Q: Suppose the domestic supply and demand for a good are given by $$ Q_s = 2P $$ and $$ Q_d = 100 - P $$, respectively. The world price is $$ P_w = 20 . If $$the country opens to trade, what will be the quantity imported?

At $$ P = 20 $$, $$ Q_s = 2 \times 20 = 40 $$, $$ Q_d = 100 - 20 = 80 . $$Imports = $$ Q_d - Q_s = 80 - 40 = 40 $$ units.

Question 1

Suppose the domestic price of wheat in a country is higher than the world price. If the country opens up to international trade, what is the likely outcome for domestic consumers and producers?

Accepted Answer

Domestic consumers benefit from lower prices, while domestic producers lose due to increased competition.

Question 2

Which of the following best describes a tariff?

Accepted Answer

A tax imposed on imported goods, raising their price above the world price.

Question 3

If a country imposes a tariff on imported cars, what is the most likely effect on the domestic car market equilibrium?

Accepted Answer

The domestic price of cars increases, domestic producers sell more, and consumers pay higher prices.

Question 4

Which group is most likely to lose from the imposition of an import quota on foreign steel?

Accepted Answer

Domestic consumers of steel, who face higher prices and less choice.

Question 5

Consider the following scenario: The world price of sugar is $$ \ 0.20$$ $$ per pound, but the domestic price in Country X is $$ \$$ 0.30 $$ per pound. If Country X opens to trade, what will happen to the price of sugar in Country X, and who will gain?

Accepted Answer

The price will fall to $$ \ 0.20$$ $, and domestic consumers will gain while domestic producers lose.

Question 6

Which of the following is a key similarity between a tariff and an import quota?

Accepted Answer

Both restrict the quantity of imports and raise the domestic price above the world price.

Question 7

How does an import quota differ from a tariff?

Accepted Answer

A quota limits the quantity of imports directly, while a tariff raises the price but does not set a quantity limit.

Question 8

Suppose the domestic supply and demand for a good are given by $$ Q_s = 2P $$ and $$ Q_d = 100 - P $$, respectively. The world price is $$ P_w = 20 . If $$the country opens to trade, what will be the quantity imported?

Accepted Answer

At $$ P = 20 $$, $$ Q_s = 2 	imes 20 = 40 $$, $$ Q_d = 100 - 20 = 80 . $$Imports = $$ Q_d - Q_s = 80 - 40 = 40 $$ units.

Question 9

Which of the following is NOT a common argument for restricting international trade?

Accepted Answer

Trade restrictions are necessary to increase consumer surplus.

Question 10

Which of the following is a counter-argument to the claim that trade restrictions protect domestic jobs?

Accepted Answer

While some jobs are protected, consumers pay higher prices and jobs are lost in export industries due to retaliation.

Question 11

Which of the following is an example of a non-tariff barrier to trade?

Accepted Answer

A government regulation requiring all imported electronics to meet specific safety standards.

Question 12

Suppose a country imposes a tariff that raises the domestic price of a good from $$ P_w  to$$ $$ P_t . $$Which area on a standard supply and demand diagram represents the deadweight loss from the tariff?

Accepted Answer

The sum of the two triangles between $$ P_w $$ and $$ P_t  on $$either side of the tariff revenue rectangle.

Question 13

Which of the following best describes the effect of an export equilibrium on domestic prices and welfare?

Accepted Answer

Domestic prices rise to the world price, domestic producers gain, and domestic consumers lose.

Question 14

Which of the following equations correctly represents the calculation of imports in an open economy?

Accepted Answer

$$ 	ext{Imports} = Q_d - Q_s  at $$the world price

Question 15

Which of the following is NOT a likely effect of imposing a tariff on imported goods?

Accepted Answer

A decrease in the domestic price of the imported good.

Question 16

Which of the following is one of the two key reasons for restricting international trade?

Accepted Answer

To protect national security and to help infant industries develop.

Question 17

Suppose the government imposes an import quota on foreign textiles. What is a likely outcome compared to a tariff of equal size?

Accepted Answer

Quota rents may go to foreign producers, while tariff revenue goes to the government.

Question 18

Which of the following best defines exports?

Accepted Answer

Goods and services produced domestically and sold to other countries.

Question 19

If a country imposes a tariff on imported shoes, which of the following groups is most likely to benefit?

Accepted Answer

Domestic shoe producers, who face less competition from imports.

Question 20

Which of the following is a plausible real-world example of an argument for restricting international trade?

Accepted Answer

A country restricts imports of agricultural products to protect its food supply in case of war.

Step-by-Step Guidance for International Trade (Macroeconomics, Chapter 15)

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