Chap 9

When politicians argue that outsourcing or offshoring of technical support to Bangladesh by Sirius Satellite Radio is harmful to the U.S. economy, they are employing which of the following arguments for restricting trade?

• The infant-industry argument

• The jobs argument

• The national-security argument

• The deadweight-loss argument

Which of the following statements about a tariff is true?

• A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus.

• A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus.

• A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus.

• A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus.

Which of the following statements about import quotas is true?

• Import quotas are preferred to tariffs because they raise more revenue for the imposing government.

• For every tariff, there is an import quota that could have generated a similar result.

• Voluntary quotas established by the exporting country generate no deadweight loss for the importing country.

• An import quota reduces the price to the domestic consumers.

Which of the following is not employed as an argument in support of trade restrictions?

• Free trade harms national security if vital products are imported.

• Free trade destroys domestic jobs.

• Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus.

• Free trade harms infant industries in an importing country.

• Free trade is harmful to importing countries if foreign countries subsidize their exporting industries.

Because producers are better able to organize than consumers are, we would expect there to be political pressure to create _______.

• free trade

• import restrictions

• export restrictions

• none of the answer choices

When a country allows trade and exports a good, _______.

• domestic producers are better off, domestic consumers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners

• domestic consumers are better off, domestic producers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners

• domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers

• domestic consumers are better off, domestic producers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers

If free trade is allowed, a country will export a good if the world price is _______.

• below the before-trade domestic price of the good

• above the before-trade domestic price of the good

• equal to the before-trade domestic price of the good

• none of the answer choices

Suppose the world price is below the before-trade domestic. If a country allows free trade, ______.

• consumers will gain and producers will lose

• producers will gain and consumers will lose

• both producers and consumers will gain

• both producers and consumers will lose

Which of the following statements about free trade between France and Italy is true?

• France will export cheese, but there will be no trade in wine because neither country has a comparative advantage in the production of wine.

• France will export cheese, and Italy will export wine.

• France will export both wine and cheese.

• France will export wine, and Italy will export cheese.

If the world price for a good exceeds the before-trade domestic price for a good, then that country must have _______.

• a comparative advantage in the production of the good

• an absolute advantage in the production of the good

• a comparative disadvantage in the production of the good

• an absolute disadvantage in the production of the good