Question 1

Suppose the domestic price of coffee in Vietnam is $$2/kg, while the world price is 3.50/kg. $$According to the principle of comparative advantage, what is the likely outcome for Vietnam in the coffee market?

Accepted Answer

Vietnam will export coffee because it has a comparative advantage.

Question 2

Which of the following best describes the concept of deadweight loss (DWL) resulting from a tariff?

Accepted Answer

DWL is the loss of total surplus due to production and consumption distortions caused by the tariff.

Question 3

If the domestic equilibrium price and quantity for solar panels in Vietnam are found by solving $$100 - Q = 20 + Q$$, what are the equilibrium price ($$P_D) $$and quantity ($$Q^*$$)?

Accepted Answer

$$P_D = 60, Q^* = 40$$

Question 4

Which of the following is NOT a dynamic benefit of open trade?

Accepted Answer

Guaranteed higher wages for all domestic workers

Question 5

A country is considered a 'small open economy' if:

Accepted Answer

It is a price taker in world markets and its actions do not affect the world price.

Question 6

If a tariff of $$T is $$imposed on an imported good with world price $$P_W$$, what is the new domestic price?

Accepted Answer

$$P_W + T$$

Question 7

In the context of trade, what does the area labeled 'D + F' on a tariff graph represent?

Accepted Answer

Deadweight loss due to production and consumption distortions

Question 8

Which of the following is a key reason why trade policy is politically contentious, according to the study materials?

Accepted Answer

Losses are concentrated among a few stakeholders, while gains are dispersed among many.

Question 9

If the world price of steel is $$500/ton and a tariff of 100/$$ton is imposed, causing imports to fall from 300k tons to 170k tons, what is the government revenue from the tariff?

Accepted Answer

$$17.0$$ million

Question 10

Which of the following is NOT one of the five classic arguments for trade restrictions?

Accepted Answer

Technology Transfer

Question 11

When a country opens to free trade and becomes an importer of a good, what happens to consumer and producer surplus?

Accepted Answer

Consumer surplus increases, producer surplus decreases.

Question 12

Which of the following best explains the 'infant industry' argument for trade protection?

Accepted Answer

New industries need temporary protection to achieve economies of scale.

Question 13

If a quota is imposed instead of a tariff, what happens to the area that would have been government revenue under a tariff?

Accepted Answer

It is captured as quota rent by license holders.

Question 14

Which of the following is a superior alternative to permanent tariffs for national security, according to economists?

Accepted Answer

Stockpiling critical reserves in peacetime

Question 15

In the solar panel market example, if the world price is $$40$$ and the autarky price is $$60$$, what is the volume of imports?

Accepted Answer

$$40,000$$ panels

Question 16

Which of the following is a real-world example of a 'world mover' industry for Vietnam?

Accepted Answer

Robusta coffee

Question 17

What is the main economic intuition behind comparing $$P_D to$$ $$P_W$$ when analyzing trade?

Accepted Answer

It empirically tests for comparative advantage.

Question 18

Which of the following is NOT a reason for deadweight loss due to tariffs?

Accepted Answer

Government revenue from tariffs

Question 19

If a country exports a good after opening to trade, which group is most likely to lose?

Accepted Answer

Domestic consumers

International Trade: Comparative Advantage, Welfare, and Policy Debates

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