Question 1

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is PW.Assume that all jeans are identical.
  FIGURE 34- 2
-Canadian governments (provincial and federal)currently provide enormous protection (through tariffs)to which of the following domestic industries?

Accepted Answer

The Canadian government provides significant protection to the dairy industry through tariffs and supply management to support domestic producers.

Question 2

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is PW.Assume that all jeans are identical.
  FIGURE 34- 2
-Refer to Figure 34- 2.Suppose Canada has free trade in jeans and then imposes a tariff of $t per pair.Canadian consumers will lose consumer surplus equal to the area

Accepted Answer

E

Question 3

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.
  FIGURE 34- 4
-If all countries try to expand their exports and restrict their imports through the use of export subsidies and import tariffs,the net effect will probably be

Accepted Answer

When countries try to restrict imports and subsidize exports, it creates trade barriers which result in a fall in the volume of trade. This leads to a decline in the average living standards in each country as they miss out on the benefits of comparative advantage and specialization. Additionally, this can also lead to retaliation by other countries and the overall global trade may suffer. Hence, the best choice is D.

Question 4

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is PW.Assume that all jeans are identical.
  FIGURE 34- 2
-Consider the following statement: "With unemployment at its highest level in years,Canada needs to protect domestic jobs by promoting a "Buy Canadian" policy." This statement is because _ .

Accepted Answer

The statement is incorrect because it overlooks the fact that importing foreign goods can lead to increased exports of domestic goods, as trade relationships are often reciprocal and can benefit the economy overall.

Question 5

Suppose you are an economist advising the Canadian government as to whether to erect trade barriers for the protection of Canada's textile industry.You are likely to study the gains to be realized in this industry and weigh those against

Accepted Answer

As an economist, the advisor would likely consider the potential negative effects of erecting trade barriers, such as higher prices for Canadian consumers. Additionally, they may also analyze the potential gains for the textile industry and weigh those against the potential costs to the broader economy and Canada's trading partners. However, protecting one industry could lead to inefficiencies and distortions in the market, ultimately harming the economy as a whole.

Question 6

Consider trade between country A and country B.If country A has wages that are substantially less than those in country B,

Accepted Answer

The pattern of comparative advantage depends not only on the difference in wages but also on the relative productivities of labor in the two countries. Therefore, it is possible that country B may still have a comparative advantage in producing certain goods despite higher wages, and trade between the two countries can be mutually beneficial. Choices A, B, C, and E are incorrect because they either assume absolute advantage or do not apply to the given scenario.

Question 7

The main difference between a tariff and an "equivalent" voluntary export restriction (VER)is that

Accepted Answer

A tariff generates revenue for the government of the importing country, while a VER allows foreign producers to capture the extra market value.

Question 8

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.
  FIGURE 34- 4
-Refer to Figure 34- 4.Assume there is free trade in bicycles.At a world price of $300,Canada's will be _ bicycles per year.

Accepted Answer

The answer of The diagram below shows supply and demand...

Question 9

Consider the following statement: "Canadians on average are worse off when some manufacturing jobs migrate from Canada to low- wage countries in Central America." This statement is because _ .

Accepted Answer

The statement is incorrect because the permanent gains to consumers from lower prices generally outweigh the temporary losses to displaced manufacturing workers.

Question 10

It is not possible for one country to sell all products more cheaply than other countries for any length of time because the

Accepted Answer

If one country sells all products more cheaply, the importing countries' currencies would depreciate, making imports more expensive and exports cheaper, thus balancing trade.

Question 11

The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is PW.Assume that all cotton towels are identical.
  FIGURE 34- 3
-Consider the North American Free Trade Agreement (NAFTA)between Canada,the United States and Mexico.Some industries in Canada,however,continue to have some trade protection.An example is

Accepted Answer

The diagram shows the domestic demand and supply curves for cotton towels in Canada. However, the question is asking about trade protection in Canadian industries. The best choice is E, dairy products, as this industry in Canada has historically been protected by trade barriers and subsidies.

Question 12

Any policy designed to benefit domestic industries at the expense of foreign export industries is called

Accepted Answer

A policy designed to benefit domestic industries at the expense of foreign export industries is called protectionism. This can be done through tactics such as tariffs, quotas, subsidies, and other barriers to trade. The ultimate goal is to protect domestic industries and workers from foreign competition by making imports more expensive or harder to obtain, thus favoring domestic production and consumption.

Question 13

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is PW.Assume that all jeans are identical.
  FIGURE 34- 2
-Consider the following statement: "Without a doubt,free trade improves the lives of every Canadian citizen." This statement is _ because .

Accepted Answer

The statement is incorrect because while free trade may bring overall benefits to a country, there are winners and losers in the process. In this specific case, if Canada were to open up to free trade, the domestic denim industry may suffer as they may not be able to compete with cheaper imported jeans, leading to possible job losses and economic hardship for those directly affected. However, consumers would benefit from the lower prices of imported jeans. Therefore, while free trade may lead to overall gains for a country, it is important to acknowledge the distributional effects and potential winners and losers.

Question 14

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.
  FIGURE 34- 4
-Refer to Figure 34- 4.Suppose the world price of bicycles is $200 and Canada has in place a 50% tariff on this good.The deadweight loss to the Canadian economy resulting from this tariff is per year.

Accepted Answer

The deadweight loss is the area of the triangle formed by the difference between the world price and the domestic price, multiplied by the quantity of imports. In this case, the world price is $200, the domestic price is $300, and the quantity of imports is 10,000. So the deadweight loss is (1/2) * (300 - 200) * 10,000 = $500,000.

Question 15

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is PW.Assume that all jeans are identical.
  FIGURE 34- 2
-Refer to Figure 34- 2.Suppose Canada has free trade in jeans and then imposes a tariff of $t per pair.Canada's jean- producing firms will gain producer surplus equal to the area

Accepted Answer

The answer of The diagram below shows the domestic demand...

Question 16

Suppose that at the current world price bananas are imported into Canada.Suppose also that domestic supply is perfectly inelastic and domestic demand has unit elasticity.If Canada were to place a tariff on imported bananas,the

Accepted Answer

Since domestic demand has unit elasticity, a rise in price due to the tariff will not change the total expenditure on bananas, even though the price increases.

Question 17

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.
  FIGURE 34- 4
-Refer to Figure 34- 4.Assume there is free trade in bicycles.If the world price of bicycles is $500,domestic consumption is at a price of _ _.

Accepted Answer

The answer of The diagram below shows supply and demand...

Question 18

When a firm sells its product abroad for less than the price at which it sells it in its domestic market,it is often accused of

Accepted Answer

When a firm sells its product abroad for less than the price at which it sells it in its domestic market, it is often accused of "dumping." Dumping refers to the practice of exporting goods at a price lower than the price charged in the home market or selling goods abroad at a price lower than the cost of production. It is considered unfair trade practice and can harm domestic producers in the export market.

Question 19

The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is PW.Assume that all cotton towels are identical.
  FIGURE 34- 3
-Refer to Figure 34- 3.If Canada imposes a tariff of $t per cotton towel,the deadweight loss to the Canadian economy is shown by area

Accepted Answer

The deadweight loss caused by a tariff is the lost gains from trade due to the reduction of trade caused by the tariff. In this case, the deadweight loss is represented by the area of triangle B and rectangle D. Therefore, the best choice is C.

Question 20

The diagram below shows the domestic demand and supply curves for denim jeans in Canada.The prevailing world price is PW.Assume that all jeans are identical.
  FIGURE 34- 2
-Refer to Figure 34- 2.Suppose Canada has free trade in jeans and then imposes a tariff of $t per pair.The deadweight loss to the Canadian economy is represented by the area

Accepted Answer

The deadweight loss from a tariff is represented by the areas of the triangles that show the loss in consumer and producer surplus that is not offset by gains elsewhere, which are typically labeled as E and H in economic diagrams.

Quiz 34: Trade Policy