Question 1

Recall Application 3, "Are They Really Dumping?" to answer the following questions:
-Based on what you learned from the application, can a firm who exports to the U.S. be charged with dumping even though the price they sell at home is lower?

Accepted Answer

According to the application, a firm who exports to the U.S. can be charged with dumping even though the price they sell at home is lower. This is because the "constructed value" estimated by the Department of Commerce can overstate the price that the firm charges at home, and the firm that brings forward the charges can supply overstated figures data to the Department of Commerce. Therefore, both option B and C are correct.

Question 2

Suppose France produces only two goods, airplanes and grapes. If France has a comparative advantage in grapes, a move toward free trade will:

Accepted Answer

If France has a comparative advantage in grapes, it means that France can produce grapes at a lower opportunity cost than airplanes. By moving toward free trade, France can benefit from importing airplanes at a lower cost and focusing on producing grapes, which it can produce more efficiently. This will lead to an increase in grape production, benefits for grape workers, and lower costs for airplane consumers. However, this may harm airplane workers in the short run as they may face job losses. But in the long run, the economy will benefit from producing goods where it has a comparative advantage, leading to an increase in overall output and income. Therefore, option D is the correct answer.

Question 3

Suppose the United States produces only two goods, grapes and tractors. If the United States has a comparative advantage in tractors, a move toward free trade will:

Accepted Answer

If the United States has a comparative advantage in tractors, then it can produce tractors at a lower opportunity cost than grapes. This means that by specializing in tractor production and trading with other countries for grapes, the US can increase its overall output and consumption of both goods. While grape workers may be harmed in the short term, in the long term the benefits of increased efficiency and productivity should outweigh any initial costs. Overall, the nation as a whole should benefit from the move toward free trade.

Question 4

Recall Application 4, "Trade, Consumption and Inequality," to answer the following questions:
-According to the application, examples of non- durable goods include:

Accepted Answer

Toys are non-durable goods because they are typically used up or discarded within a short period of time.

Question 5

The increase in the U.S trade deficit with Mexico after NAFTA went into effect was most likely the result of:

Accepted Answer

The devaluation of the peso made Mexican goods cheaper for American consumers, which increased imports and thus the U.S. trade deficit with Mexico.

Question 6

If France can produce grapes at a higher opportunity cost than any other nation, France is said to have a(n) _______  in the production of grapes.

Accepted Answer

France has a comparative disadvantage in the production of grapes because it incurs a higher opportunity cost compared to other nations.

Question 7

Figure 18.1
-Refer to Figure 18.1. Duckland has a comparative advantage in the production of:

Accepted Answer

According to the figure, Duckland has a lower opportunity cost of producing umbrellas compared to sunglasses. Therefore, it has a comparative advantage in the production of umbrellas.

Question 8

Autarky refers to:

Accepted Answer

Autarky refers to a situation where a nation or an economy is self-sufficient and does not participate in international trade.

Question 9

Figure 18.3
-Refer to Figure 18.3. With free trade, the equilibrium price is:

Accepted Answer

With free trade, the equilibrium price is determined by the world market, which is $8 in this scenario.

Question 10

For a nation to have a comparative advantage in a good it must have:

Accepted Answer

A nation has a comparative advantage in a good if it can produce that good at a lower opportunity cost than other nations. This means that the nation gives up less of other goods to produce the good in question. It is not necessary for the nation to have more or better resources, or a straight-line production possibilities curve, although these factors may contribute to its ability to produce the good at a lower opportunity cost.

Question 11

A tariff is a:

Accepted Answer

A tariff is a tax on an imported good, designed to make it less competitive with domestically produced goods. Option A refers to a quota, not a tariff. Option B is incorrect, as voluntary is the opposite of a tariff which is a form of government intervention. Option C refers to an excise tax, which is different from a tariff.

Question 12

Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A produces only x, it can make 20x per day. If nation A produces only y, it can make 15y per day. If nation B produces only x, it can make 15x per day. If nation B produces only y, it can make 15y per day. After trade begins nation _______ will specialize in the production of x and nation _______ will specialize in the production of y.

Accepted Answer

In order to maximize production and benefit from trade, each nation should specialize in producing the good that it has a comparative advantage in, meaning the good that it can produce at a lower opportunity cost than its trading partner. 
Nation A has a comparative advantage in producing x because it can produce 20 units of x per day compared to nation B's production of 15 units of x per day. 
Nation B has a comparative advantage in producing y because it can produce 15 units of y per day compared to nation A's production of 15 units of y per day (meaning they have equal production capabilities). 
Therefore, nation A will specialize in producing x and nation B will specialize in producing y.

Question 13

As a whole, nations are better off after trade and specialization because:

Accepted Answer

Trade and specialization allow nations to consume beyond their production possibilities curve, as they can trade for goods they do not produce, effectively expanding their consumption possibilities.

Question 14

If France can produce grapes at a lower opportunity cost than any other nation, France is said to have a(n)_______ in the production of grapes.

Accepted Answer

According to the given scenario, if France can produce grapes at a lower opportunity cost than any other nation, France has a comparative advantage in the production of grapes. This means that France can produce grapes more efficiently and effectively than other nations, giving them a competitive edge in the global market.

Question 15

As punishment to Europe for refusing to remove their ban on U.S. and Canadian hormone- treated beef, the WTO allowed the U.S. and Canada:

Accepted Answer

This is the most likely consequence as it is the most common form of retaliation allowed by the WTO. It would allow the U.S. and Canada to impose higher tariffs on a range of European products in response to the ban on their beef, thereby putting economic pressure on the European countries to remove their ban.

Question 16

Figure 18.1
-Refer to Figure 18.1. In autarky, the maximum amount of umbrellas that Duckland can produce is:

Accepted Answer

In autarky, Duckland can produce either 100 umbrellas or 500 apples. This is shown by the production possibility curve in Figure 18.1. Therefore, the maximum amount of umbrellas that Duckland can produce is 100.

Question 17

The difficulty with enforcing anti- dumping laws is that predatory pricing is difficult to determine if the lower price is due to:

Accepted Answer

Price discrimination involves a company charging different prices to different customers. This can result in a lower price for some customers, which may be mistaken for predatory pricing. Therefore, it can be difficult to determine whether a lower price is due to price discrimination or predatory pricing.

Question 18

What are some of the reasons why people protest against free trade?

Accepted Answer

The answer of What are some of the reasons why...

Question 19

Suppose the US imposes a ban on imported steel from China because the Chinese steel was made with factories that pollute the environment. If China complains to the WTO regarding the US ban, the WTO will side with:

Accepted Answer

The WTO generally does not allow countries to impose trade restrictions based on the production methods of another country unless there is a direct impact on the importing country.

Question 20

In 2002, President Bush imposed a tariff on imported steel in order to protect domestic steel producers. What was the reason why the tariff ended?

Accepted Answer

The threat of retaliatory tariffs by Europe was the reason why the tariff ended. The European Union had threatened to impose their own tariffs on US goods in response to the steel tariff, which would have hurt US industries and the economy as a whole. In order to avoid this, President Bush decided to repeal the tariff.

Quiz 18: International Trade and Public Policy

Recall Application 3, "Are They Really Dumping?" to answer the following questions: -Based on what you learned from the application, can a firm who exports to the U.S. be charged with dumping even though the price they sell at home is lower?

Suppose France produces only two goods, airplanes and grapes. If France has a comparative advantage in grapes, a move toward free trade will:

Suppose the United States produces only two goods, grapes and tractors. If the United States has a comparative advantage in tractors, a move toward free trade will:

Recall Application 4, "Trade, Consumption and Inequality," to answer the following questions: -According to the application, examples of non- durable goods include:

The increase in the U.S trade deficit with Mexico after NAFTA went into effect was most likely the result of:

If France can produce grapes at a higher opportunity cost than any other nation, France is said to have a(n) _______ in the production of grapes.

Figure 18.1 -Refer to Figure 18.1. Duckland has a comparative advantage in the production of: