Question 1

The benefits of trade include: I.greater productivity due to specialization.
II.higher output due to specialization according to comparative advantage.
III.increased welfare when preferences differ.

Accepted Answer

All three benefits are valid and recognized in economic theory. Trade allows for greater productivity and output due to specialization, as resources can be allocated to their most efficient use. Additionally, trade allows individuals to access a wider range of goods and services that may not be available domestically, increasing overall welfare when consumers have different preferences.

Question 2

Which of the following statements regarding trade is NOT true?

Accepted Answer

Trade does not necessarily raise prices for both trading partners. It can actually lead to lower prices as a result of increased competition and access to a wider range of goods.

Question 3

An increase in import trade tends to ______ domestic prices.

Accepted Answer

An increase in import trade usually means an increase in the supply of goods in the domestic market, which will lead to a decrease in domestic prices.

Question 4

According to the supply and demand framework in the text,an increase in import trade tends to ______ domestic production of a good.

Accepted Answer

An increase in import trade implies that foreign producers are able to supply the good at a lower cost than domestic producers. As a result, consumers tend to switch to the cheaper imported good, reducing the demand for the domestic good. This, in turn, leads to a decrease in production of the domestic good to adjust to the lower demand. Therefore, an increase in import trade tends to decrease domestic production of a good.

Question 5

If Tyler and Alex are trading partners,do their gains from trade depend on whether Tyler and Alex live in the same country?

Accepted Answer

The gains from trade depend on the comparative advantage of each partner and the terms of trade they negotiate. The location of the partners does not affect the gains from trade. Therefore, it does not matter in which country Tyler and Alex live.

Question 6

Use the following to answer questions 
Figure: International Trade 1 
-(Figure: International Trade 1)Refer to the figure.With the international trade in this figure,domestic consumption is ______ units,and ______ of those units are imported.

Accepted Answer

Domestic consumption is the quantity of goods consumed within the country, which is the quantity demanded at the world price. In the figure, this would be where the domestic demand curve intersects the world price line, indicating 13 units. The difference between domestic consumption (13 units) and domestic production (the quantity supplied by domestic producers at the world price, 5 units) is the quantity imported, which is 8 units (13 - 5 = 8).

Question 7

Protectionism:

Accepted Answer

Protectionism refers to policies that restrict trade and favor domestic producers. This can be done through tariffs, quotas, or other trade barriers. The aim of protectionism is to protect domestic industries and to decrease reliance on imports. However, it can lead to higher prices for consumers and retaliation from foreign countries, which can ultimately harm domestic industries as well.

Question 8

Use the following to answer questions 
Figure: Trade 
-(Figure: Trade)Refer to the figure.If this figure represents the market for oil and the country imposes no tariffs on international trade,domestic consumption will be:

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 9

Use the following to answer questions 
Figure: Foreign Trade 
-(Figure: Foreign Trade)Refer to the figure.What quantity would be traded in a free-trade environment?

Accepted Answer

In a free-trade environment, the quantity traded is determined by the intersection of the domestic supply and demand curves with the world price. The figure likely shows that at the world price, domestic demand exceeds domestic supply, and the difference between these quantities (1,400) represents the quantity imported to meet the excess demand.

Question 10

If the world price of cotton is less than the price that would occur domestically without trade,then a country will:

Accepted Answer

If the world price of cotton is less than the price that would occur domestically without trade, it means that other countries are able to produce cotton at a lower cost. In this scenario, it makes sense for the country to import cotton from other countries, rather than produce it domestically at a higher cost. Therefore, the correct answer is C - import cotton.

Question 11

When a country adopts free trade and becomes a net exporter of a good,that good:

Accepted Answer

The answer of When a country adopts free trade and...

Question 12

Use the following to answer questions 
Figure: Foreign Trade 
-(Figure: Foreign Trade)Refer to the figure.What quantity would be traded in the absence of any international trade?

Accepted Answer

In the absence of any international trade, the quantity traded would be at the intersection of the domestic supply and demand curves, which is 1,000 units.

Question 13

International trade is similar to local trade because:

Accepted Answer

Both international and local trade are based on the concept of comparative advantage, where each party specializes in producing the item(s) it can produce most efficiently and trades with others for items they are less efficient at producing. This leads to overall economic efficiency and benefits for all parties involved. The other options are incorrect as specialization does occur in international and local trade, they are not always efficient, and political considerations can play a significant role in international trade.

Question 14

Use the following to answer questions 
Figure: Trade 
-(Figure: Trade)Refer to the figure.If the world price for the good in this figure were higher than the domestic price,a move to free international trade means that the domestic economy would become:

Accepted Answer

If the world price is higher than the domestic price, it means the domestic economy can produce the good cheaper than the world market. Therefore, when moving to free international trade, the domestic economy would export more of the good to the world market, becoming a net exporter.

Question 15

Use the following to answer questions 
Figure: Trade 
-(Figure: Trade)Refer to the figure.With free international trade,the country in this figure will find that the good:

Accepted Answer

With free international trade, the price of the good will decrease as domestic consumers now have access to cheaper imports from foreign producers.

Question 16

Import trade tends to ______ domestic quantity of a good exchanged.

Accepted Answer

Import trade allows for an increased quantity of a good to be exchanged, as domestic consumers have access to goods that may not be produced domestically. This can lead to increased competition and potentially lower prices for consumers.

Question 17

Consider the following statements: I.Relative to a no-trade situation,if the United States exported wheat,the U.S.domestic wheat price would rise and domestic production of wheat would expand.
II.Relative to a no-trade situation,international trade causes the prices of all goods to rise.

Accepted Answer

Statement I is true because as the United States exports wheat, it reduces its domestic supply, causing the domestic price to increase. This increase in price then incentivizes domestic producers to increase their production levels, which ultimately leads to an expansion in the domestic production of wheat.
Statement II is false because international trade can result in both price increases and decreases, depending on factors such as the degree of competition in the relevant markets, the types of goods being traded, and prevailing market conditions (e.g. supply and demand).

Question 18

Use the following to answer questions 
Figure: International Trade 1 
-(Figure: International Trade 1)Refer to the figure.According to the figure,which of the following statements is TRUE?

Accepted Answer

After international trade, the price falls from $8 to $4, which is a $4 decrease. Consumption increases from 4 units to 8 units, which is an increase of 4 units.

Question 19

Use the following to answer questions 
Figure: Foreign Trade 
-(Figure: Foreign Trade)Refer to the figure.What quantity would be imported?

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Question 20

Use the following to answer questions 
Figure: Foreign Trade 
-(Figure: Foreign Trade)Refer to the figure.What quantity would be produced domestically?

Accepted Answer

The answer of Use the following to answer questions 
Figure:...

Quiz 19: International Trade

The benefits of trade include: I.greater productivity due to specialization. II.higher output due to specialization according to comparative advantage. III.increased welfare when preferences differ.

Which of the following statements regarding trade is NOT true?

An increase in import trade tends to ______ domestic prices.

According to the supply and demand framework in the text,an increase in import trade tends to ______ domestic production of a good.

If Tyler and Alex are trading partners,do their gains from trade depend on whether Tyler and Alex live in the same country?

Use the following to answer questions Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure.With the international trade in this figure,domestic consumption is units,and of those units are imported.

Protectionism:

Use the following to answer questions Figure: Trade -(Figure: Trade) Refer to the figure.If this figure represents the market for oil and the country imposes no tariffs on international trade,domestic consumption will be:

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be traded in a free-trade environment?

If the world price of cotton is less than the price that would occur domestically without trade,then a country will:

When a country adopts free trade and becomes a net exporter of a good,that good:

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be traded in the absence of any international trade?

International trade is similar to local trade because:

Use the following to answer questions Figure: Trade -(Figure: Trade) Refer to the figure.If the world price for the good in this figure were higher than the domestic price,a move to free international trade means that the domestic economy would become:

Use the following to answer questions Figure: Trade -(Figure: Trade) Refer to the figure.With free international trade,the country in this figure will find that the good:

Import trade tends to ______ domestic quantity of a good exchanged.

Consider the following statements: I.Relative to a no-trade situation,if the United States exported wheat,the U.S.domestic wheat price would rise and domestic production of wheat would expand. II.Relative to a no-trade situation,international trade causes the prices of all goods to rise.

Use the following to answer questions Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure.According to the figure,which of the following statements is TRUE?

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be imported?

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be produced domestically?

Quiz 19: International Trade

The benefits of trade include: I.greater productivity due to specialization. II.higher output due to specialization according to comparative advantage. III.increased welfare when preferences differ.

Which of the following statements regarding trade is NOT true?

An increase in import trade tends to ______ domestic prices.

According to the supply and demand framework in the text,an increase in import trade tends to ______ domestic production of a good.

If Tyler and Alex are trading partners,do their gains from trade depend on whether Tyler and Alex live in the same country?

Use the following to answer questions Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure.With the international trade in this figure,domestic consumption is ______ units,and ______ of those units are imported.

Protectionism:

Use the following to answer questions Figure: Trade -(Figure: Trade) Refer to the figure.If this figure represents the market for oil and the country imposes no tariffs on international trade,domestic consumption will be:

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be traded in a free-trade environment?

If the world price of cotton is less than the price that would occur domestically without trade,then a country will:

When a country adopts free trade and becomes a net exporter of a good,that good:

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be traded in the absence of any international trade?

International trade is similar to local trade because:

Use the following to answer questions Figure: Trade -(Figure: Trade) Refer to the figure.If the world price for the good in this figure were higher than the domestic price,a move to free international trade means that the domestic economy would become:

Use the following to answer questions Figure: Trade -(Figure: Trade) Refer to the figure.With free international trade,the country in this figure will find that the good:

Import trade tends to ______ domestic quantity of a good exchanged.

Consider the following statements: I.Relative to a no-trade situation,if the United States exported wheat,the U.S.domestic wheat price would rise and domestic production of wheat would expand. II.Relative to a no-trade situation,international trade causes the prices of all goods to rise.

Use the following to answer questions Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure.According to the figure,which of the following statements is TRUE?

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be imported?

Use the following to answer questions Figure: Foreign Trade -(Figure: Foreign Trade) Refer to the figure.What quantity would be produced domestically?

Use the following to answer questions Figure: International Trade 1 -(Figure: International Trade 1) Refer to the figure.With the international trade in this figure,domestic consumption is units,and of those units are imported.