domestic consumption, respectively, are
a. 600 and 400.
b. 800 and 400.
c. 400 and 600.
d. 400 and 800.
TOP: International trade | Equilibrium quantity MSC: Applicative
128. Refer to Figure 9-12. Consumer surplus before trade is

a. $3,600.
b. $4,200.
c. $5,400.
d. $6,000.
129. Refer to Figure 9-12. Consumer surplus after trade is

a. $1,600.
b. $2,400.
c. $3,200.
d. $3,600.
130. Refer to Figure 9-12. Producer surplus before trade is

a. $3,600.
b. $4,600.
c. $5,400.
d. $6,250.
131. Refer to Figure 9-12. Producer surplus after trade is

a. $7,000.
b. $7,500.
c. $8,800.
d. $9,600.
132. Refer to Figure 9-12. With trade allowed, this country

a. exports 200 units of the good.
b. exports 400 units of the good.
c. imports 200 units of the good.
d. exports 800 units of the good.
Figure 9-13
133. Refer to Figure 9-13. The price and domestic quantity demanded after trade are
a. $8 and 300.
b. $8 and 900.
c. $14 and 900.
d. $14 and 600.
TOP: International trade | Equilibrium price | Equilibrium quantity
MSC: Applicative
134. Refer to Figure 9-13. With trade, domestic production and domestic consumption, respectively, are
a. 600 and 600.
b. 600 and 300.
c. 300 and 900.
d. 600 and 900.
TOP: Trade | Equilibrium MSC: Applicative
135. Refer to Figure 9-13. Consumer surplus before trade is

a. $1,600.
b. $2,400.
c. $3,200.
d. $3,600.
136. Refer to Figure 9-13. Consumer surplus after trade is

a. $3,600.
b. $5,400.
c. $7,200.
d. $8,100.
137. Refer to Figure 9-13. Producer surplus before trade is

a. $3,600.
b. $4,400.
c. $5,200.
d. $6,600.
138. Refer to Figure 9-13. With trade, producer surplus is

a. $900.
b. $1,100.
c. $1,500.
d. $2,000.
139. Refer to Figure 9-13. With trade, the country

a. exports 200 units of the good.
b. exports 400 units of the good.
c. imports 400 units of the good.
d. imports 600 units of the good.
Figure 9-14. On the diagram below, Q represents the quantity of crude oil and P represents the price of crude oil.
140. Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,
a. consumer surplus for domestic crude-oil consumers decreases.
b. the demand for crude oil by domestic crude-oil consumers decreases.
c. the losses of the domestic losers outweigh the gains of the domestic winners.
d. domestic crude-oil producers sell less crude oil.
141. Refer to Figure 9-14. When the country for which the figure is drawn allows international trade in crude oil,
a. consumer surplus changes from the area A + B + D to the area A.
b. producer surplus changes from the area C to the area B + C + D.
c. total surplus decreases by the area D.
142. Refer to Figure 9-14. The country for which the figure is drawn
a. has a comparative advantage relative to other countries in the production of crude oil and it will
export crude oil.
b. has a comparative advantage relative to other countries in the production of crude oil and it will
import crude oil.
c. has a comparative disadvantage relative to other countries in the production of crude oil and it will
export crude oil.
d. has a comparative disadvantage relative to other countries in the production of crude oil and it will
import crude oil.
TOP: Comparative advantage | Exports MSC: Applicative
143. Refer to Figure 9-14. A result of this country allowing international trade in crude oil is as follows:
a. The well-being of domestic crude-oil producers is now higher in that they now sell more crude oil
at a higher price per barrel.
b. The effect on the well-being of domestic crude-oil consumers is unclear in that they now buy more
crude oil, but at a higher price per barrel.
c. The effect on the well-being of the country is unclear in that domestic producer surplus increases,
while the effect on domestic consumer surplus is unclear.
144. A tariff on a product makes

a. domestic sellers better off and domestic buyers worse off.
b. domestic sellers worse off and domestic buyers worse off.
c. domestic sellers better off and domestic buyers better off.
d. domestic sellers worse off and domestic buyers better off.
TOP: Tariffs | Economic welfare MSC: Interpretive
145. A tariff on a product

a. is a direct quantitative restriction on the amount of a good that can be imported.
b. increases the domestic quantity supplied.
c. increases domestic consumer surplus.
146. A tariff on a product

a. enhances the economic well-being of the domestic economy.
b. increases the domestic quantity supplied.
c. increases the domestic quantity demanded.
d. results in an increase in producer surplus that is greater than the resulting decrease in consumer
surplus.
147. If the United States imports televisions and the U.S. government imposes a tariff on televisions, then
a. total surplus in the American television market decreases.
b. producer surplus in the American television market increases.
c. U.S. imports of foreign televisions decrease.
148. When a country that imports a particular good imposes a tariff on that good,
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.
TOP: Tariffs | Consumer surplus | Total surplus MSC: Interpretive
149. When a country that imports a particular good imposes a tariff on that good,
TOP: Tariffs | Producer surplus | Total surplus MSC: Interpretive
150. When a country that imports a particular good imposes an import quota on that good,
TOP: Import quotas | Consumer surplus | Total surplus MSC: Interpretive
151. When a country that imports a particular good imposes an import quota on that good,
TOP: Import quotas | Producer surplus | Total surplus MSC: Interpretive
152. A tariff is a tax placed on

a. an exported good and it lowers the domestic price of the good below the world price.
b. an exported good and it ensures that the domestic price of the good stays the same as the world
price.
c. an imported good and it lowers the domestic price of the good below the world price.
d. an imported good and it raises the domestic price of the good above the world price.
TOP: Tariffs | Prices MSC: Interpretive
153. A tariff
a. lowers the domestic price of the exported good below the world price.
b. keeps the domestic price of the exported good the same as the world price.
c. raises the domestic price of the imported good above the world price.
d. lowers the domestic price of the imported good below the world price.
154. When a country moves away from a free trade position and imposes a tariff on imports, it causes
a. a decrease in total surplus in the market.
b. a decrease in producer surplus in the market.
c. an increase in consumer surplus in the market.
d. a decrease in revenue to the government.
155. If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results
from a tariff is represented on the supply-and-demand graph by
a. the area of one triangle.
b. the area of one rectangle.
c. the combined areas of two different triangles.
d. the combined areas of two different rectangles.
TOP: Tariffs | Deadweight loss MSC: Interpretive
156. Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case that
a. Iran is an exporter of lumber.
b. the domestic quantity of lumber supplied exceeds the domestic quantity of lumber demanded at the
world price without the tariff.
c. the world price without the tariff is less than the price of lumber without trade.
d. the world price without the tariff is greater than the price of lumber without trade.
157. Spain is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Spain impos-
es a $5 tariff on chips. As a result,
a. Spanish consumers of chips and Spanish producers of chips both gain.
b. Spanish consumers of chips gain and Spanish producers of chips lose.
c. Spanish consumers of chips lose and Spanish producers of chips gain.
d. Spanish consumers of chips and Spanish producers of chips both lose.
158. Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark
imposes a $5 tariff on chips. Which of the following outcomes is possible?
a. More Danish-produced chips are sold in Denmark.
b. More foreign-produced chips are sold in Denmark.
c. Danish consumers of chips become better off.
d. Total surplus in the Danish chip market increases.
TOP: Tariffs MSC: Applicative
159. Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Chile impos-
es a $7 tariff on chips. Which of the following outcomes is possible?
a. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips decreases; and
the quantity of chips imported by Chile decreases.
b. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and
c. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips increases; and
d. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and
the quantity of chips imported by Chile does not change.
TOP: Tariffs | Prices MSC: Analytical
160. Honduras is an importer of goose-down pillows. The world price of these pillows is $50. Honduras imposes a
$7 tariff on pillows. Honduras is a price-taker in the pillow market. As a result of the tariff, the price of goose-
down pillows in Honduras
a. remains at $50 and the quantity of goose-down pillows purchased in Honduras decreases.
b. increases to $57 and the quantity of goose-down pillows purchased in Honduras decreases.
c. increases to a new price between $50 and $57 and the quantity of goose-down pillows purchased in
Honduras decreases.
d. increases to a new price above $57 and the quantity of goose-down pillows purchased in Honduras
remains the same.
TOP: Tariffs | Equilibrium MSC: Applicative
161. Turkey is an importer of wheat. The world price of a bushel of wheat is $7. Turkey imposes a $3-per-bushel
tariff on wheat. Turkey is a price-taker in the wheat market. As a result of the tariff,
a. Turkish consumers of wheat become worse off and Turkish producers of wheat become worse off.
b. Turkish consumers of wheat become worse off and Turkish producers of wheat become better off.
c. Turkish consumers of wheat become better off and Turkish producers of wheat become worse off.
d. Turkish consumers of wheat become better off and Turkish producers of wheat become better off.
162. When the nation of Brownland first permitted trade with other nations, domestic producers of wheat experi-
enced an increase in producer surplus of $4 million and total surplus in Brownland’s wheat market increased
by $1 million. We can conclude that
a. Brownland became an exporter of wheat.
b. consumer surplus in Brownland increased by $3 million.
c. the opening of trade caused the domestic supply curve for wheat in Brownland to shift to the left.
d. this example is inconsistent with the economic theory of international trade.
TOP: Exports | Gains from trade MSC: Applicative
163. When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experi-
enced a decrease in producer surplus of $5 million and total surplus in Mooseland’s sugar market increased by
$2 million. We can conclude that
a. Mooseland became an exporter of sugar.
b. the overall economic well-being of participants in the sugar market in Mooseland fell because of
trade.
c. consumer surplus in Mooseland increased by $7 million.
d. the opening of trade caused the domestic demand curve for sugar in Mooseland to shift to the right.
TOP: Imports | Gains from trade MSC: Applicative
Figure 9-15
164. Refer to Figure 9-15. With trade and without a tariff, the price and domestic quantity demanded are
a. P1 and Q1.
b. P1 and Q4.
c. P2 and Q2.
d. P2 and Q3.
TOP: Trade | Equilibrium MSC: Interpretive
165. Refer to Figure 9-15. With the tariff, the domestic price and domestic quantity demanded are
a. P1 and Q1.
b. P1 and Q4.
c. P2 and Q2.
d. P2 and Q3.
TOP: Tariffs | Equilibrium MSC: Applicative
166. Refer to Figure 9-15. With the tariff, the quantity of saddles imported is
a. Q3 - Q1.
b. Q3 - Q2.
c. Q4 - Q1.
d. Q4 - Q2.
167. Refer to Figure 9-15. A result of the tariff is that, relative to the free-trade situation, the quantity of saddles
imported decreases by
a. Q2 - Q1.
b. Q3 - Q2.
c. Q4 - Q3.
d. Q4 - Q3 + Q2 - Q1.
168. Refer to Figure 9-15. Consumer surplus with trade and without a tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D + E + F.
169. Refer to Figure 9-15. Producer surplus with trade and without a tariff is
a. G.
b. C + G.
c. A + C + G.
d. A + B + C + G.
170. Refer to Figure 9-15. Consumer surplus with the tariff is

a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D +E + F.
TOP: Tariffs | Consumer surplus MSC: Applicative
171. Refer to Figure 9-15. Producer surplus with the tariff is

a. G.
b. C + G.
c. A + C + G.
d. A + B + C + G.
TOP: Tariffs | Producer surplus MSC: Applicative
172. Refer to Figure 9-15. The amount of government revenue created by the tariff is
a. B.
b. E.
c. D + F.
d. B + D + E + F.
173. Refer to Figure 9-15. As a result of the tariff, there is a deadweight loss that amounts to
a. B.
b. E.
c. D + F.
d. B + D + E + F.
174. Refer to Figure 9-15. For the saddle market, area B represents
a. government’s revenue from the tariff.
b. the deadweight loss of the tariff.
c. the increase in producer surplus, relative to the free-trade situation, as a result of the tariff.
TOP: International trade | TariffsMSC: Applicative
175. Refer to Figure 9-15. For the saddle market, area E represents
a. government’s revenue from the tariff.
b. producer surplus after the tariff becomes effective.
c. the decrease in consumer surplus, relative to the free-trade situation, as a result of the tariff.
d. the decrease in total surplus, relative to the free-trade situation, as a result of the tariff.
Figure 9-16. The figure below illustrates a tariff. On the graph, Q represents quantity and P represents price.
176. Refer to Figure 9-16. Government revenue raised by the tariff is represented by the area
a. E.
b. B + E.
c. D + E + F.
d. B + D + E + F.
177. Refer to Figure 9-16. The tariff

a. decreases producer surplus by the area C and decreases consumer surplus by the area C + D + E +
F.
b. decreases producer surplus by the area C + D and decreases consumer surplus by the area D + E +
F.
c. increases producer surplus by the area C and decreases consumer surplus by the area C + D + E +
F.
d. increases producer surplus by the area B + C and decrease consumer surplus by the area D + E + F.
TOP: Tariffs | Economic welfare MSC: Applicative
178. Refer to Figure 9-16. The tariff

a. decreases producer surplus by the area C, decreases consumer surplus by the area C + D + E, and
decreases total surplus by the area D + F.
b. increases producer surplus by the area C, decreases consumer surplus by the area C + D + E + F,
and decreases total surplus by the area D + F.
c. creates government revenue represented by the area B + E and decreases total surplus by the area D
+ E + F.
d. increases producer surplus by the area C + G and creates government revenue represented by the
area D + E + F.
179. Refer to Figure 9-16. The deadweight loss created by the tariff is represented by the area
a. B.
b. D + F.
c. D + E + F.
d. B + D + E + F.
180. Refer to Figure 9-16. The area C + D + E + F represents

a. the decrease in consumer surplus caused by the tariff.
b. the decrease in total surplus caused by the tariff.
c. the deadweight loss of the tariff minus government revenue raised by the tariff.
d. the deadweight loss of the tariff plus government revenue raised by the tariff.
181. A quota is
a. a tax placed on imports.
b. a limit on the quantity of imports.
c. a tax on exports to other countries.
d. an excess of exports over imports.
TOP: Import quotas MSC: Definitional
182. Both tariffs and import quotas

a. increase the quantity of imports and raise the domestic price of the good.
b. increase the quantity of imports and lower the domestic price of the good.
c. decrease the quantity of imports and raise the domestic price of the good.
d. decrease the quantity of imports and lower the domestic price of the good.
TOP: Tariffs | Import quotas MSC: Interpretive
183. A major difference between tariffs and import quotas is that

a. tariffs create deadweight losses, but import quotas do not.
b. tariffs help domestic consumers, and import quotas help domestic producers.
c. tariffs raise revenue for the government, but import quotas create surplus for those who get the
licenses to import.
184. Tariffs and quotas are different in the sense that

a. tariffs cause deadweight losses, while quotas do not cause deadweight losses.
b. tariffs raise revenue for the government, while quotas do not raise revenue for the government.
c. tariffs enhance the well-being of domestic consumers, while quotas diminish the well-being of
domestic consumers.
d. tariffs enhance the well-being of domestic producers, while quotas diminish the well-being of
domestic producers.
185. Import quotas and tariffs produce similar results. Which of the following is not one of those results?
a. The domestic price of the good increases.
b. Consumer surplus of domestic consumers increases.
c. Producer surplus of domestic producers increases.
d. A deadweight loss is experienced by the domestic country.
186. Import quotas and tariffs produce some common results. Which of the following is not one of those common
results?
a. Total surplus in the domestic country falls.
b. Producer surplus in the domestic country increases.
c. The domestic country experiences a deadweight loss.
d. Revenue is raised for the domestic government.
187. An import quota

a. is preferable to a tariff since an import quota does not create a deadweight loss.
b. is a tax on imported goods.
c. reduces the welfare of domestic consumers.
d. reduces the welfare of domestic producers.
TOP: Import quotas MSC: Interpretive
188. The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its
trade restrictions, it discovers that it is importing incense, exporting steel, and neither importing nor exporting
rugs. We can conclude that Aquilonia’s new free-trade policy has
a. increased consumer surplus and producer surplus in the incense market.
b. increased consumer surplus in the steel market and left producer surplus in the rug market
unchanged.
c. decreased consumer surplus in both the steel and rug markets.
d. decreased consumer surplus in the steel market and increased total surplus in the incense market.
189. The nation of Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its
trade restrictions, it discovers that it is importing rice, exporting steel, and neither importing nor exporting
TVs. We can conclude that producer surplus in Aquilonia is now
a. higher in the steel market, lower in the rice market, and unchanged in the TV market.
b. higher in the rice and steel markets, and unchanged in the TV market.
c. lower in the rice and TV markets, and higher in the steel market.
d. lower in the rice and steel markets, and the same in the TV market.
190. Zelzar has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions,
it discovers that it is importing incense, exporting steel, and neither importing nor exporting rugs. Which
groups in Zelzar are better off as a result of the new free-trade policy?
a. producers of incense and consumers of steel
b. consumers of all three goods
c. consumers of incense and producers of rugs
d. producers of steel and consumers of incense
191. The United States has imposed taxes on some imported goods that have been sold here by foreign countries at
below their cost of production. These taxes
a. benefit the United States as a whole, because they generate revenue for the government. In addition,
because the goods are priced below cost, the taxes do not harm domestic consumers.
b. benefit the United States as a whole, because they generate revenue for the government and
increase producer surplus.
c. harm the United States as a whole, because they reduce consumer surplus by an amount that
exceeds the gain in producer surplus and government revenue.
d. harm the United States as a whole, because they reduce producer surplus by an amount that exceeds
the gain in consumer surplus and government revenue.
192. Some goods can be produced at low cost only if they are produced in large quantities. This phenomenon is
called
a. marginal cost of production.
b. marginal benefit of size.
c. economies of scale.
d. economies of production.
TOP: Economies of scale MSC: Definitional
193. Relative to a situation in which domestic firms do not compete with foreign firms, firms in countries that en-
gage in free trade
a. can realize economies of scale more fully.
b. have greater market power.
c. experience larger producer surplus.
TOP: Economies of scale | International trade MSC: Interpretive
Figure 9-17
Price
76 Domestic Supply
72
68
64
60
56
52
48
44
40
36
32
28 World price + tariff

24
20 World Price
16 Domestic Demand
12
4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100 Quantity
194. Refer to Figure 9-17. Without trade, consumer surplus is

a. $400 and producer surplus is $200.
b. $400 and producer surplus is $800.
c. $1,600 and producer surplus is $200.
d. $1,600 and producer surplus is $800.
TOP: Consumer surplus | Producer surplus MSC: Applicative
195. Refer to Figure 9-17. With free trade, consumer surplus is

TOP: International trade | Consumer surplus | Producer surplus MSC: Applicative
196. Refer to Figure 9-17. With trade and a tariff, consumer surplus is
TOP: Tariffs | Consumer surplus | Producer surplus MSC: Applicative
197. Refer to Figure 9-17. Without trade, total surplus is

a. $600.
b. $1,200.
c. $1,800.
d. $2,250.
198. Refer to Figure 9-17. With free trade, total surplus is

a. $600.
b. $1,200.
c. $1,800.
d. $2,400.
199. Refer to Figure 9-17. With trade and a tariff, total surplus is
a. $1,224.
b. $1,416.
c. $1,512.
d. $1,704.
TOP: Tariffs | Total surplus MSC: Applicative
200. Refer to Figure 9-17. With free trade, the country imports
a. 16 units of the good.
b. 24 units of the good.
c. 60 units of the good.
d. 64 units of the good.
201. Refer to Figure 9-17. Relative to the free-trade outcome, the imposition of the tariff
a. decreases imports of the good by 16 units and increases domestic production of the good by 8 units.
b. decreases imports of the good by 16 units and increases domestic production of the good by 16
units.
c. decreases imports of the good by 24 units and increases domestic production of the good by 8 units.
d. decreases imports of the good by 24 units and increases domestic production of the good by 24
units.
202. Refer to Figure 9-17. The amount of revenue collected by the government from the tariff is
a. $32.
b. $288.
c. $368.
d. $720.
203. Refer to Figure 9-17. The deadweight loss caused by the tariff is
a. $24.
b. $72.
c. $96.
d. $144.
204. Refer to Figure 9-17. When comparing no trade to free trade, the gains from trade amount to
a. $400.
b. $600.
c. $750.
d. $1,000.
205. Refer to Figure 9-17. When the country moves from no trade to free trade, consumer surplus
a. increases by $1,200 and producer surplus increases by $600.
b. increases by $1,200 and producer surplus decreases by $600.
c. decreases by $1,350 and producer surplus increases by $450.
d. decreases by $1,350 and producer surplus decreases by $450.
206. Refer to Figure 9-17. When the country moves from free trade to trade and a tariff, consumer surplus
a. decreases by $576 and producer surplus does not change.
b. decreases by $576 and producer surplus increases by $192.
c. decreases by $792 and producer surplus does not change.
d. decreases by $792 and producer surplus increases by $192.
TOP: Tariffs | Consumer surplus | Producer surplus MSC: Applicative
207. When a certain nation abandoned a policy of prohibiting international trade in automobiles in favor of a free-
tree policy, the result was that the country began to import automobiles. The change in policy improved the
well-being of that nation in the sense that
a. both producers of automobiles and consumers of automobiles in that nation became better off as a
result.
b. the gains to automobile producers in that nation exceeded the losses of the automobile consumers in
that nation.
c. the gains to automobile consumers in that nation exceeded the losses of the automobile producers in
that nation.
d. even though total surplus in that nation decreased, it was still true that consumer surplus and
producer surplus increased.
208. After a certain nation changed its policy from one that banned international trade in wheat to one that allowed
international trade in wheat, the nation began importing wheat. As a result, total surplus in the wheat market
increased by $10 million. Which of the following changes could have occurred as well?
a. The price of wheat in that nation increased with the adoption of the new policy.
b. The domestic quantity of wheat supplied increased with the adoption of the new policy.
c. Consumer surplus in the wheat market increased by $7 million and producer surplus in the wheat
market increased by $3 million.
d. Consumer surplus in the wheat market increased by $15 million and producer surplus in the wheat
market decreased by $5 million.
TOP: Gains from trade | Economic welfare MSC: Applicative
209. When the nation of Isoland opens up its steel market to international trade, that change
a. creates winners and losers, regardless of whether Isoland ends up exporting or importing steel.
b. results in a decrease in total surplus, regardless of whether Isoland ends up exporting or importing
steel.
c. creates winners, but no losers, if Isoland ends up exporting steel.
d. creates losers, but no winners, if Isoland ends up importing steel.
210. Some time ago, the nation of Republica opened up its paper market to international trade. Which of the fol-
lowing results of this policy change is consistent with the notion that Republica has a comparative advantage
over other countries in producing paper?
a. The price of paper in Republica decreased as a result of the policy change.
b. Republica began exporting paper as a result of the policy change.
c. The domestic demand curve for paper shifted to the right as a result of the policy change.
d. The domestic quantity of paper demanded increased as a result of the policy change.
211. Domestic producers of a good become better off, and domestic consumers of a good become worse off, when
a country begins allowing international trade in that good and
a. the country becomes an importer of the good as a result.
b. the world price exceeds the domestic price of the good that prevailed before international trade was
allowed.
c. other countries have a comparative advantage, relative to the country in question, in producing the
good.
d. total surplus does not change as a result.
TOP: Gains from trade | Prices MSC: Interpretive
Figure 9-18. On the diagram below, Q represents the quantity of peaches and P represents the price of peaches.
The domestic country is Isoland.
P
7
6
Domestic supply
5
4
3
2
Domestic demand
1
10 20 30 40 50 60 Q
212. Refer to Figure 9-18. If Isoland allows international trade and if the world price of peaches is $5, then
a. Isoland has a comparative advantage, relative to other countries, in producing peaches.
b. Isoland will import peaches.
c. consumer surplus with trade exceeds consumer surplus without trade.
TOP: Comparative advantage | Price MSC: Applicative
213. Refer to Figure 9-18. If Isoland allows international trade and if the world price of peaches is $3, then
a. Isoland has a comparative advantage, relative to other countries, in producing peaches.
b. Isoland will export peaches.
c. producer surplus with trade exceeds producer surplus without trade.
d. consumer surplus with trade exceeds consumer surplus without trade.
TOP: Gains from trade | Consumer surplus MSC: Applicative
214. Refer to Figure 9-18. If Isoland allows international trade, then it will be an exporter of peaches if and only if
the world price of peaches is
a. above $2.
b. below $4.
c. above $4.
d. below $7.
TOP: Price | Exports MSC: Interpretive
215. Refer to Figure 9-18. If Isoland allows international trade and the world price of peaches is $5, then
a. producer surplus will be smaller than it would be if Isoland banned trade.
b. consumer surplus will be smaller than it would be if Isoland banned trade.
c. the domestic quantity of peaches demanded will exceed the domestic quantity of peaches supplied.
d. Isoland will be an importer of peaches.
TOP: Prices | Consumer surplus | Producer surplus MSC: Applicative
216. Refer to Figure 9-18. Suppose Isoland changes from a no-trade policy to a policy that allows international
trade. If the world price of peaches is $5, then the policy change results in
a. a decrease in consumer surplus.
b. an increase in producer surplus.
c. an increase in total surplus.
TOP: Prices | Consumer surplus | Producer surplus MSC: Applicative
trade. If the world price of peaches is $5, then the policy change results in a
a. $25 decrease in consumer surplus.
b. $20 increase in consumer surplus.
c. $25 decrease in producer surplus.
d. $20 increase in producer surplus.
TOP: Consumer surplus MSC: Analytical
trade. If the world price of peaches is $3, then the policy change results in a
a. $15.00 decrease in producer surplus.
b. $45.00 increase in consumer surplus.
c. $20.00 increase in total surplus.
d. $12.50 increase in total surplus.
TOP: Gains from trade | Economic welfare MSC: Analytical
219. Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?
a. Consumer surplus decreases by $100; producer surplus increases by $100; and government revenue
from the tariff amounts to $50.
b. Consumer surplus decreases by $200; producer surplus increases by $100; and government revenue
c. Consumer surplus increases by $100; producer surplus decreases by $200; and government revenue
d. Consumer surplus decreases by $50; producer surplus increases by $200; and government revenue
TOP: Tariffs | Consumer surplus | Producer surplus | Government
MSC: Applicative
220. Suppose France imposes a tariff on wine of 3 euros per bottle. If government revenue from the tariff amounts
to 30 million euros per year and if the quantity of wine supplied by French wine producers, with the tariff, is 8
million bottles per year, then we can conclude that
a. the quantity of wine demanded by France, with the tariff, is 18 million bottles per year.
b. the quantity of wine demanded by France, without the tariff, would be 24 million bottles per year.
c. the amount of the deadweight loss is 24 million euros per year.
d. the tariff causes French buyers of wine to pay 2 euros more per bottle than they would pay without
the tariff.
TOP: Tariffs MSC: Analytical
221. For a country that is considering the adoption of either a tariff or an import quota on a particular good, an im-
portant difference is that
a. an import quota has no effect on consumer surplus, while a tariff decreases consumer surplus.
b. an import quota has no effect on producer surplus, while a tariff decreases producer surplus.
c. a tariff raises total surplus, while an import quota does not.
d. a tariff raises revenue for that country’s government, while an import quota does not.
222. For any country that allows free trade,

a. domestic quantity demanded is equal to domestic quantity supplied at the world price.
b. domestic quantity demanded is greater than domestic quantity supplied at the world price.
c. both producers and consumers in that country gain when domestic products are exported, but both
groups lose when foreign products are imported.
d. the domestic price is equal to the world price.
Figure 9-19. On the diagram below, Q represents the quantity of textiles and P represents the price of textiles.
24 P
21
18 Domestic supply
15
12
9 World Price
Domestic demand
6
3
20 40 60 80 100 120 140 Q
223. Refer to Figure 9-19. With free trade, the country for which the figure is drawn will
a. export 30 units of textiles.
b. export 50 units of textiles.
c. import 30 units of textiles.
d. import 50 units of textiles.
TOP: International trade | Imports MSC: Applicative
224. Refer to Figure 9-19. With free trade, consumer surplus in the textile market amounts to
a. $210.
b. $320.
c. $405.
d. $910.
225. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particu-
lar good,
TOP: International trade | Consumer surplus | Total surplus MSC: Interpretive
226. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of a particu-
lar good,
227. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particu-
lar good,
228. When a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particu-
lar good,
229. When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,
230. When a country that exported a particular good abandons a free-trade policy and adopts a no-trade policy,
231. When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
232. Denmark is an importer of computer chips and adds a $5 per chip tariff to the world price of $12 per chip.
Suppose Denmark removes the tariff. Which of the following outcomes is not possible?
a. More Danish-produced chips are sold in Denmark.
b. More foreign-produced chips are sold in Denmark.
c. Danish consumers of chips become better off.
d. Total surplus in the Danish chip market increases.
233. Japan imposes a $300 per ton tariff on imported steel, raising the price charged in Japan to $1,000. Using only
this information, which of the following statements is correct?
a. The world price for steel is $300.
b. The world price for steel is $700.
c. The world price for steel is $1,000.
d. The world price for steel is $1,300.
234. When a country allows international trade and becomes an importer of a good,
b. domestic consumers of the good become better off.
c. the gains of the winners fall short of the losses of the losers.
TOP: Imports|Economic welfare MSC: Applicative
235. The world price of a ton of steel is $1,000. Before Russia allowed trade in steel, the price of a ton of steel there
was $650. Once Russia allowed trade in steel with other countries, Russia began
a. exporting steel and the price per ton in Russia remained at $650.
b. exporting steel and the price per ton in Russia increased to $1,000.
c. importing steel and the price per ton in Russia remained at $650.
d. importing steel and the price per ton in Russia increased to $1,000.
TOP: Exports|Prices MSC: Applicative
236. The world price of a ton of steel is $650. Before Russia allowed trade in steel, the price of a ton of steel there
was $1,000. Once Russia allowed trade in steel with other countries, Russia began
a. exporting steel and the price per ton in Russia decreased to $650.
b. exporting steel and the price per ton in Russia remained at $1,000.
c. importing steel and the price per ton in Russia decreased to $650.
d. importing steel and the price per ton in Russia remained at $1,000.
TOP: Exports|Prices MSC: Applicative
237. If Freedonia changes its laws to allow international trade in software and the world price is higher than its do-
mestic price, then it must be the case that
a. both consumer surplus and producer surplus increase.
b. consumer surplus increases and producer surplus decreases.
c. consumer surplus decreases and producer surplus increases.
d. both consumer surplus and producer surplus decrease.
TOP: Trade|Total surplus MSC: Applicative
238. If Freedonia changes its laws to allow international trade in software and the world price is lower than its do-
mestic price, then it must be the case that
a. both consumer surplus and producer surplus increase.
b. consumer surplus increases and producer surplus decreases.
c. consumer surplus decreases and producer surplus increases.
d. both consumer surplus and producer surplus decrease.
TOP: Trade|Total surplus MSC: Applicative
239. Domestic producers of a good become worse off, and domestic consumers of a good become better off, when
a country begins allowing international trade in that good and
a. the country becomes an importer of the good as a result.
b. the world price exceeds the domestic price of the good that prevailed before international trade was
allowed.
c. the country in question has a comparative advantage, relative to other countries, in producing the
good.
d. total surplus does not change as a result.
TOP: Gains from trade|Prices MSC: Interpretive

a. domestic producers become better off, and domestic consumers become worse off.
b. domestic producers become worse off, and domestic consumers become better off.
c. domestic producers become better off, but the effect on the well-being of domestic consumers is
ambiguous.
d. domestic consumers become worse off, but the effect on the well-being of domestic producers is
ambiguous.

a. domestic producers become better off, and domestic consumers become worse off.
b. domestic producers become worse off, and domestic consumers become better off.
c. domestic consumers become better off, but the effect on the well-being of domestic producers is
ambiguous.
d. domestic producers become worse off, but the effect on the well-being of domestic consumers is
ambiguous.
242. In the market for apples in a certain country, consumer surplus increases and total surplus increases when that
country
a. abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of apples.
b. abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of apples.
c. abandons a free-trade policy, adopts a no-trade policy, and becomes an importer of apples.
d. abandons a free-trade policy, adopts a no-trade policy, and becomes an exporter of apples.
TOP: Trade | Consumer surplus | Total surplus MSC: Interpretive
243. In September 2009, President Obama imposed a 35 percent tariff on

a. tires imported from South Korea.
b. tires imported from China.
c. automobiles imported from South Korea.
d. beef imported from Canada.
244. In September 2009, President Obama

a. imposed a tariff on tires imported from China; in doing so, the president reneged on an agreement
into which the U.S. had entered in 2001.
b. imposed a tariff on tires imported from China; the tariff was in accordance with an agreement into
which the U.S. had entered in 2001.
c. removed a tariff on tires imported from China; the tariff had been imposed by President George W.
Bush.
d. removed a tariff on tires imported from China; the tariff had been imposed by President Bill
Clinton.
245. In 2001, the U.S. agreed to support China’s entry into the World Trade Organization. Under a special “safe-
guard provision” of that agreement, American companies or workers harmed by imports from China can ask
the government for protection by demonstrating that
a. imports from China pose a hazard to the health of American citizens.
b. China is competing unfairly or selling its products at less than their true cost.
c. products that are allegedly “made in China” are actually made in a different country.
d. American producers have suffered a “market disruption” or a “surge” in imports from China.
246. In September 2009, China took steps toward imposing tariffs on American exports of
a. automotive products and chicken in response to President Obama’s decision to impose tariffs on
toys imported from China.
b. airplanes and beef in response to President Obama’s decision to impose tariffs on toys imported
from China.
c. automotive products and chicken in response to President Obama’s decision to impose tariffs on
tires imported from China.
d. airplanes and beef in response to President Obama’s decision to impose tariffs on tires imported
from China.
THE WINNERS AND LOSERS FROM TRADE (PART II)

Figure 9-20
The figure illustrates the market for rice in Vietnam.

Price
16
Domestic supply
10 World Price
4
Domestic demand
1,500 2,000 3,000 Quantity

a. Vietnam will experience a shortage of rice if trade is not allowed.
b. Vietnam will experience a surplus of rice if trade is not allowed.
c. Vietnam has a comparative advantage in producing rice, relative to the rest of the world.
d. foreign countries have a comparative advantage in producing rice, relative to Vietnam.

a. Vietnam has a comparative advantage in producing rice, relative to the rest of the world.
b. foreign countries have a comparative advantage in producing rice, relative to Vietnam.
c. Vietnam has an absolute advantage in producing rice, relative to the rest of the world.
d. foreign countries have an absolute advantage in producing rice, relative to Vietnam.
3. Refer to Figure 9-20. In the absence of trade, total surplus in the Vietnamese rice market amounts to
a. 9,250.
b. 10,000.
c. 12,000.
d. 13,000.
4. Refer to Figure 9-20. Given that Vietnam is a small country, it is apparent from the figure that
a. Vietnam will export rice if trade is allowed.
b. Vietnam will import rice if trade is allowed.
c. Vietnam has nothing to gain either by importing or exporting rice.
d. the world price will fall if Vietnam begins to allow its citizens to trade with other countries.
5. Refer to Figure 9-20. With trade, Vietnam will

a. export 1,000 units of rice.
b. export 1,500 units of rice.
c. import 1,000 units of rice.
d. import 1,500 units of rice.
6. Refer to Figure 9-20. With trade, Vietnamese rice producers will produce
a. 2,000 units of rice and their producer surplus will be 4,000.
b. 2,000 units of rice and their producer surplus will be 7,500.
c. 3,000 units of rice and their producer surplus will be 7,500.
d. 3,000 units of rice and their producer surplus will be 9,000.
TOP: Exports | Producer surplus MSC: Applicative
7. Refer to Figure 9-20. Vietnam’s gains from trade in rice amount to

a. 750.
b. 1,000.
c. 1,250.
d. 1,500.
Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton
of cardboard.
For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a
ton of cardboard.
8. Refer to Scenario 9-2. If Boxland prohibits international trade in cardboard, then the equilibrium price of a
ton of cardboard is
a. $36 and the equilibrium quantity of cardboard is 74 tons.
b. $44 and the equilibrium quantity of cardboard is 88 tons.
c. $52 and the equilibrium quantity of cardboard is 96 tons.
d. $60 and the equilibrium quantity of cardboard is 100 tons.
NAT: Analytic LOC: Supply and demand TOP: Equilibrium
MSC: Applicative
9. Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, if Boxland goes from prohibiting
international trade in cardboard to allowing international trade in cardboard,
a. domestic producers of cardboard become better off and domestic consumers of cardboard become
better off.
b. domestic producers of cardboard become better off and domestic consumers of cardboard become
worse off.
c. domestic producers of cardboard become worse off and domestic consumers of cardboard become
better off.
d. domestic producers of cardboard become worse off and domestic consumers of cardboard become
worse off.
TOP: Imports | Welfare MSC: Applicative
10. Refer to Scenario 9-2. Suppose the world price of cardboard is $45 and international trade is allowed. Then
Boxland’s consumers demand
a. 110 tons of cardboard and Boxland’s producers supply 75 tons of cardboard.
b. 110 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
c. 96 tons of cardboard and Boxland’s producers supply 75 tons of cardboard.
d. 96 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
NAT: Analytic LOC: Supply and demand
TOP: Quantity demanded | Quantity supplied MSC: Applicative
11. Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative to the no-trade situation,
international trade in cardboard produces which of the following results for Boxland?
a. It increases consumer surplus, decreases producer surplus, and increases total surplus.
b. It increases consumer surplus, increases producer surplus, and increases total surplus.
c. It increases consumer surplus, decreases producer surplus, and decreases total surplus.
d. It decreases consumer surplus, increases producer surplus, and increases total surplus.
TOP: Imports | Consumer surplus | Producer surplus | Total surplus
MSC: Applicative
12. Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then Boxland’s gains from internation-
al trade in cardboard amount to
a. $88.75.
b. $102.50.
c. $122.50.
d. $135.00.
TOP: Imports | Gains from trade MSC: Analytical
international trade in cardboard
a. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00.
b. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.
c. benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50.
d. harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.
TOP: Imports | Welfare MSC: Analytical
14. Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then, if Boxland goes from prohibiting
international trade in cardboard to allowing international trade in cardboard,
a. domestic producers of cardboard become better off and domestic consumers of cardboard become
better off.
b. domestic producers of cardboard become better off and domestic consumers of cardboard become
worse off.
c. domestic producers of cardboard become worse off and domestic consumers of cardboard become
better off.
d. domestic producers of cardboard become worse off and domestic consumers of cardboard become
worse off.
TOP: Exports | Welfare MSC: Applicative
15. Refer to Scenario 9-2. Suppose the world price of cardboard is $60 and international trade is allowed. Then
Boxland’s consumers demand
a. 110 tons of cardboard and Boxland’s producers supply 120 tons of cardboard.
b. 96 tons of cardboard and Boxland’s producers supply 96 tons of cardboard.
c. 96 tons of cardboard and Boxland’s producers supply 115 tons of cardboard.
d. 80 tons of cardboard and Boxland’s producers supply 120 tons of cardboard.
NAT: Analytic LOC: Supply and demand
TOP: Quantity demanded | Quantity supplied MSC: Applicative
international trade in cardboard produces which of the following results for Boxland?
a. It decreases consumer surplus, increases producer surplus, and decreases total surplus.
b. It decreases consumer surplus, increases producer surplus, and increases total surplus.
c. It decreases consumer surplus, decreases producer surplus, and decreases total surplus.
d. It increases consumer surplus, increases producer surplus, and increases total surplus.
TOP: Exports | Consumer surplus | Producer surplus | Total surplus
MSC: Applicative
17. Refer to Scenario 9-2. Suppose the world price of cardboard is $60. Then Boxland’s gains from internation-
al trade in cardboard amount to
a. $145.
b. $160.
c. $210.
d. $320.
TOP: Exports | Gains from trade MSC: Analytical
international trade in cardboard
a. benefits Boxlandian consumers by $750 and harms Boxlandian producers by $660.
b. harms Boxlandian consumers by $736 and harms Boxlandian producers by $598.
c. harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864.
d. harms Boxlandian consumers by $804 and benefits Boxlandian producers by $984.
TOP: Exports | Welfare MSC: Analytical
THE ARGUMENTS FOR RESTRICTING TRADE
1. Congressman Smith cites the “jobs argument” when he argues in favor of restrictions on trade; he argues that
everything can be produced at lower cost in other countries. The likely flaw in Congressman Smith’s reason-
ing is that he ignores the fact that
a. there is no evidence that any worker ever lost his or her job because of free trade.
b. unemployment of labor is not a serious problem relative to other economic problems.
c. the gains from trade are based on comparative advantage.
d. the gains from trade are based on absolute advantage.
TOP: Trade restrictions MSC: Interpretive
2. “Owners of firms in young industries should be willing to incur temporary losses if they believe
that those firms will be profitable in the long run.” This observation helps to explain why many economists
are skeptical about the
a. national-security argument.
b. infant-industry argument.
c. unfair-competition argument.
d. jobs argument.
3. One should be especially wary of the national-security argument for restricting trade when that argument is
made by
a. representatives of industry.
b. representatives of the defense establishment.
c. members of households.
d. foreign government officials.
4. The “unfair-competition” argument might be cited by an American who believes that

a. almost every country has a comparative advantage, relative to the United States, in producing
almost all goods.
b. young industries should be protected against foreign competition until they become profitable.
c. the American automobile industry should be protected against Japanese firms that are able to
produce automobiles at relatively low cost.
d. the French government’s subsidies to French farmers justify restrictions on American imports of
French agricultural products.
5. If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricul-
tural subsidies, the United States will be
a. better off no matter how Honduras responds.
b. better off if Honduras gives in, and will be no worse off if it doesn't.
c. worse off if Honduras doesn't give in to the threat.
d. worse off no matter how Honduras responds.
TOP: Trade policy MSC: Interpretive
6. Which of the following arguments for trade restrictions is often advanced?

a. Trade restrictions make all Americans better off.
b. Trade restrictions increase economic efficiency.
c. Trade restrictions are necessary for economic growth.
d. Trade restrictions are sometimes necessary for national security.
7. About what percent of total world trade is accounted for by countries that belong to the World Trade Organi-
zation?
a. 54 percent
b. 72 percent
c. 89 percent
d. 97 percent
TOP: WTO MSC: Definitional
8. At present, the United States uses a system of quotas to limit the amount of sugar imported into the country.
Which of the following statements is most likely true?
a. The quotas are probably the result of lobbying from U.S. consumers of sugar. The quotas increase
consumer surplus for the United States, reduce producer surplus for the United States, and harm
foreign sugar producers.
b. The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas increase
producer surplus for the United States, reduce consumer surplus for the United States, and harm
c. The quotas are probably the result of lobbying from foreign producers of sugar. The quotas reduce
producer surplus for the United States, increase consumer surplus for the United States, and benefit
d. U.S. lawmakers did not need to be lobbied to impose the quotas because total surplus for the United
States is higher with the quotas than without them.
TOP: Trade policy MSC: Applicative
9. Suppose France subsidizes French wheat farmers, while Germany offers no subsidy to German wheat farmers.
As a result of the French subsidy, sales of French wheat to Germany
a. may prompt German farmers to invoke the unfair-competition argument.
b. increase the consumer surplus of German buyers of wheat.
c. increase the total surplus of the German people.
TOP: Trade policy | Economic welfare MSC: Applicative
10. Congresswoman Gaga represents a state in which several firms manufacture furniture. She wants to impose
tariffs on all imported furniture. Which of the following is the least likely consequence of such tariffs?
a. Domestic furniture buyers will lose consumer surplus, have less variety, and will pay higher prices.
b. Domestic furniture producers will gain producer surplus.
c. Domestic furniture producers will have a higher rate of technological advance.
d. Domestic furniture producers will have more market power.
TOP: Tariffs | Technology MSC: Applicative
11. Countries that restrict foreign trade are likely to

a. forgo the additional surplus that trade allows, but will probably enjoy economies of scale.
b. forgo the additional surplus that trade allows, but will be compensated by a higher rate of
technological change.
c. forgo the additional surplus that trade allows, but will have a lower rate of unemployment.
d. have more firms with domestic market power.
12. Opponents of free trade often want the United States to prohibit the import of goods made in overseas facto-
ries that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to
a. cause these factories to pay the U.S. minimum wage.
b. increase the rate of technological advance in poor countries so that they can afford to pay higher
wages.
c. increase poverty in poor countries and benefit U.S. firms which compete with these imports.
d. harm U.S. firms which compete with these imports.
13. Several arguments for restricting trade have been advanced. Those arguments do not include
a. the jobs argument.
b. the protection-as-a-bargaining-chip argument.
c. the no-deadweight-loss argument.
d. the infant-industry argument.
14. Critics of free trade sometimes argue that allowing imports from foreign countries causes a reduction in the
number of domestic jobs. An economist would argue that
a. foreign competition may cause unemployment in import-competing industries, but the effect is
temporary because other industries, especially exporting industries, will be expanding.
b. foreign competition may cause unemployment in import-competing industries, but the increase in
consumer surplus due to free trade is more valuable than the lost jobs.
c. the critics are correct, so countries must protect their industries with tariffs or quotas.
d. foreign competition may cause unemployment in import-competing industries, but the increase in
the variety of goods consumers can choose from is more valuable than the lost jobs.
TOP: Trade policy | Employment MSC: Interpretive
15. Which of the following is not a commonly-advanced argument for trade restrictions?
a. the jobs argument
b. the national-security argument
c. the infant-industry argument
d. the efficiency argument
TOP: Trade policy MSC: Definitional
16. Workers displaced by trade eventually find jobs in

a. another country.
b. the government sector.
c. the industries in which the country has a comparative advantage.
d. a different company in the same industry.
TOP: Trade | Employment MSC: Interpretive
17. The infant-industry argument

a. is based on the belief that protecting industries when they are young will pay off later.
b. is based on the belief that protecting industries producing goods and services for infants is
necessary if a country is to have healthy children.
c. has the support of most economists.
d. is an argument that is advanced by advocates of free trade.
18. Which of the following is the most accurate statement?

a. Protection is necessary in order for young industries to grow up and be successful.
b. Protection is not necessary for an industry to grow.
c. Protection is necessary because if young industries are not protected, they may suffer losses.
d. Protection may not always be necessary for infant industries, but it has proven to be useful in most
cases.
19. If the Korean steel industry subsidizes the steel that it sells to the United States, the
a. United States should protect its domestic steel industry from this unfair competition.
b. harm done to U.S. steel producers from this unfair competition exceeds the gain to U.S. consumers
of cheap Korean steel.
c. harm done to U.S. steel producers is less than the benefit that accrues to U.S. consumers of steel.
d. United States should subsidize the products it sells to Korea.
20. The two basic approaches that a country can take as a means to achieve free trade are the
a. unilateral approach and the multilateral approach.
b. short-run approach and the long-run approach.
c. continental approach and the global approach.
d. industry approach and the security approach.
TOP: Trade MSC: Interpretive
21. When a country takes a multilateral approach to free trade, it

a. removes trade restrictions on its own.
b. reduces its trade restrictions while other countries do the same.
c. does not remove trade restrictions no matter what other countries do.
d. is willing to trade with multiple countries at once.
22. Which of the following is not an advantage of a multilateral approach to free trade over a unilateral approach?
a. A multilateral approach can reduce trade restrictions abroad as well as at home.
b. A multilateral approach has the potential to result in freer trade.
c. A multilateral approach requires the agreement of two or more nations.
d. A multilateral approach may have political advantages.
23. When a country takes a unilateral approach to free trade, it

a. removes trade restrictions on its own.
b. reduces its trade restrictions while other countries do the same.
c. does not remove trade restrictions no matter what other countries do.
d. is willing to trade with multiple countries at once.
24. A possible outcome of the multilateral approach to free trade is that such an approach can
a. win political support when a unilateral approach cannot.
b. result in more restricted trade than under a unilateral approach, when international negotiations fail.
c. result in drastic reductions in tariffs for many countries.
25. Which of the following assertions is not correct about the multilateral approach to free trade?
a. The multilateral approach has the potential to result in freer trade than does the unilateral approach.
b. The multilateral approach may have a political advantage over the unilateral approach.
c. The multilateral approach is simpler than the unilateral approach.
d. NAFTA and GATT both represent multilateral approaches to free trade.
26. The North American Free Trade Agreement

a. is an example of the unilateral approach to free trade.
b. eliminated tariffs on imports to North America from the rest of the world.
c. reduced trade restrictions among Canada, Mexico and the United States.
TOP: NAFTA MSC: Definitional
27. Since World War II, GATT has been responsible for reducing the average tariff among member countries
from about
a. 40 percent to about 5 percent.
b. 40 percent to about 20 percent.
c. 80 percent to about 20 percent.
d. 20 percent to about 10 percent.
TOP: GATT MSC: Definitional
28. The General Agreement on Tariffs and Trade (GATT) was initiated in response to
a. in increase in exports of low-priced goods from developing countries to developed countries.
b. the replacement of manufacturing jobs with service jobs in developed countries.
c. economic dislocations caused by the North American Free Trade Agreement (NAFTA) in the
1990s.
d. high tariffs imposed during the Great Depression of the 1930s.
TOP: GATT MSC: Definitional
29. The rules established under GATT are enforced by the

a. governments of the nations that are involved in GATT.
b. North American Free Trade Association.
c. World Trade Organization.
d. European Union.
TOP: GATT | WTO MSC: Definitional
30. President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is
most consistent with the
a. national-security argument.
b. infant-industry argument.
c. unfair competition argument.
d. protection-as-a-bargaining chip-argument.
31. The problem with the protection-as-a-bargaining-chip argument for trade restrictions is
a. if it works consumer surplus will decline.
b. if it works producer surplus falls.
c. if it fails the country faces a choice between two bad options.
d. if it fails total surplus will increase.
32. In a 2007 New York Times article Paul Krugman wrote that
a. the infant-industry argument works well as an argument in favor of protection for the U.S. steel
industry.
b. the negative effects of third world exports on U.S. wages may be increasing.
c. there are social gains to the U.S. from free trade.
d. high wage countries account for a growing share of U.S. imports of manufactured goods.
33. In a December 2007 New York Times column Paul Krugman argued in favor of
a. protectionism based on the national-security argument.
b. protectionism based on the infant-industry argument.
c. protectionism based on the unfair-competition argument.
d. keeping world markets relatively open.
34. In a December 2007 New York Times column, Paul Krugman noted that
a. it is difficult to find instances of trade between high-wage countries in the modern era.
b. it is difficult to find instances of trade between high-wage countries and low-wage countries in the
modern era.
c. the United States now imports more oil and other raw materials from other advanced countries than
from the third world.
d. the United States now imports more manufactured goods from the third world than from other
advanced countries.
TOP: Trade MSC: Definitional
35. In recent years, which countries have taken a unilateral approach to the removal of trade restrictions?
a. China and North Korea
b. Chile and South Korea
c. Russia and Japan
d. the United States and Mexico
36. Which of the following is the most accurate statement?

a. The one argument for restricting trade that almost all economists accept as valid is the infant-
industry argument.
b. Almost all economists insist that it is never appropriate to protect “key” industries, even when there
are legitimate concerns about national security.
c. The idea that one nation might want to threaten another nation with a trade restriction is associated
with the protection-as-a-bargaining-chip argument for restricting trade.
d. The protection-as-a-bargaining-chip argument for restricting trade is also known as the infant-
industry argument.
37. Suppose Ukraine subsidizes Ukrainian wheat farmers, while Russia offers no subsidy to Russian wheat farm-
ers. As a result of the Ukrainian subsidy, sales of Ukrainian wheat to Russia
a. may prompt Russian farmers to invoke the infant-industry argument.
b. increase the consumer surplus of Russian buyers of wheat.
c. decrease the total surplus of the Russian people.
TOP: Trade policy | Economic welfare MSC: Applicative
38. A common argument in favor of restricting trade

a. concerns the strategy of bargaining.
b. is that efforts should be made to get new industries started.
c. emphasizes the belief that all countries should play by the same rules.
39. A common argument in favor of restricting international trade in good x is based on the premise that
a. international trade reduces total surplus in countries that export good x.
b. international trade reduces total surplus in countries that import good x.
c. international trade is desirable only when countries with different domestic supplies of natural
resources play by different rules when trading with one another.
d. trade restrictions can be useful when one country bargains with its trading partners.
CONCLUSION
1. In 2008, the Los Angeles Times asked members of the American public whether free international trade has
helped or hurt the economy. Of those surveyed,
a. 57 percent said free international trade helped the economy.
b. 26 percent said free international trade helped the economy.
c. 30 percent said free international trade hurt the economy.
d. 16 percent said free international trade hurt the economy.
2. Most economists view the United States’ experience with trade as

a. one from which no firm conclusions about the virtues of free trade can be reached, due to the
relatively short history of international trade in the U.S.
b. one from which no firm conclusions about the virtues of free trade can be reached, due to the lack
of trade within the U.S. throughout most of the early history of the U.S.
c. an ongoing experiment that confirms the virtues of free trade.
d. an ongoing experiment that calls into serious question the notion that free trade enhances the
economic well-being of a nation.
3. Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as
a. confirmation of the virtues of free trade.
b. confirmation of the infant-industry argument.
c. confirmation that free trade agreements are not necessary.
d. confirmation that specialization in absolute advantage works.
TRUE/FALSE
1. The history of the textile industry raises important questions for economic policy.
ANS: F PTS: 1 DIF: 1 REF: 9-0
2. Trade decisions are based on the principle of absolute advantage.

TOP: Absolute advantage MSC: Interpretive
3. The sum of consumer and producer surplus measures the total benefits that buyers and sellers receive from
participating in a market.
ANS: T PTS: 1 DIF: 2 REF: 9-1
4. According to the principle of comparative advantage, all countries can benefit from trading with one another
because trade allows each country to specialize in doing what it does best.
5. The world price of cotton is the highest price of cotton observed anywhere in the world.
TOP: Prices MSC: Definitional
6. If the world price of a good is greater than the domestic price in a country that can engage in international
trade, then that country becomes an importer of that good.
7. Without free trade, the domestic price of a good must be equal to the world price of a good.
8. The nation of Aviana soon will abandon its no-trade policy and adopt a free-trade policy. If the world price of
goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound, then Aviana
should export goose meat.
TOP: Prices | Comparative advantage | Exports MSC: Interpretive
9. If a country allows free trade and its domestic price for a given good is lower than the world price, then it will
import that good.
TOP: Prices|Comparative advantage MSC: Definitional
10. “Trade raises the economic well-being of a nation in the sense that the gains of the winners exceed
the losses of the losers.” This statement is correct for a nation that exports manufactured goods, but it is not
correct for a nation that imports manufactured goods.
TOP: Trade | Economic welfare MSC: Interpretive
11. The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2
pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Lone-
land were to allow free trade, it would export cheese.
TOP: Comparative advantage | Trade MSC: Applicative
12. If Argentina exports oranges to the rest of the world, Argentina's producers of oranges are worse off, and Ar-
gentina's consumers of oranges are better off, as a result of trade.
TOP: Trade | Economic welfare MSC: Applicative
13. If a country’s domestic price of a good is lower than the world price, then that country has a comparative ad-
vantage in producing that good.
TOP: Comparative advantage | Prices MSC: Interpretive
14. When a country allows international trade and becomes an importer of a good, domestic producers of the good
are better off, and domestic consumers of the good are worse off.
15. If the United Kingdom imports tea cups from other countries, then U.K. producers of tea cups are better off,
and U.K. consumers of tea cups are worse off, as a result of trade.
16. If Belgium exports chocolate to the rest of the world, then Belgian chocolate producers benefit from higher
producer surplus, Belgian chocolate consumers are worse off because of lower consumer surplus, and total
surplus in Belgium increases because of the exports of chocolate.
17. In principle, trade can make a nation better off, because the gains to the winners exceed the losses to the los-
ers.
TOP: Trade | Economic welfare MSC: Interpretive
18. Suppose the Ivory Coast, a small country, imports wheat at the world price of $4 per bushel. If the Ivory Coast
imposes a tariff of $1 per bushel on imported wheat, then, other things equal, the price of wheat in Ivory Coast
will increase, but by less than $1.
19. The small-economy assumption is necessary to analyze the gains and losses from international trade.
TOP: International trade | Assumptions MSC: Interpretive
20. The greater the elasticities of supply and demand, the smaller are the gains from trade.
TOP: Gains from trade | Price elasticities of demand and supply
MSC: Applicative
21. If a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the
tariff.
22. When a government imposes a tariff on a product, the domestic price will equal the world price.
23. A tariff increases the quantity of imports and moves the market farther from its equilibrium without trade.
24. When a country abandons no-trade policies in favor of free-trade policies and becomes an importer of steel,
then the domestic price of steel will increase as a result.
TOP: Imports | Prices MSC: Interpretive
25. When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse
off.
26. When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off
and sellers of shoes in that country become better off.
27. Deadweight loss measures the decrease in total surplus that results from a tariff or quota.
TOP: Deadweight loss MSC: Interpretive
28. If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the gov-
ernment will gain tariff revenue, and domestic consumers will gain consumer surplus.
29. Domestic consumers gain and domestic producers lose when the government imposes a tariff on imports.
30. The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of
wine imported, and increase the quantity of wine produced domestically.
TOP: Prices | Imports | Tariffs MSC: Interpretive
31. 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.
32. Suppose Ecuador imposes a tariff on imported bananas. If the increase in producer surplus is $50 million, the
reduction in consumer surplus is $150 million, and the deadweight loss of the tariff is $30 million, then the tar-
iff generates $130 million in revenue for the government.
33. Tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium
without trade, thus reducing the gains from trade.
TOP: Tariffs | Deadweight loss MSC: Interpretive
34. Import quotas and tariffs both cause the quantity of imports to fall.
35. Import quotas and tariffs make domestic sellers better off and domestic buyers worse off.
TOP: Tariffs | Import quotas | Economic welfare MSC: Interpretive
36. If a country allows free trade and imports cars, then it is the case that the gains to domestic producers out-
weigh the losses to domestic consumers.
TOP: Trade|Economic welfare MSC: Applicative
37. The nation of Cranolia used to prohibit international trade, but now trade is allowed, and Cranolia is exporting
furniture. Relative to the previous no-trade situation, buyers of furniture in Cranolia are now better off.
38. The nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is ex-
porting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches
in Spritzland has increased.
TOP: Trade | Total surplus MSC: Applicative
39. Free trade allows firms to realize economies of scale, resulting in higher costs of production.
TOP: Trade | Economies of scale MSC: Interpretive
40. For a given country, comparing the world price of aluminum and the domestic price of aluminum before trade
indicates whether that country’s demand for aluminum exceeds the demand for aluminum in other countries.
41. For Country A, the world price of soybeans exceeds the domestic equilibrium price of soybeans. As a result,
international trade allows buyers of soybeans in Country A to experience greater consumer surplus than they
otherwise would experience.
TOP: Trade | Consumer surplus MSC: Interpretive
42. For Country A, the world price of textiles exceeds the domestic equilibrium price of textiles. As a result, in-
ternational trade allows sellers of textiles in Country A to experience greater producer surplus than they oth-
erwise would experience.
TOP: Trade | Producer surplus MSC: Interpretive
43. William and Jamal live in the country of Dumexia. As a result of Dumexia’s legalization of international trade
in bananas, William becomes better off and Jamal becomes worse off. It follows that William is a seller, and
Jamal is a buyer, of bananas.
TOP: Trade | Welfare MSC: Interpretive
44. 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.
TOP: Trade | Welfare MSC: Interpretive
45. Economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because
of foreign competition.
TOP: Trade policy | Employment MSC: Interpretive
46. Free trade causes job losses in industries in which a country does not have a comparative advantage, but it also
causes job gains in industries in which the country has a comparative advantage.
TOP: Comparative advantage | Employment MSC: Interpretive
47. Most economists support the infant-industry argument because it is so easy to implement in practice.
48. If Honduras were to subsidize the production of wool blankets and sell them in Sweden at artificially low pric-
es, the Swedish economy would be worse off.
TOP: Trade policy | Economic welfare MSC: Interpretive
49. Policymakers often consider trade restrictions in order to protect domestic producers from foreign competitors.
50. GATT is an example of a successful unilateral approach to achieving free trade.

TOP: GATT MSC: Interpretive
51. NAFTA is an example of a multilateral approach to achieving free trade.

TOP: NAFTA MSC: Interpretive
52. The rules established under the General Agreement on Tariffs and Trade (GATT) are enforced by an interna-
tional body called the World Trade Organization (WTO).
TOP: GATT | WTO MSC: Definitional
53. A multilateral approach to free trade has greater potential to increase the gains from trade than a unilateral
approach, because the multilateral approach can reduce trade restrictions abroad as well as at home.
54. Economists feel that national security concerns never provide a legitimate rationale for trade restrictions.
55. Economists view free trade as a way to raise living standards both at home and abroad.
56. 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.
57. 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.
58. Most economists view the United States as an ongoing experiment that raises serious doubts about the virtues
of free trade.
SHORT ANSWER
1. Use the graph to answer the following questions about CDs.
a. What is the equilibrium price of CDs before trade?

b. What is the equilibrium quantity of CDs before trade?
c. What is the price of CDs after trade is allowed?
d. What is the quantity of CDs exported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?
ANS:
a. $12
b. 50
c. $15
d. 30
e. $250
f. $122.50
g. $250
h. $422.50
i. $500
j. $545
k. $45
PTS: 1 DIF: 2 REF: 9-2 NAT: Analytic
LOC: Gains from trade, specialization and trade TOP: Exports | Economic welfare
MSC: Applicative
2. Using the graph below, answer the following questions about hammers.
a. What is the equilibrium price of hammers before trade?

b. What is the equilibrium quantity of hammers before trade?
c. What is the price of hammers after trade is allowed?
d. What is the quantity of hammers imported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?
ANS:
a. $14
b. 90
c. $10
d. 85
e. $360
f. $810
g. $405
h. $125
i. $765
j. $935
k. $170
LOC: Gains from trade, specialization and trade TOP: Imports | Economic welfare
MSC: Applicative
3. Using the graph, assume that the government imposes a $1 tariff on hammers. Answer the following questions
given this information.
a. What is the domestic price and quantity demanded of hammers after the tariff is imposed?
b. What is the quantity of hammers imported before the tariff?
c. What is the quantity of hammers imported after the tariff?
d. What would be the amount of consumer surplus before the tariff?
e. What would be the amount of consumer surplus after the tariff?
f. What would be the amount of producer surplus before the tariff?
g. What would be the amount of producer surplus after the tariff?
h. What would be the amount of government revenue because of the tariff?
i. What would be the total amount of deadweight loss due to the tariff?
ANS:
a. $6, 84
b. 66
c. 44
d. $384
e. $294
f. $45
g. $80
h. $44
i. $11
LOC: Gains from trade, specialization and trade TOP: Tariffs | Economic welfare
MSC: Applicative
4. How does an import quota differ from an equivalent tariff?

ANS:
Both the import quota and the tariff raise the domestic price of the good, reduce the welfare of domestic
consumers, increase the welfare of domestic producers, and cause deadweight losses. The only difference for
the economy is that the tariff raises revenue for the government, while the import quota creates surplus for
license holders.
LOC: Gains from trade, specialization and trade TOP: Tariffs | Import quotas
MSC: Interpretive
5. Characterize the two different approaches a nation can take to achieve free trade. Does one approach have an
advantage over the other?
ANS:
A unilateral approach is when a country removes its trade restrictions on its own. A multilateral approach is
when a country removes its trade restrictions while other countries do the same. A multilateral approach has
two advantages. The first is that it has the potential to result in freer trade because it can reduce trade
restrictions abroad as well as at home. If international negotiations fail, however, the result could be more
restricted trade than under a unilateral approach. Also, the multilateral approach may have a political
advantage and can sometimes win political support when a unilateral reduction cannot.
LOC: Gains from trade, specialization and trade TOP: Trade policy
MSC: Interpretive
6. What are the arguments in favor of trade restrictions, and what are the counterarguments? According to most
economists, do any of these arguments really justify trade restrictions? Explain.
ANS:
Arguments mentioned in the text include the jobs argument, the national security argument, the infant industry
argument, the unfair competition argument, and the protection-as-a-bargaining-chip argument. These
arguments and counter-arguments are outlined in section 9-3 of the text. Most economists would dismiss the
jobs argument, the infant industry argument, and the unfair competition argument on strictly economic
grounds. The bargaining-chip argument carries high risks of economic harm if the threat doesn't work. The
national-security argument balances economic loss from trade restriction against the benefit of long-term
national survival, and is probably the argument that economists would most likely buy if it were clear that the
industry being protected was clearly crucial to national security.
LOC: Gains from trade, specialization and trade TOP: Trade policy
MSC: Interpretive
Another random document with
no related content on Scribd:
muuttua. Minä päätin siis jättää hänet Dorothyn käsiin ja toivoa
parasta.
Heinäkuu 10 p:nä.
Hohhoh, viime kuu oli tosiaan kuin päiväkirja itsessään, ja minä

olen alkanut käsittää olevani niitä tyttöjä, joille jotakin tapahtuu. Ja
minun täytyy sittenkin myöntää, että elämä on tosiaan ihmeellistä.
Sillä ihan viime kuluneiden viikkojen aikana on tapahtunut niin
paljon, että tytön pää melkein menee pyörälle.
Tarkoitan ensiksikin, että menin jalokivikauppaan ostoksille ja ostin

hurmaavan nelitahkoisen smaragdin ja pitkän rihman helmiä Henryn
laskuun. Sitten soitin Henrylle kaukolinjan puhelimella ja sanoin
hänelle, että halusin nähdä häntä aika paljon, ja hän oli kovin, kovin
mielissään ja lupasi heti saapua New Yorkiin. Ja sitten minä pyysin
Dorothya tulemaan kotiini ollakseen siellä Henryn saapuessa ja
näyttämään Henrylle, mitä olin hänen laskuunsa ostellut, ja
kertomaan hänelle, kuinka tuhlaavainen minä näytin olevan. Ja
kuinka minä näyin tulevan vain hupsua hupsummaksi. Ja minä
annoin Dorothylle valtuuden mennä niin pitkälle kuin halusi, kunhan
hän ei vain vihjaise mitään kunnialleni käypää. Sillä mitä
tahrattomammalta minun maineeni näyttäisi, sitä paremmin saattaisi
asia lopuksi päättyä. Ja Henry oli täsmällisesti talossa
kahtakymmentä minuuttia yli yhden, ja minä käskin Lulun laittaa
puolista hänelle ja Dorothylle ja käskin Dorothyn sanoa hänelle, että
minä olin mennyt katsomaan Venäjän kruununkalleuksia, joita joku
venäläinen suuriruhtinatar kaupitteli Ritzissä.
Ja sitten minä menin Primrosen teehuoneeseen syömään puolista
herra Montrosen kanssa, koska herra Montrose kernaasti kertoo
minulle kaikista suunnitelmistaan ja sanoo, että minä hänen
mielestään paljon muistutan tyttöä, jonka nimi oli matami Recamier
ja jolle intellektentit herrasmiehet tavallisesti kertoivat kaikki
suunnitelmansa, silloinkin kun Ranskan vallankumous riehui heidän
ympärillään.
Ja herra Montrose ja minä söimme herkullisen puolisen, vaikken

minä herra Montrosen seurassa koskaan pane merkille, mitä syön,
sillä herra Montrosen jutellessa tyttö vain kuuntelee molemmilla
korvillaan. Mutta kaiken aikaa minä kuunnellessani ajattelin Dorothya
ja tuskittelin, että hän ehkä kertoisi Henrylle jotakin, mikä ei olisi
minulle vallan edullista jälkeenpäin. Ja vihdoin herra Montrosekin
näkyi sen huomaavan ja sanoi: "Mikä sinua vaivaa, tyttöseni?
Maksaisinpa pennin ajatuksistasi."
Sitten minä kerroin hänelle kaikki. Ja hän näkyi miettivän aika

paljon ja sitten hän sanoi: "On tosiaan kovin ikävää, että herra
Spoffardin perhe-elämä tuskastuttaa sinua, sillä herra Spoffard olisi
ihanteellinen mies minun filmieni kustantajaksi." Ja sitten herra
Montrose sanoi, että hän alunpitäen oli ajatellut, kuinka ihanteellista
olisi, että minä esittäisin Dolly Madisonia. Sitten minä aloin miettiä ja
sanoin herra Montroselle, että toivoin saavani vallan ison
rahasumman myöhemmin ja kustantaisin sen itse. Mutta herra
Montrose vastasi, että se olisi liian myöhään, koska kaikki
eläväinkuvain yhtiöt sitä nyt tavottelivat ja se melkein hetikohta
siepattaisiin.
Tällöin minä melkein säikähdin, sillä äkkiä juolahti mieleeni, että

jos ottaisin Henryn ja samalla työskentelisin elävissäkuvissa, niin ei
Henryn seuraelämä olisi niin hirveää. Sillä jos tytöllä olisi niin paljon
puuhaa, ei tosiaan merkitsisi vallan paljoa, vaikka hänen täytyisikin
sietää Henryä silloin, kun hänellä ei ollut puuhaa. Mutta sitten minä
muistin, millä asioilla Dorothy oli, ja sanoin herra Montroselle, että
pelkäsin olevan jo liian myöhäistä. Riensin siis puhelimeen ja soitin
kotiin Dorothylle ja kysyin, mitä hän oli Henrylle sanonut. Ja Dorothy
sanoi näyttäneensä hänelle sen nelitahkoisen smaragdin ja
kertoneensa hänelle minun ostaneeni sen pikku leluksi vihreään
pukuuni, mutta että kun olin saanut siihen pukuun tahran, aioin antaa
sekä puvun että smaragdin Lululle. Ja sitten hän sanoi näyttäneensä
helmet ja sanoi, että minä ne ostettuani kaduin, etten ostanut
vaaleanpunaisia, valkoiset kun olivat niin perin tavallisia, joten minä
olin käskenyt Lulun purkaa ne ja ommella aamunuttuuni. Ja sitten
hän oli sanonut hänelle olleensa vähän pahoillaan, että olin mennyt
ostamaan venäläisiä kruununkalleuksia, koska hän aavisteli niiden
tietävän onnettomuutta, mutta että minä olin hänelle sanonut, että
jos ne sellaisiksi osoittautuisivat, niin voisinhan minä jonakuna iltana,
kun uusi kuu oli noussut taivaalle, mennä nakkaamaan ne
vasemman olkani yli Hudson-virtaan, mikä kyllä kirot poistaisi.
Ja sitten hän sanoi Henryn alkaneen käydä levottomaksi. Sitten

hän kertoi sanoneensa hänelle olevansa iloinen, että minä kerrankin
jouduin naimisiin, koska minulla oli sellainen kova onni, että aina kun
menin kihloihin, näkyi minun kihlatulleni jotakin tapahtuvan. Silloin
Henry kysyi, mitä esimerkiksi. Ja Dorothy sanoi, että pari niistä oli
mielisairaalassa, yksi oli velkaantuneena ampunut itsensä ja lopuista
piti pakko-työsiirtola huolta. Ja Henry kysyi, kuinka heille nyt niin oli
käynyt, ja Dorothy selitti, että se vain johtui minun
tuhlaavaisuudestani, ja sanoi ihmettelevänsä, ettei Spoffard ollut siitä
koskaan kuullut, sillä minunhan tarvitsi syödä vain puolista Ritzissä
jonkun kuuluisan pörssimiehen kanssa, jotta seuraavana päivänä
tapahtuisi romahdus. Ja hän sanoi, ettei hän suinkaan tahtonut
mitään vihjaista, mutta että minä olin syönyt päivällistä erään kovin,
kovin mahtavan saksalaisen kanssa, kun seuraavana päivänä
Saksan markat muuttuivat makulatuuriksi.
Siitä kaikesta minä melkein vimmastuin ja käskin Dorothyn

pysyttää Henryn talossa, kunnes minä tulisin sinne selittämään.
Sitten minä jäin puhelimeen sillä välin, kun Dorothy meni katsomaan,
odottaisiko Henry. Ja Dorothy tuli minuutin päästä takaisin ja sanoi,
että vierashuone oli tyhjä, mutta että jos rientäisin Broadwaylle, niin
epäilemättä näkisin tomupilven Pennsylvanian aseman puolella, ja
siellä huristaisi Henry.
Sitten minä palasin herra Montrosen luo ja sanoin, että minun

täytyi tavoittaa Henry Pennsylvanian asemalta, maksoi mitä maksoi.
Ja jos joku sanoisi, että me lähdimme Primrosen teehuoneesta
kiireellisesti, niin se olisi vallan lievää kieltä. Niin me menimme
Pennsylvania asemalle ja hädin tuskin minä ehdin Philadephian
junaan, jättäen herra Montrosen junan viereen levottomana
kynsiänsä pureskelemaan. Mutta minä huusin hänelle, että hän
menisi hotelliinsa, ja lupasin soittaa hänelle tulokset, heti kun juna
olisi saapunut perille.
Sitten minä kävelin junan läpi, ja siellä oli Henry, kasvoillaan ilme,
jota en ikinä unohda. Sillä kun hän näki minut, näkyi hän kutistuvan
puoleen normaalikoostaan. Minä istahdin siis hänen viereensä ja
sanoin hänelle, että hänen menettelynsä tosiaan hävetti minua ja
että jollei hänen rakkautensa voinut kestää pikku koetta, jonka minä
ja Dorothy pikemminkin huvin vuoksi olimme keksineet, niin en
viitsisi mokomalle herrasmiehelle virkkaa sanaakaan. Ja minä sanoin
hänelle, että jollei hän voinut erottaa oikeata nelitahkoiseksi
veistettyä smaragdia rihkamakaupan lelusta, niin hänen tulisi hävetä.
Ja minä sanoin, että jos hän luuli, että jokainen rihmallinen valkoisia
lasihelmiä oli kalliita päärlyjä, niin ei ollut ihmekään, että hän saattoi
niin pahoin erehtyä tytön luonnetta arvostellessaan. Ja sitten minä
aloin itkeä Henryn tavattoman epäluuloisuuden vuoksi, jolloin hän
yritti mua lohduttaa, mutta minä olin niin syvästi loukkaantunut, etten
lausunut hänelle siivoa sanaa ennenkuin olimme Newarkin
sivuuttaneet. Mutta Newarkin sivuutettuamme Henry itsekin itki, ja
minun sydämeni aina niin heltyy kuullessani herrasmiehen itkevän,
että minä lopuksi annoin hänelle anteeksi. Kotiin päästyäni minun
siis täytyy viedä jalokivet kauppaan takaisin.
Ja sitten minä selitin Henrylle, että halusin elämällemme tulevan

jotakin tarkoitusta ja että tahdoin tehdä maailman paremmaksi, kuin
mitä se tähän asti näkyy olleen. Ja minä sanoin hänelle, että kun hän
tiesi niin paljon filmiammatista kaiken sensuroimisensa perusteella,
niin olin ajatellut, että minun mielestäni hänen pitäisi itse antautua
filmialalle. Sillä minä sanoin hänelle, että hänenlaisensa
herrasmiehen velvollisuus maailmaa kohtaan oli valmistaa
säädyllisiä filmejä ollakseen esimerkkinä muille filmiyhtymille ja
näyttääkseen maailmalle, millaisia säädylliset filmit olivat. Ja
Henryssä se herätti kovin, kovin suurta mielenkiintoa, koskei hän
milloinkaan ollut ajatellut filmialaa. Sitten minä sanoin hänelle, että
voisimme saada herra Gilbertson Montrosen kirjoittamaan meille
filmitekstit, ja hän sensuroisi ne ja minä näyttelisin niissä, ja kun
kaikki olisimme tehneet tehtävämme, niin varmaan siitä tulisi
taidetta. Mutta ne olisivat myöskin puhtaampia kuin useimmat
taideteokset näkyvät olevan. Henry sanoi siis, että päästyämme
Philadelphiaan me ryhtyisimme hommaan, mutta hän ei tosiaan ollut
sitä mieltä, että minun tulisi niissä näytellä. Mutta minä sanoin
Henryle, että mikäli olin nähnyt hienon maailmannaisten yrityksiä
elävien kuvien alalla, en luullut, että olisi arvoa alentavaa, jos joku
heistä yrityksissään onnistuisikin. Näin sain hänet siihenkin
suostumaan.
Päästyämme siis Henryn maatilalle me kerroimme kaikki Henryn

omaisille, ja he kaikki ihastuivat. Sillä se oli ensi kertaa sodan
jälkeen, kun Henryn omaiset olivat saaneet jotakin määrätietoista
mieleensä painettavaksi. Tarkoitan, että Henryn sisar asian
kuultuaan ihan hypähti riemusta, sillä hän sanoi, että hän ottaisi
pitääkseen huolta kuorma-autoista ja pitäisi ne ensiluokkaisessa
kunnossa. Sitten minä myöskin lupasin Henryn äidille, että hän saisi
näytellä filmeissä. Tarkoitan, että voisimme esittää hänestä lähikuvan
silloin tällöin, koska toki jokaisessa filmissä täytyy olla lystillistä
lievennystä. Ja minä lupasin Henryn isälle, että me kärräisimme
hänet läpi ateljeerin ja sallisimme hänen katsella kaikkia
näyttelijättäriä, jolloin hän oli vähällä taaskin saada uuden puuskan.
Ja sitten minä soitin herra Montroselle ja sovin hänen kanssaan, että
hän tulisi tapaamaan Henryä ja pohtimaan hänen kanssaan asiaa.
Ja herra Montrose sanoi: "Jumala siunatkoon sinua, herttainen
lapsi!"
Ja minä alan melkein uskoa, mitä jokainen sanoo, että minä olen
pelkkää päivänpaistetta, koska jokainen näkyy tulevan onnelliseksi
joutuessaan kosketuksiin minun kanssani. Tarkoitan, kaikki muut
paitsi Eisman. Sillä New Yorkiin palattuani minä avasin kaikki hänen
sähkösanomansa ja huomasin, että hänen piti saapua Aquitanialla jo
heti seuraavana päivänä. Minä siis menin Aquitanialle häntä
vastaan, vein hänet Ritziin puoliselle ja kerroin hänelle kaikesta.
Silloin hän kävi kovin, kovin alakuloiseksi, sillä hän sanoi, että ihan
heti, kun hän oli saanut minut täydelleen kasvatetuksi, minun pitikin
juosta tieheni ja mennä avioliittoon. Mutta minä sanoin hänelle, että
hänen tosiaan tulisi olla minusta hyvin ylpeä, sillä kun hän
vastaisuudessa näkisi minut puolisella Ritzissä kuuluisan Henry H.
Spoffardin vaimona, niin minä aina niiaisin hänelle, jos hänet näkisin,
ja hän voisi osoittaa minua kaikille tuttavilleen ja sanoa, että juuri
hän, Gus Eisman, oli kasvattanut minut tähän asemaan. Ja se
ilahdutti herra Eismania aika paljon, enkä minä tosiaan välitä, mitä
hän juttelee tuttavilleen, koskeivät hänen tuttavansa kumminkaan ole
minun lajiani, eikä sitä, mitä hän minusta sanoneekin, huhu minun
seurapiirissäni kerro. Kun siis puolinen oli nautittu, luulen tosiaan,
että vaikkei herra Eisman varsin onnellinen ollutkaan, ei hän
kuitenkaan voinut olla tuntematta jotakin huojennusta, varsinkin
minun monia ostoksiani ajatellessaan.
Senjälkeen vietettiin siis hääni, ja koko Philadelphian ja New

Yorkin kermasto tuli minun häihini, ja kaikki olivat minulle kovin
herttaisia, koska melkein jokainen heistä on kirjoittanut filmin. Ja
jokainen sanoo, että minun hääni olivat kovin, kovin ihanat.
Tarkoitan, että Dorothykin sanoi niiden olleen ihanat, vaikka Dorothy
väitti täytyneensä keskittää ajatuksensa armeenialaisten verilöylyyn
voidakseen pidättyä nauramasta ääneensä jokaisen kuullen. Mutta
se vain osoittaa, ettei edes avioliitto ole pyhä Dorothyn kaltaiselle
tytölle. Ja häiden jälkeen minä kuulin Dorothyn salavihkaa juttelevan
herra Montoselle ja sanovan herra Montoselle, että kai minusta tulisi
suuri eläväinkuvain sankaritar, jos hän sepittäisi minulle osan, jossa
olisi esitettävä vain iloa, surua ja vatsankipua. En siis luule, että
Dorothykaan on oikein uskollinen ystävä.
Henryjä minä emme lähteneet kuherrusmatkalle, koska minä

sanoin Henrylle, että olisi tosiaan itsekästä meidän molempain
matkustaa pois yhdessä yksinämme sillä välin kun kaikki meidän
toimintamme meitä niin kipeästi kaipasi. Sillä täytyihän minun viettää
aika paljon aikaa herra Montrosen kanssa, yhdessä
tarkastaessamme filmitekstejä, koska herra Montrose sanoo, että
minulla on enemmän aatteita kuin mitään muuta. Siis toimittaakseni
Henrylle jotakin tehtävää sillä välin kun herra Montrose ja minä
puuhailemme filmissä, minä pyysin Henryä perustamaan
menestysliiton kaikkien ylimääräisten tyttöjen keskuuteen, jotta he
kertoisivat hänelle kaikki huolensa ja hän saisi tilaisuuden antaa
heille hengellistä hoivaa. Ja siitä on tosiaan tullut hyvin, hyvin suuri
syksee, sillä nykyisin ei ole muissa ateljeereissa varsin paljon työtä
tekeillä, joten ylimääräisillä tytöillä ei ole mitään parempaa tointa, ja
tietäväthän he kaikki, ettei Henry anna heille työtä meidän
ateljeerissamme, jos he eivät yhdy liittoon. Ja mitä turmeltuneempia
he sanovat olleensa ennenkuin Henry heidät tapasi, sitä enemmän
Henry siitä pitää, ja Dorothy sanoo, että hän oli eilen ateljeerissa, ja
selittää, että jos se kaikki, mitä ne ylimääräiset tytöt ovat Henrylle
itsestään kertoilleet, voitaisiin filmata ja puijata sensorin silmien ohi,
niin elävätkuvat kyllä pian olisivat päässeet lapsenkengistään.
Ja Henry sanoo, että minä olen avannut hänelle ihan uuden

maailman ja ettei hän eläissään ole ennen ollut näin onnellinen. Ja
näyttää tosiaan siltä kuin ei kukaan, jonka tunnen, olisi koskaan ollut
näin onnellinen elämässään. Sillä minä taivutan Henryn päästämään
isänsä ateljeeriin joka päivä, koska ateljeerissa toki pitää olla joku
pelästyspeikkokin ja se tässä tapauksessa voi yhtä hyvin olla Henryn
isä kuin joku muukin. Minä olen siis antanut käskyn kaikille
sähkömiehille, etteivät kääntäisi valosoihtujaan häneen, vaan
sallisivat hänen pitää hauskaa, koska tämä onkin hänen
ensimmäinen tilaisuutensa. Henryn äiti taas leikkauttaa tukkansa
polkaksi ja parafinoittaa kasvonsa, valmistuakseen esittämään
Carmenin osaa, koska hän näki matami Calve-nimisen tytön sitä
näyttelevän, kun hän oli kuherrusmatkallaan, ja hän on tosiaan aina
tuumaillut, että hän voisi sen tehtävän suorittaa paremmin. Enkä
minä häntä estellyt, vaan sallin hänen pitää päänsä ja nauttia
riemustaan. Mutten minä viitsi sähkömiehille puhua Henryn äidistä.
Eikä Henryn sisar ole Verdungin taistelun jälkeen koskaan ollut näin
onnellinen, sillä hänen huolehdittavinaan on kuusi kuorma-autoa ja
viisitoista hevosta, ja hän sanoo, että aselevosta asti hänestä ei
mikään ole siinä määrin muistuttanut sotaa kuin elävienkuvien
ammatti. Ja myöskin Dorothy on hyvin onnellinen, sillä Dorothy
sanoo, että hän on tässä kuussa nauranut enemmän kuin Eddie
Cantor koko vuodessa. Mutta kun tulee herra Montrosen vuoro,
luulen, että hän on onnellisempi kuin kukaan muu, koska hän
saanee minulta niin paljon ymmärtämystä ja simbatiaa.
Ja minä olen itsekin hyvin onnellinen, koska suurinta elämässä

sittenkin on tehdä kaikki muut onnellisiksi. Ja kun nyt jokainen on
niin onnellinen, luulen tosiaan, että on sopiva aika päättää
päiväkirjani, kun minulla nyt kumminkin on liian paljon puuhaa
harjoitellessa filmejäni herra Montrosen kanssa, voidakseni enää
pitää yllä mitään muuta kirjallista toimintaa. Ja minulla on niin kiirettä
Henryn elämän päivänpaisteena, että se kaikkien muiden
suoruuksieni ohella kyllä riittänee tytön tavoittelemaksi
saavutukseksi. Niinpä siis tosiaan luulen, että voin sanoa hyvästi
päiväkirjalleni siinä tunnossa, että kaikki lopultakin aina kääntyy
parhain päin.
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THE DETERMINANTS OF TRADE

1. What is the fundamental basis for trade among nations?

2. Patterns of trade among nations are primarily determined by

6. The principle of comparative advantage asserts that

7. A tax on an imported good is called a

9. The price of a good that prevails in a world market is called the

18. Trade among nations is ultimately based on

19. A country has a comparative advantage in a product if the world price is

27. If a country is an exporter of a good, then it must be the case that

6. When a country allows trade and becomes an exporter of a good,

7. Trade enhances the economic well-being of a nation in the sense that

8. When a country allows trade and becomes an importer of a good,

9. When a country allows trade and becomes an importer of a good,

15. When a country allows trade and becomes an exporter of a good,

16. When a country allows trade and becomes an importer of coal,

19. When a country allows trade and becomes an exporter of a good,

20. When a country allows trade and becomes an importer of a good,

The figure illustrates the market for wool in Scotland.

21. Refer to Figure 9-1. From the figure it is apparent that

22. Refer to Figure 9-1. From the figure it is apparent that

23. Refer to Figure 9-1. With trade, Scotland will

28. Refer to Figure 9-1. When trade is allowed,

32. Which of the following statements is true?

44. Refer to Figure 9-2. Without trade, consumer surplus is

45. Refer to Figure 9-2. Without trade, producer surplus is

48. Refer to Figure 9-2. With free trade, consumer surplus is

49. Refer to Figure 9-2. With free trade, producer surplus is

50. Refer to Figure 9-2. As a result of trade, total surplus increases by

51. Refer to Figure 9-2. This country

Figure 9-3. The domestic country is China.

54. Refer to Figure 9-3. With no international trade,

56. Refer to Figure 9-3. With trade, China will

57. Refer to Figure 9-3. With trade, producer surplus in China is

60. Refer to Figure 9-4. With trade, Nicaragua

61. Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

63. Refer to Figure 9-4. Which of the following statements is accurate?

68. Refer to Scenario 9-1. If trade in peaches is allowed, the

70. Refer to Figure 9-5. With trade, this country

71. Refer to Figure 9-5. Without trade, consumer surplus amounts to

72. Refer to Figure 9-5. Without trade, producer surplus amounts to

73. Refer to Figure 9-5. Without trade, total surplus amounts to

75. Refer to Figure 9-5. With trade, consumer surplus is

76. Refer to Figure 9-5. With trade, producer surplus is

77. Refer to Figure 9-5. With trade, total surplus is

85. Refer to Figure 9-6. With trade and without a tariff,

87. Refer to Figure 9-6. The size of the tariff on carnations is

88. Refer to Figure 9-6. The imposition of a tariff on carnations

97. Refer to Figure 9-7. With trade, Wales

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