Question 1

Protection is often temporary to help infant industries.

Accepted Answer

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

Question 2

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

Accepted Answer

When a tariff is imposed on imported wine, it becomes more expensive for domestic consumers to buy foreign wine. This causes a shift in demand towards domestic wine, leading to an increase in the price of domestic wine due to the higher demand. The tariff also makes it more profitable for domestic producers to supply wine, leading to an increase in domestic production.

Question 3

Related to the Economics in Practice on p. 349: Protectionism of the kind that is suggested in the petition of the candle makers would most likely result in

Accepted Answer

Protectionism, such as a ban on imports, can lead to lower consumption as consumers are not able to choose from a wider range of products at potentially lower prices. In the case of the candle makers' petition, they are asking for a ban on imports of foreign candles, which would limit consumers' options and potentially lead to higher prices. It is unlikely that this would result in more efficient production or lower production costs for the domestic candle makers.

Question 4

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 is a restriction on the quantity of a particular good that can be imported. By limiting imported steel, the demand for domestically produced steel will increase, causing the price of steel to increase. Additionally, since domestic producers will need to produce more steel to meet the increased demand, the domestic production of steel will also increase. Therefore, the correct answer is A) price; production.

Question 5

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 inefficiencies, higher prices for consumers, and retaliation from other countries, which can harm the overall economy and make people worse off.

Question 6

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

Accepted Answer

Some environmental groups argue that free trade policies can lead to lower environmental standards in order to compete in global markets, and can encourage the exploitation of natural resources without regard for sustainability.

Question 7

Refer to the information provided in Figure 18.5 below to answer the questions that follow.  Figure 18.5
-Refer to Figure 18.5. The domestic price of oil is $130 per barrel. This country imports 5 million barrels if the world price of oil is

Accepted Answer

If the world price of oil is $125, then the country's domestic price of oil is equal to the world price. Therefore, there is no need to import any oil and the quantity imported is zero. If the world price is below $125, then the country can import oil at a cheaper price and therefore imports more than 5 million barrels. If the world price is above $125, then the country can produce oil domestically at a cheaper price and therefore does not need to import as much as 5 million barrels.

Question 8

Related to the Economics in Practice on page 349: 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 satirical essay was a critique of protectionism and argued that protecting domestic industries that can't compete effectively is pointless. His proposal for a quota on sunlight was meant to highlight the absurdity of protectionism.

Question 9

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 that they are unable to produce or can only produce at a higher opportunity cost, enabling consumers to consume beyond their domestic production possibility frontier.

Question 10

An argument in favor of free trade is that trade barriers prevent a nation from reaping the benefits of specialization.

Accepted Answer

Specialization allows countries to focus on producing goods and services that they can produce most efficiently and at a lower cost than other countries. When trade barriers are in place, countries are unable to take advantage of the benefits of specialization, leading to inefficiencies and higher costs for consumers. Free trade allows for countries to specialize and trade with one another, leading to a more efficient allocation of resources and lower costs for consumers.

Question 11

An argument in favor of free trade is that trade barriers force consumers to pay higher prices for protected products than they would otherwise pay.

Accepted Answer

Trade barriers, such as tariffs and quotas, increase the cost of imported goods, making them more expensive for consumers to purchase. This decreased competition also allows domestic producers to raise their prices on protected products, further increasing the cost to consumers. Without these trade barriers, consumers would have access to cheaper imported goods and domestic producers would face more competition, resulting in lower prices overall.

Question 12

Since 1980, most nation shave increased tariff rates.

Accepted Answer

Since 1980, there has been a trend towards reduced tariff rates through international trade agreements and policies such as the World Trade Organization. Some countries have implemented temporary tariff increases in response to specific events, but overall the trend has been towards lower tariffs.

Question 13

In general, free-trade makes the people of a country better off.

Accepted Answer

Free-trade allows for better access to goods and services at lower prices, which can lead to increased consumer welfare and economic growth. It also encourages competition and innovation, leading to more efficient production and increased profits for businesses. However, there may be some negative effects on certain industries or groups of workers, and it is important for governments to address these issues through policies such as worker retraining programs and social safety nets.

Question 14

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 it's a common argument, it's not universally valid because protecting industries from foreign competition can lead to inefficiencies, higher prices for consumers, and can harm the overall economy by discouraging innovation and adaptation. Additionally, wage differences can reflect differences in living costs and productivity levels.

Question 15

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

Accepted Answer

The theory of comparative advantage states that countries can benefit from specializing in the production of goods and services where they have a lower opportunity cost and trading those products with other countries. Free trade allows countries to engage in trade based on their comparative advantage, which leads to a more efficient allocation of resources, increased competition, and ultimately, lower prices for consumers. Quotas, export subsidies, and tariffs, on the other hand, can distort trade and lead to higher prices and reduced efficiency.

Question 16

Related to the Economics in Practice on p. 349: 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 mean that the French government would impose trade barriers (such as tariffs or quotas) on imported candles, making them more expensive for consumers. This would allow the domestic candle makers to raise their prices without the threat of foreign competition, leading to higher prices for candles in France.

Question 17

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

Accepted Answer

Free trade allows a country to consume beyond its production possibility frontier by specializing in the production of goods for which it has a comparative advantage and trading for other goods, but it does not allow a country to produce beyond its production possibility frontier.

Question 18

Free trade decreases world production and consumption.

Accepted Answer

Free trade actually increases world production and consumption by allowing countries to specialize in producing the goods and services they have a comparative advantage in, leading to increased efficiency and overall economic growth.

Question 19

Refer to the information provided in Figure 18.5 below to answer the questions that follow.  Figure 18.5
-Refer to Figure 18.5. 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

With a domestic price of $130 and a world price of $120, a $10 tariff would raise the world price to $130, making domestic and world prices equal, thus eliminating the incentive to import.

Question 20

Related to the Economics in Practice on page 349: 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 were able to gain protection for their industry, it would likely result in higher prices for candles. This is because the protection would make it more difficult for foreign candle makers to compete in the French market, reducing supply and potentially increasing prices. While this may benefit the candle makers in the short run, it could also result in inefficiencies in the industry and ultimately harm the overall economy.

Quiz 18: International Trade, Comparative Advantage, and Protectionism