Question 1

Refer to the information provided in Figure 33.4 below to answer the question(s) that follow.  Figure 33.4
-Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic consumption is

Accepted Answer

With free trade, the price of a leather wallet is $10, which is lower than the domestic price of $20. This lower price increases domestic consumption to 300 units.

Question 2

Related to the Economics in Practice on page 669: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Accepted Answer

If the candle makers gained protection, it would limit competition and allow them to charge higher prices for their products. This would lead to consumers having to pay higher prices for candles, potentially causing a decrease in demand for candles and a decrease in overall economic efficiency. Therefore, the French economy would have to pay higher prices for candles if the candle makers gained protection.

Question 3

Related to the Economics in Practice on p. 669: The French economy would most likely have to pay higher prices for candles if the candle makers in the petition

Accepted Answer

If the candle makers in the petition were able to gain protection for their industry, it would likely result in higher prices for candles in the French economy as competition would be decreased and the protected candle makers would be able to charge higher prices without fear of losing market share to foreign competitors.

Question 4

Free trade decreases world production and consumption.

Accepted Answer

Free trade is generally considered to increase world production and consumption by lowering barriers to trade and increasing competition. It allows businesses to access larger markets and consumers to access a wider range of goods at lower prices.

Question 5

Related to the Economics in Practice on p. 669: Protectionism of the kind that is suggested in the petition of the candle makers would most likely result in

Accepted Answer

Protectionism in the form of banning imports of foreign, cheaper candles will result in a decrease in consumption. This is because consumers will have to either pay higher prices for domestically produced candles or go without candles altogether. Therefore, the overall demand for candles would decrease, lowering consumption.

Question 6

Refer to the information provided in Figure 33.4 below to answer the question(s) that follow.  Figure 33.4
-Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If the tariff is changed so that it is now ________, tariff revenue in this country will be zero.

Accepted Answer

If the tariff is $10, the price with the tariff would equal the domestic price of $20, eliminating imports and thus tariff revenue.

Question 7

A tariff imposed on imported wine will cause the domestic ________ of wine to increase and the domestic ________ of wine to increase.

Accepted Answer

A tariff on imported wine is a tax on foreign wine, which will make it more expensive to import. This will lead to an increase in the price of imported wine, making it less attractive to consumers. As a result, the demand for domestic wine will increase, which will lead to an increase in the price and production of domestic wine.

Question 8

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow.  Figure 33.5
-Refer to Figure 33.5. The domestic price of oil is $130 per barrel, and the world price of oil is $120 per barrel. If the domestic government imposes a tariff of $________ per barrel, it will eliminate all oil imports and achieve tariff revenues of $________.

Accepted Answer

If the domestic price is $130 and the world price is $120, a tariff of $10 will equalize the domestic and world prices, eliminating imports. Since imports are eliminated, tariff revenue will be zero.

Question 9

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow.  Figure 33.5
-Refer to Figure 33.5. The domestic price of oil is $130 per barrel. If the world price of oil is $135 per barrel, this country will

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 10

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow.  Figure 33.5
-Refer to Figure 33.5. The domestic price of oil is $130 per barrel. This country imports 5 million barrels if the world price of oil is

Accepted Answer

According to the graph, at a world price of $125 per barrel of oil, the quantity demanded by this country would be 5 million barrels, which is the same as the quantity supplied domestically. Therefore, if the world price of oil is $125, the country would not need to import any oil and the domestic price of oil would also be $125, which is the same as the world price. If the world price were to be $120, the quantity demanded would be greater than the domestic supply, so the country would need to import more than 5 million barrels. If the world price were to be $135 or $140, the country would have a surplus of domestically supplied oil, and therefore would not import any oil.

Question 11

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow.  Figure 33.5
-Refer to Figure 33.5. The domestic price of oil is $130 per barrel. This country imports 14 million barrels if the world price of oil is $________.

Accepted Answer

The correct answer is A because the world price of oil must be lower than the domestic price of oil in order for the country to import oil.

Question 12

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow.  Figure 33.5
-Refer to Figure 33.5. The domestic price of oil is $130 per barrel. If the world price of oil is $120 per barrel, this country will

Accepted Answer

At the world price of $120, the domestic demand for oil is 25 million barrels and domestic supply is 11 million barrels. Therefore, the country will need to import the difference between demand and supply, which is 14 million barrels (25 - 11 = 14).

Question 13

Refer to the information provided in Figure 33.4 below to answer the question(s) that follow.  Figure 33.4
-Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed, domestic consumption of domestically produced wallets will be ________ wallets and domestic consumption of imported wallets will be ________ wallets.

Accepted Answer

With a tariff, the domestic price of a leather wallet is $15, which is higher than the world price of $10. This will lead to a decrease in imports and an increase in domestic production. The domestic consumption of domestically produced wallets will increase from 100 to 150, and the domestic consumption of imported wallets will decrease from 250 to 100.

Question 14

The case for ________ is based on the theory of comparative advantage.

Accepted Answer

The theory of comparative advantage suggests that countries can benefit from free trade by specializing in the production of goods and services in which they have a lower opportunity cost than their trading partners. This leads to increased efficiency and productivity, which ultimately benefits both countries. Quotas, export subsidies, and tariffs distort trade and can lead to inefficiencies and market inefficiencies.

Question 15

It is a valid argument that industries need to be protected from foreign competition because foreign wages are substantially lower than wages paid to U.S. workers.

Accepted Answer

While protecting industries from foreign competition due to lower foreign wages might protect domestic jobs in the short term, it can lead to inefficiencies, higher prices for consumers, and retaliation from other countries. Economic theory and practice suggest that free trade generally benefits countries by allowing them to specialize in industries where they have a comparative advantage.

Question 16

Free trade allows the people of a country to consume outside their production possibility frontier.

Accepted Answer

Free trade allows a country to import goods and services that are not produced within the country, thereby enabling its people to consume goods and services outside their domestic production possibility frontier.

Question 17

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow.  Figure 33.5
-Refer to Figure 33.5. The domestic price of oil is $130 per barrel, and the world price of oil is $120 per barrel. If the domestic government imposes a tariff of $10 per barrel, it will

Accepted Answer

If the domestic price of oil is $130 per barrel and the world price is $120 per barrel, then without a tariff, consumers in the domestic market would prefer to purchase oil from the world market. This means that the domestic market would import all of its oil, which is represented by the vertical intercept of the domestic demand curve with the world supply curve.

With the imposition of the tariff, the domestic price of oil would rise by the amount of the tariff to $140 per barrel ($130 + $10). At this price, the domestic quantity demanded would decrease, and the domestic quantity supplied would increase, so the domestic market would move along its supply and demand curves.

The import quantity would decrease from the initial level (represented by the vertical intercept of domestic demand and world supply) to a new level represented by the horizontal intercept of domestic demand and world supply at the higher domestic price with the tariff.

Since the new horizontal intercept represents a quantity of zero barrels, this means that the domestic market would import zero barrels of oil with the tariff in place. Therefore, the answer is A) import zero barrels.

Question 18

Related to the Economics in Practice on page 669: Satirist Frederic Bastiat's essay arguing for a quota on sunlight in order to protect domestic candle makers suggests that it is pointless to

Accepted Answer

Bastiat's essay was a satirical critique of protectionist policies that tried to shelter domestic industries from foreign competition. By proposing a quota on sunlight to protect candle makers, Bastiat was showing the absurdity of protecting industries that cannot compete effectively. Thus, the essay suggests that it is pointless to protect such industries through legislation.

Question 19

A quota imposed on imported steel will cause the domestic ________ of steel to increase and the domestic ________ of steel to increase.

Accepted Answer

A quota limits the amount of steel that can be imported into a country. This reduction in competition will cause the price of domestic steel to increase as domestic producers will have more power to set prices. Additionally, domestic producers will be incentivized to increase production to meet the demand previously filled by imports. Therefore, the production of domestic steel will also increase.

Question 20

Refer to the information provided in Figure 33.4 below to answer the question(s) that follow.  Figure 33.4
-Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With the tariff domestic consumption is

Accepted Answer

The answer of Refer to the information provided in Figure...

Quiz 33: International Trade, Comparative Advantage, and Protectionism

Related to the Economics in Practice on page 669: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Related to the Economics in Practice on p. 669: The French economy would most likely have to pay higher prices for candles if the candle makers in the petition

Free trade decreases world production and consumption.

Related to the Economics in Practice on p. 669: Protectionism of the kind that is suggested in the petition of the candle makers would most likely result in

A tariff imposed on imported wine will cause the domestic of wine to increase and the domestic of wine to increase.

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow. Figure 33.5 -Refer to Figure 33.5. The domestic price of oil is $130 per barrel. If the world price of oil is $135 per barrel, this country will

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow. Figure 33.5 -Refer to Figure 33.5. The domestic price of oil is $130 per barrel. This country imports 5 million barrels if the world price of oil is

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow. Figure 33.5 -Refer to Figure 33.5. The domestic price of oil is $130 per barrel. This country imports 14 million barrels if the world price of oil is $________.

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow. Figure 33.5 -Refer to Figure 33.5. The domestic price of oil is $130 per barrel. If the world price of oil is $120 per barrel, this country will

The case for ________ is based on the theory of comparative advantage.

It is a valid argument that industries need to be protected from foreign competition because foreign wages are substantially lower than wages paid to U.S. workers.

Free trade allows the people of a country to consume outside their production possibility frontier.

Refer to the information provided in Figure 33.5 below to answer the question(s) that follow. Figure 33.5 -Refer to Figure 33.5. The domestic price of oil is $130 per barrel, and the world price of oil is $120 per barrel. If the domestic government imposes a tariff of $10 per barrel, it will

Related to the Economics in Practice on page 669: Satirist Frederic Bastiat's essay arguing for a quota on sunlight in order to protect domestic candle makers suggests that it is pointless to

A quota imposed on imported steel will cause the domestic of steel to increase and the domestic of steel to increase.