Question 1

Which of the following best describes the concept of comparative advantage in international trade?

Accepted Answer

A country can produce a good at a lower opportunity cost than another country.

Question 2

Suppose Canada imposes a tariff of $$2 on every imported T-shirt. If the world price is 5 $$and the domestic price without trade is $8, what will be the price of imported T-shirts after the tariff?

Accepted Answer

$$\7$

Question 3

Which of the following is NOT a typical effect of an import quota?

Accepted Answer

It generates tariff revenue for the government.

Question 4

A country imposes a quota on imported cars. What is the most likely effect on domestic car prices and consumer surplus?

Accepted Answer

Domestic car prices increase and consumer surplus decreases.

Question 5

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

Accepted Answer

A regulation requiring all imported toys to meet strict safety standards.

Question 6

Why are export subsidies generally considered illegal under World Trade Organization (WTO) rules?

Accepted Answer

They distort international trade by giving unfair advantages to domestic exporters.

Question 7

Suppose the domestic price of aircraft in Canada is $$120, but the world price is 150. If $$Canada allows free trade, what will happen to the quantity of aircraft produced and sold domestically?

Accepted Answer

Production will increase and domestic sales will decrease.

Question 8

Which of the following arguments is commonly used to justify protectionist policies?

Accepted Answer

Protectionist policies help infant industries grow.

Question 9

If a country imposes a tariff, which group is most likely to benefit directly from this policy?

Accepted Answer

Domestic producers of the imported good

Question 10

Which of the following best explains the concept of rent seeking in the context of international trade?

Accepted Answer

Groups lobby the government for policies that benefit them at the expense of the general public.

Question 11

A country restricts imports to protect domestic jobs. What is a likely unintended consequence of this policy?

Accepted Answer

Higher prices for consumers

Question 12

Suppose the government compensates workers who lose their jobs due to free trade. Which of the following is a likely outcome?

Accepted Answer

Some workers may not claim compensation.

Question 13

If Canada imposes a quota of 1 million T-shirts on imports, what is the most likely effect compared to free trade?

Accepted Answer

The domestic price of T-shirts will rise.

Question 14

Which of the following is a likely result of a trade war involving tariffs between two countries?

Accepted Answer

Both countries experience reduced trade and higher prices.

Question 15

A country has a comparative advantage in producing wheat if:

Accepted Answer

It can produce wheat at a lower opportunity cost than other countries.

Question 16

Which of the following is NOT a reason governments restrict international trade?

Accepted Answer

To maximize consumer surplus

Question 17

Suppose the world price of a good is lower than the domestic price. If a country opens to free trade, what will happen to domestic production and imports?

Accepted Answer

Domestic production will decrease and imports will increase.

Question 18

Which of the following best describes a voluntary export restraint (VER)?

Accepted Answer

A self-imposed limit by the exporting country on the quantity of exports.

Question 19

If a country implements strict health and safety regulations on imported food, what is the likely economic effect?

Accepted Answer

Imports of food will decrease.

Question 20

Which of the following is a potential benefit of free trade?

Accepted Answer

Increased variety of goods for consumers.

International Trade and Trade Restrictions: Microeconomics Study Notes

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