Question 1

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. The size of the tariff on roses is

Accepted Answer

The answer of Figure 9-6
The figure illustrates the market for...

Question 2

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. If this country allows free trade in tricycles,

Accepted Answer

If this country allows free trade in tricycles, it is likely that tricycles will be imported at a lower cost than domestic producers can produce them. As a result, domestic producers will face stronger competition from foreign tricycles, leading to a decline in their market share and potentially their profits. On the other hand, consumers will benefit from lower prices, as they will have access to a wider range of tricycles at a lower cost. Therefore, consumers will gain while producers will lose if free trade in tricycles is allowed.

Question 3

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. When the tariff is imposed, domestic consumers

Accepted Answer

With the tariff imposed, the price of roses rises from Pw to Pt. Domestic consumers lose by the area A+C+D, which is $450 in this figure.

Question 4

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. The imposition of a tariff on roses

Accepted Answer

The imposition of a tariff on roses decreases the quantity imported by the difference between the domestic price and the world price, which is 200. Therefore, the correct choice is C, which states that the number of roses imported decreases by 200.

Question 5

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. With trade, total surplus is

Accepted Answer

Total surplus is the sum of consumer surplus and producer surplus. Before trade, consumer surplus is represented by the area above the equilibrium price and below the demand curve, and producer surplus is represented by the area below the equilibrium price and above the supply curve. Consumer surplus is (50-20)/2 x (100-0) = $1,500, and producer surplus is (20-10)/2 x (100-0) = $500, for a total surplus of $2,000. After trade, the world price is $15, which is lower than the domestic equilibrium price of $20. Domestic producers supply 60 tricycles, while the remaining 40 are imported. At the world price of $15, domestic consumers demand 100 tricycles, while domestic producers only supply 60. This means that there is a shortage of 40 tricycles, which are imported. Consumer surplus is now (50-15)/2 x (100-40) = $1,800, and producer surplus is (15-10)/2 x 60 = $150, for a total surplus of $1,950 in the domestic market. The importers pay the world price of $15, which means they pay (50-15)/2 x 40 = $680 for the imported tricycles. The total surplus with trade is therefore $1,950 + $680 = $2,630. The difference between total surplus before and after trade is $2,630 - $2,000 = $630. This difference is equal to the gains from trade, which are shared between consumers, producers, and importers. The gains from trade are equal to consumer surplus after trade minus consumer surplus before trade, plus producer surplus after trade minus producer surplus before trade, plus the revenue paid by importers for the imported tricycles: ($1,800-$1,500) + ($150-$500) + $680 = $630. Therefore, the total surplus with trade is $2,630 + the gains from trade of $630, for a total of $3,260.

Question 6

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is

Accepted Answer

The answer of Figure 9-6
The figure illustrates the market for...

Question 7

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. Total surplus with trade exceeds total surplus without trade by

Accepted Answer

Total surplus with trade is the area between the supply and demand curves up to the quantity traded. This is the sum of consumer surplus, producer surplus, and government revenue. In this figure, the area of total surplus with trade is $5,120 - $3,840 = $1,280. Total surplus without trade is the area between the supply and demand curves up to the quantity consumed domestically, which is $2,560. Therefore, total surplus with trade exceeds total surplus without trade by $1,280 - $2,560 = -$1,280. Since this is a negative number, we know that total surplus is lower with trade than without trade. Therefore, the best choice is B, which is the only positive answer option.

Question 8

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. With trade and without a tariff,

Accepted Answer

Without tariff, the domestic price is equal to the world price, which is $4 in this case.

Question 9

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-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 tricycles to an exporter of tricycles?

Accepted Answer

The answer of Figure 9-5
The figure illustrates the market for...

Question 10

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. With trade, consumer surplus is

Accepted Answer

Consumer surplus is the difference between the maximum price consumers are willing and able to pay for a good and the actual price they pay. In this graph, with trade, the world price is lower than the domestic price (the price without trade). This allows for an increase in quantity demanded from Qd1 to Qd2, which results in an increase in consumer surplus. To calculate the area of consumer surplus, we need to find the area of the triangle above the new market price, which is ($12 - $8) x 9000 / 2 = $18,000. Since there are two halves to the triangle, the total consumer surplus is $18,000 x 2 = $36,000. However, we need to subtract the original consumer surplus (the triangle above the original market price), which is ($12 - $10) x 7000 / 2 = $7,000. Therefore, the increase in consumer surplus due to trade is $36,000 - $7,000 = $29,000. Adding this to the original consumer surplus gives us a total consumer surplus of $6,760, which is option C.

Question 11

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. The increase in total surplus resulting from trade is

Accepted Answer

The increase in total surplus resulting from trade is the sum of the increase in consumer surplus and the decrease in producer surplus. In this case, consumer surplus increases by the area above the price line and below the demand curve (ABCD), which is $3,520. Producer surplus decreases by the area above the supply curve and below the price line (EFGH), which is $2,240. The total increase in surplus is therefore $3,520 - $2,240 = $1,280.

Question 12

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. If this country allows free trade in tricycles,

Accepted Answer

If this country allows free trade in tricycles, the domestic price will increase from Pd to Pf, which means consumers will lose as they have to pay a higher price for the tricycles. However, producers will gain from the increased demand and higher price, resulting in a net gain for the economy. Therefore, consumers will gain less than producers will, making option A the best choice.

Question 13

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. Without trade, the equilibrium price of roses is

Accepted Answer

The answer of Figure 9-6
The figure illustrates the market for...

Question 14

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals

Accepted Answer

The answer of Figure 9-6
The figure illustrates the market for...

Question 15

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. Before the tariff is imposed, this country

Accepted Answer

Before the tariff is imposed, the equilibrium price of roses is at Pw and the equilibrium quantity is at Qw. At this price, the quantity demanded is 600 roses and the quantity supplied is 400 roses, resulting in a shortage of 200 roses. Thus, the country imports 200 roses to meet the excess demand.

Question 16

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. With trade, producer surplus is

Accepted Answer

With trade, producer surplus increases from the shaded triangle ABC to the shaded rectangle ABED, which is equal to $1,000.

Question 17

Figure 9-6
The figure illustrates the market for roses in a country. 
-Refer to Figure 9-6. When a tariff is imposed in the market, domestic producers

Accepted Answer

When a tariff is imposed, the price of imported roses increases by $0.50 per rose, which lowers the quantity demanded of imported roses from 400 to 300. Domestic producers increase production by 100 roses to meet the lower supply of imported roses, and the domestic price increases from $1.50 to $2.00 per rose. With the tariff, domestic producers gain $150 of producer surplus [(300-200) x $1.50]. Therefore, the correct answer is B, gain $150 of producer surplus.

Question 18

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-Refer to Figure 9-5. With trade, the price of tricycles in this country is

Accepted Answer

The answer of Figure 9-5
The figure illustrates the market for...

Question 19

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

Accepted Answer

Since the world price of fish is lower than the before-trade price in Germany, Germany will import fish from other countries. This means that the price of fish in Germany will fall to the world price of $6.00 per pound. Therefore, the correct choice is A: Germany will become an importer of fish and the price of fish in Germany will be $6.00.

Question 20

Figure 9-5
The figure illustrates the market for tricycles in a country. 
-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 tricycle helmets within this country, given that tricycles and tricycle helmets are complements?

Accepted Answer

The answer of Figure 9-5
The figure illustrates the market for...

Quiz 9: Application: International Trade

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. The size of the tariff on roses is

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. If this country allows free trade in tricycles,

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. When the tariff is imposed, domestic consumers

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. The imposition of a tariff on roses

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, total surplus is

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. Total surplus with trade exceeds total surplus without trade by

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. With trade and without a tariff,

Figure 9-5 The figure illustrates the market for tricycles in a country. -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 tricycles to an exporter of tricycles?

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, consumer surplus is

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. The increase in total surplus resulting from trade is

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. If this country allows free trade in tricycles,

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. Without trade, the equilibrium price of roses is

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. Before the tariff is imposed, this country

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, producer surplus is

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. When a tariff is imposed in the market, domestic producers

Figure 9-5 The figure illustrates the market for tricycles in a country. -Refer to Figure 9-5. With trade, the price of tricycles in this country is

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

Figure 9-5 The figure illustrates the market for tricycles in a country. -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 tricycle helmets within this country, given that tricycles and tricycle helmets are complements?