Question 1

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 2

Related to the Economics in Practice on page 679: 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 is a satirical critique of protectionist policies that aim to shield domestic industries from foreign competition. By absurdly proposing a quota on sunlight - a free resource - to protect domestic candle makers, Bastiat highlights the inefficiency and harm caused by protectionism. The essay argues that industries that cannot compete effectively should not be protected by government intervention but instead should either find ways to become more efficient or exit the market. Therefore, the best choice is B, which correctly identifies Bastiat's argument against protecting industries that cannot compete effectively.

Question 3

Refer to the information provided in Figure 20.5 below to answer the questions that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel. This country imports 14 million barrels if the world price of oil is $________.

Accepted Answer

When the world price of oil is below the domestic price ($130), the country will import oil to meet its demand at a lower cost. At $120, the world price is below the domestic price, leading to imports.

Question 4

Refer to the information provided in Figure 20.5 below to answer the questions that follow.  Figure 20.5
-Refer to Figure 20.5. The domestic price of oil is $130 per barrel. If the world price of oil is $135 per barrel, this country will

Accepted Answer

At a domestic price of $130 per barrel, if the world price is higher at $135, the country will export oil. The difference between the domestic quantity demanded (20 million barrels) and the domestic quantity supplied (25 million barrels) at this price is 5 million barrels, indicating the country will export 5 million barrels to the world market.

Question 5

Related to the Economics in Practice on page 679: If the candle makers in the petition were able to gain protection for their industry, the French economy would most likely

Accepted Answer

Protection for the candle makers would likely lead to higher prices for candles, as domestic producers would face less competition and could raise prices.

Question 6

Free trade decreases world production and consumption.

Accepted Answer

Free trade generally leads to increased specialization and productivity, resulting in increased production and consumption on a global scale.

Question 7

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

Accepted Answer

Free trade allows countries to import goods and services from other countries that they may not be able to produce domestically, therefore allowing them to consume beyond their own production possibility frontier.

Question 8

Refer to the information provided in Figure 20.5 below to answer the questions that follow.  Figure 20.5
-Refer to Figure 20.5. 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

To eliminate all oil imports, the tariff must raise the domestic price above the world price. Since the domestic price is $130 and the world price is $120, a $10 tariff would equalize the domestic price with the world price plus the tariff, eliminating imports. With no imports, there would be no tariff revenue, making option A correct.

Question 9

Protection is often temporary to help infant industries.

Accepted Answer

The answer of Protection is often temporary to help infant...

Question 10

According to some environmental groups, free trade policies are potentially harmful to the environment.

Accepted Answer

Some environmental groups argue that free trade policies may lead to increased production and consumption, resulting in more pollution and resource depletion. They may also criticize the lack of environmental regulations in some countries that participate in free trade agreements, which can lead to environmental degradation. However, not all environmental groups hold this view, and there is debate surrounding the relationship between free trade and the environment.

Question 11

Protection makes the people of a country better off.

Accepted Answer

Protection, in the context of trade policies like tariffs and quotas, can lead to higher prices for consumers, inefficiencies in domestic industries, and retaliation from other countries, which can overall negatively impact the economic welfare of a country's population.

Quiz 20: International Trade, Comparative Advantage, and Protectionism