Foundations of Macroeconomics, 7e, GE (Bade/Parkin)

Chapter 18 International Trade Policy

4) If you buy a DVD player produced in Japan, a

A) good was exported by Japan and imported by the United States.
B) good was imported by Japan and by the United States.
C) service was imported by Japan and exported by the United States.
D) service was exported by Japan and imported by the United States.
E) good was exported by Japan and by the United States.
Answer: A

14) The country with a comparative advantage in the production of a good has a
A) lower opportunity cost of production.
B) higher opportunity cost of production.
C) horizontal production possibilities frontier.
D) vertical production possibilities frontier.
E) linear production possibilities frontier.
Answer: A

15) The United States imports t-shirts because

A) it is a dangerous job to produce them.
B) foreign nations have a lower opportunity cost of production.
C) the United States has a lower opportunity cost of production.
D) foreign economies have an absolute advantage in their production.
E) the United States must import goods and services from other countries so that they can develop
economically.
Answer: B

16) If the United States starts to import a good that had previously been produced in the United States,
the market price of the good in the United States
A) rises.
B) falls.
C) remains constant.
D) either remains constant or rises, depending on how whether the supply of the good stays the same or
increases.
E) There is not enough information to answer the question because we need to know if the market price
in the United States had been above or below the world market price before trade began.
Answer: B

17) If the United States imports purses, then the quantity of purses produced in the United States will
________ and the quantity of purses purchased by consumers in the United States will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; increase
Answer: C

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18) Most t-shirts bought by Americans are made in Asia. As a result of free trade, the production of t-
shirts in America
A) has increased.
B) has stayed the same.
C) has decreased.
D) has been taken over by the government.
E) might change, but more information about what else the United States imports is needed to determine
if U.S. production increased, decreased, or did not change.
Answer: C

19) The United States imports t-shirts from Asia. As a result, U.S. consumers pay ________ otherwise and
Asian producers receive ________ otherwise.
A) a higher price than; a higher price than
B) a higher price than; a lower price than
C) a lower price than; a higher price than
D) a lower price than; a lower price than
E) the same price as; the same price as
Answer: C

22) If a nation imports a good that can be domestically produced, what happens to the quantity
consumed of the good and why?
A) The quantity consumed increases because the market price decreases.
B) The quantity consumed decreases because the market price increases.
C) The quantity consumed remains constant because the price is unchanged.
D) The quantity consumed increases because the market price increases.
E) The quantity consumed decreases because the market price decreases.
Answer: A

23) A country will export a good if it

A) can sell the good to a foreigner at a higher price than the no-trade price.
B) can sell the good to a foreigner at a lower price than the no-trade price.
C) can dump the good on the world market.
D) has a high opportunity cost of production.
E) is impossible to import the good.
Answer: A

24) A country exports a good if

A) it has a high opportunity cost of production.
B) the world price of the good is below the country's no-trade equilibrium price.
C) the world price of the good is above the country's no-trade equilibrium price.
D) the quantity demanded of the good in the country is greater than the quantity supplied at the world
price.
E) it cannot import the good.
Answer: C

25) A nation will export a good if its

A) no-trade, domestic price is equal to the world price.
B) no-trade, domestic price is less than the world price
C) no-trade, domestic price is greater than the world price.
D) no-trade, domestic quantity is less than the world quantity.
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E) no-trade, domestic quantity is greater than the world quantity.
Answer: B

26) As a result of importing a good, domestic consumers ________ the quantity consumed and the price
of the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) increase; does not change
Answer: B

28) The above figure shows the U.S. market for flip-flops. When there is no international trade, the U.S.
price is ________ per flip-flop and the U.S. quantity is ________ flip-flops.
A) $12; 300,000
B) $14; 500,000
C) $12; 700,000
D) $14; 300,000
E) $14; 700,000
Answer: B

30) The above figure shows the U.S. market for flip-flops. With international trade, the United States
imports ________ flip-flops.
A) 300,000
B) 500,000
C) 700,000
D) 0 because the United States exports flip-flops
E) 400,000
Answer: E

31) The above figure shows the U.S. market for flip-flops. With international trade, U.S. consumers buy
________ flip-flops and U.S. producers produce ________ flip-flops.

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A) 500,000; 500,000
B) 300,000; 700,000
C) 500,000; 300,000
D) 700,000; 300,000
E) 700,000; 500,000
Answer: D

37) The table above has the domestic demand and domestic supply schedules for a good. According to
the table, the no-trade price of the good is
A) $4.
B) $6.
C) $8.
D) $10.
E) $2.
Answer: B

38) The table above has the domestic demand and domestic supply schedules for a good. If the world
price of the good is $10, then according to the table
A) domestic production is higher before trade than after trade.
B) the country imports 16 units a day.
C) the country imports 6 units a day.
D) the country exports 6 units a day.
E) the country exports 22 units a day.
Answer: D

39) According to the above table, the country will import the good if the world price is less than ________
and will export the good if the world price is more than ________.
A) $4; $4
B) $6; $6
C) $8; $4
D) $10; $10
E) $4; $8
Answer: B

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40) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of
international trade, cherry farmers would receive ________ per pound of cherries.
A) $0.50
B) $1.50
C) $2.50
D) $2.00
E) $1.00
Answer: B

41) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of
international trade, how many pounds of cherries would U.S. farmers produce?
A) 200,000 pounds
B) 400,000 pounds
C) 600,000 pounds
D) 800,000 pounds
E) 0 pounds
Answer: B

42) The figure above shows the U.S. demand and U.S. supply curves for cherries. Suppose the world price
of cherries is $2 per pound. At this price, U.S. consumption of cherries will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: A

43) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2
per pound, the production of cherries in the United States will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.

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D) 800,000 pounds.
E) 0 pounds.
Answer: C

44) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2
per pound, the total exports of cherries from the United States to other nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: B

45) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2
per pound, the total imports of cherries to the United States from other nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: E

46) The above figure shows the U.S. market for wheat. When there no international trade, the U.S. price of
wheat is ________ per ton and the U.S. equilibrium quantity is ________ tons.
A) $14; 300,000
B) $14; 500,000
C) $16; 500,000
D) $16; 300,000
E) $16; 700,000
Answer: B

47) The above figure shows the U.S. market for wheat. With international trade, the price of wheat in the

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United States is ________ per ton and the United States ________ wheat.
A) $16; exports
B) $14; exports
C) $14; imports
D) $16; imports
E) $14; does not trade
Answer: A

48) The above figure shows the U.S. market for wheat. With international trade, the United States exports
________ of wheat.
A) 300,000 tons
B) 500,000 tons
C) 700,000 tons
D) 400,000 tons
E) None of the above answers is correct because the United States imports wheat.
Answer: D

49) The above figure shows the U.S. market for wheat. With international trade, U.S. consumers buy
________ tons of wheat and U.S. producers produce ________ tons of wheat.
A) 700,000; 300,000
B) 500,000; 500,000
C) 300,000; 500,000
D) 300,000; 700,000
E) 500,000; 700,000
Answer: D

50) The above figure shows the U.S. market for wheat. With no international trade, the price of wheat in
the United States is ________ per ton. With international trade, the price of wheat in the United States is
________ per ton.
A) $16; $14
B) $500; $300
C) $14; $16
D) $700; $300
E) $500; $700
Answer: C

51) International trade benefits

A) only the exporter.
B) only the importer.
C) both the exporter and the importer.
D) neither the exporter nor the importer.
E) the exporter at all times and sometimes also the importer.
Answer: C

64) A nation will import a good if its no-trade, domestic

A) price is equal to the world price.
B) price is less than the world price.
C) price is greater than the world price.
D) quantity is less than the world quantity.
E) quantity is greater than the world quantity.
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Answer: C

65) When a good is imported, the domestic production of it ________ and the domestic consumption of it
________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) increases; does not change
Answer: C

67) When a country imports a good, the ________ to consumers is ________ the ________ to producers.
A) loss; larger than; gain
B) loss; smaller than; gain
C) gain; smaller than; loss
D) gain; equal to; loss
E) gain; larger than; loss
Answer: E

68) When a country exports a good, the ________ to consumers is ________ the ________ to producers.
A) loss; larger than; gain
B) loss; smaller than; gain
C) gain; smaller than; loss
D) gain; equal to; loss
E) gain; larger than; loss
Answer: B

1) A tariff is
A) a tax imposed on imports.
B) any non-tax action used to restrict trade.
C) a tax imposed on exports.
D) any non-subsidy used to increase trade.
E) a subsidy granted to imports.
Answer: A

2) A tariff is a tax
A) on an exported good.
B) on an imported good.
C) imposed on all traded goods.
D) imposed on people's income.
E) imposed on the difference between the value of the goods a firm imports and the value of the goods it
exports.
Answer: B

5) Since the mid-1970s, the average U.S. tariff rate is

A) less than 5 percent.
B) between 6 percent and 15 percent.
C) between 16 percent and 25 percent.
D) between 26 percent and 35 percent.
E) larger than 36 percent.
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Answer: A

6) Looking at the average tariff rate in the United States since 1930, we see that
A) at first tariffs declined, but have recently risen.
B) tariffs have trended downward for most of the period.
C) tariff levels have remained high, at over 50 percent throughout the period.
D) while we talk about free trade, tariff levels have risen over the last 30 years.
E) tariffs were made illegal in the United States in 1955.
Answer: B

7) During the past 70 years, the peak average tariff rate in the United States stemmed from the
A) creation of GATT in the middle of the 1940s.
B) Kennedy Administration in the early 1960s.
C) Uruguay round of GATT in the 1980s.
D) Smoot-Hawley Tariff Act in the early 1930s.
E) Clinton-Bush tariff of 2000-2001.
Answer: D

8) The agreement between the United States, Mexico, and Canada that sought to lower trade barriers is
known as
A) the General Agreement on Tariffs and Trade.
B) the North American Free Trade Agreement.
C) the World Trade Organization.
D) the Smoot-Hawley Tariff Act.
E) the New World Free Trade Agreement.
Answer: B

9) In the wake of worsening relations with China, some Americans called for an increase in tariffs on
Chinese products coming into America. If higher tariffs are imposed on clothing produced in China, the
price of clothing in America would
A) decrease.
B) increase.
C) not change.
D) first increase then decrease.
E) first decrease then increase.
Answer: B

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