Question 1

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. This country

Accepted Answer

The country in the figure has a comparative advantage in producing calculators as it has a lower opportunity cost compared to other countries. Therefore, it should export calculators to take advantage of its comparative advantage in the global market. Additionally, since the country is small in comparison to the world economy, it is a price taker and cannot influence the global price of calculators. Therefore, all of the above options are correct.

Question 2

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began

Accepted Answer

Before trade, the price in Paraguay was higher than the world price. This suggests that Paraguay was not trading with the rest of the world, and was either producing televisions domestically at a higher cost or was not importing them from other countries. Once trade was allowed, Paraguay could start importing televisions at the world price of $300, which is lower than their original price of $350. Therefore, the price of a television in Paraguay will decrease to $300 due to the competition from cheaper imported televisions.

Question 3

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will be

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 4

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, producer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 5

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. The world price for calculators represents

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 6

Suppose Iceland goes from being an isolated country to being an importer of coats. As a result,

Accepted Answer

If Iceland becomes an importer of coats, it means that they can now buy coats at a lower price than what it would cost them to produce it domestically. This benefits the consumers in Iceland as they can now purchase coats at a lower price, increasing their consumer surplus. However, it does not necessarily mean that Iceland has a comparative advantage in coat production.

Question 7

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. As a result of trade, total surplus increases by

Accepted Answer

From the graph, we can see that without trade, consumer surplus is represented by the area A+B+C+D+E and producer surplus is represented by the area F+G+H+I+J. With trade, consumer surplus increases to A+B+C+D+E+K+L+M+O and producer surplus increases to F+G+H+I+J+N. The increase in total surplus is therefore the sum of the increases in consumer and producer surplus, which is (K+L+M+O)+(N), equal to $250.

Question 8

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. Without trade, producer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 9

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, consumer surplus is

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 10

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. With free trade, this country will

Accepted Answer

The answer of Figure 9-2
The figure illustrates the market for...

Question 11

Within a country, the domestic price of a product will equal the world price if

Accepted Answer

If a country allows free trade, then there are no trade restrictions that would prevent the domestic price from equaling the world price. If there were trade restrictions, such as tariffs or quotas, the domestic price may be higher or lower than the world price. If a country chooses to import or export a product, it may still not equal the world price due to other factors such as transportation costs or quality differences.

Question 12

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. At the world price and with free trade,

Accepted Answer

At the world price with free trade, the domestic quantity demanded of calculators is equal to the domestic quantity supplied, indicating that the calculator market is in equilibrium. Option A is incorrect because in this scenario, the domestic quantity of calculators demanded is equal to the domestic quantity of calculators supplied. Option C is incorrect because there is no information in the figure to suggest that the domestic demand for calculators is perfectly inelastic. Option D is also incorrect because it is not clear whether domestic producers or consumers are better off, as it depends on the specifics of the market and the relative prices before and after free trade.

Question 13

When a country allows international trade and becomes an importer of a good,

Accepted Answer

When a country allows international trade and becomes an importer of a good, domestic producers of the good may become worse off as they face more competition from foreign producers. However, domestic consumers of the good become better off as they have access to a wider variety of goods at a lower price. The gains of the winners (consumers) exceed the losses of the losers (producers), resulting in net welfare gains for the country.

Question 14

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then

Accepted Answer

The answer of Suppose a country abandons a no-trade policy...

Question 15

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

Accepted Answer

The answer of Assume, for Colombia, that the domestic price...

Question 16

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

Accepted Answer

The answer of The world price of a pound of...

Question 17

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Accepted Answer

When a country allows trade in coffee with other countries, the domestic price of coffee will eventually equal the world price of coffee through the process of arbitrage. If the domestic price of coffee is higher than the world price, then domestic producers will find it profitable to export coffee, which will increase the global supply of coffee and lower the world price. Conversely, if the domestic price of coffee is lower than the world price, then the country will import coffee, which will decrease the global supply of coffee and raise the world price. Eventually, these forces will converge to make the domestic price of coffee equal the world price.

Question 18

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

Accepted Answer

The answer of Suppose a country abandons a no-trade policy...

Question 19

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

Accepted Answer

Allowing international trade in steel will increase competition in the domestic market, resulting in a lower price for consumers and a decrease in the price received by domestic producers. However, overall, the sum of consumer surplus and producer surplus will increase as a result of gains from trade. This holds true regardless of whether the country ends up importing or exporting steel. Therefore, option A is correct. Option B is not necessarily true, as the quantity of steel demanded by domestic consumers could either increase or decrease depending on the changes in the price. Option C is not true due to the lower price that domestic producers receive in the face of greater competition. Finally, option D is incorrect because the gains from trade are sufficient to compensate the losses incurred by the losers.

Question 20

Figure 9-2
The figure illustrates the market for calculators in a country. 
-Refer to Figure 9-2. Without trade, consumer surplus is

Accepted Answer

Consumer surplus without trade is the area below the demand curve and above the price line. In this case, without trade, the consumer surplus is the triangle formed by the points (0,15), (15,10), and (0,10). The area of this triangle is (1/2)(15)(5) = $37.50. Multiplying this by the number of consumers (22.5 million) gives a total consumer surplus without trade of $843.75, which rounds to $845.

Quiz 9: Application: International Trade

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. This country

Suppose the world price of a television is $300. Before Paraguay allowed trade in televisions, the price of a television there was $350. Once Paraguay began allowing trade in televisions with other countries, Paraguay began

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. If this country chooses to trade, the price of calculators in this country will be

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, producer surplus is

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. The world price for calculators represents

Suppose Iceland goes from being an isolated country to being an importer of coats. As a result,

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. As a result of trade, total surplus increases by

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. Without trade, producer surplus is

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, consumer surplus is

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. With free trade, this country will

Within a country, the domestic price of a product will equal the world price if

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. At the world price and with free trade,

When a country allows international trade and becomes an importer of a good,

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then

Assume, for Colombia, that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began

After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries,

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. Without trade, consumer surplus is