BAIB3004 Week 3 Seminar 24/25

Which of the following best describes consumer surplus?

• The area above the supply curve and below the price line

• The area below the demand curve and above the price line

• The area between the supply and demand curves

• The total revenue received by producers

In the context of international trade, what typically happens to consumer surplus in an importing country when trade barriers are removed?

• It increases

• It decreases

• It remains unchanged

• It becomes negative

The theory of comparative advantage suggests that countries should:

• Produce everything they consume domestically

• Specialise in producing goods they can make most efficiently relative to other goods

• Always import goods that are cheaper from other countries

• Focus only on industries where they have an absolute advantage

What effect does imposing a tariff typically have on domestic producer surplus?

• It increases

• It decreases

• It remains unchanged

• It becomes zero

In a perfectly competitive market, the point where the supply curve intersects the demand curve represents:

• Maximum consumer surplus

• Maximum producer surplus

• Market equilibrium

• Government revenue

Which of the following is NOT a determinant of international trade patterns according to the theory of comparative advantage?

• Opportunity cost of production

• Relative productivity

• Absolute advantage in all goods

• Resource endowments

When a country opens up to international trade, what typically happens to the total economic surplus (consumer surplus + producer surplus)?

• It always increases

• It always decreases

• It generally increases, but there may be exceptions

• It remains unchanged

In the context of international trade, producer surplus in an exporting country is likely to:

• Increase

• Decrease

• Remain unchanged

• Become negative

Which of the following best describes the effect of a quota on consumer surplus in the importing country?

• It increases consumer surplus

• It decreases consumer surplus

• It has no effect on consumer surplus

• It eliminates consumer surplus entirely

When analysing the gains from trade using consumer and producer surplus, which of the following statements is generally true?

• Gains are always equally distributed between consumers and producers

• Consumers always gain while producers always lose

• The net gain for the economy is usually positive, but some groups may lose

• Only the government gains through increased tax revenue