Question

QUESTION 11

1. Consider a case where a country imports of very large quantity of Good R and the Terms of Trade Effects Tariff Model holds. When the country changes from trade in Good R without a tariff to trade in Good R with a tariff (assuming no retaliation on that product),

   	a.	the total surplus of foreign producer countries falls and the world total surplus falls
   	b.	the total surplus of foreign producer countries falls and the world total surplus rises
   	c.	the total surplus of foreign producer countries rises and the world total surplus falls
   	d.	the total surplus of foreign producer countries rises and the world total surplus rises

3 points   

QUESTION 12

1. For free trade area,

   	a.	each member maintains its own policies towards non-members
   	b.	there are no trade barriers on substantially all merchandise and service trade among members
   	c.	the member countries use a common currency
   	d.	all of the above

3 points   

QUESTION 13

1. Regarding international trade, which of the following is false?  

   	a.	lower shipping costs over the past decades have caused the volume of international trade to rise
   	b.	trade between two countries allows both countries to consume more than if they had no trade
   	c.	to have the highest standard of living, a country should produce each of the products for which it can produce more units than other countries
   	d.	international trade includes both merchandise (goods) and services

3 points   

QUESTION 14

1. Consider a case where a country imports Good T and the Basic Tariff Model holds. When the country changes from trade in Good T without a tariff to trade in Good T with a tariff, the change in consumer surplus is greater than (assuming no retaliation on that product),

   	a.	the change in producer surplus
   	b.	the change in tariff revenue
   	c.	both A and B combined
   	d.	neither A nor B

3 points   

QUESTION 15

1. Consider a case where a country imports Good Y and the Basic Tariff Model holds. When the country changes from trade in Good Y without a tariff to trade in Good Y with a tariff (assuming no retaliation on that product),

   	a.	the price falls and the quantity of imported units falls
   	b.	the price falls and the quantity of imported units rises
   	c.	the price rises and the quantity of imported units falls
   	d.	the price rises and the quantity of imported units rises

3 points   

QUESTION 16

1. Suppose there are two countries, Country A and Country B and there are two products, t-shirts and belts. In 20 labor hours, Country A can produce 90 t-shirts or it can produce 30 belts. Meanwhile, in 20 labor hours, Country B can produce 80 t-shirts or it can produce 20 belts. The opportunity cost to produce a t-shirt in Country A is,

   	a.	0.33 belts
   	b.	0.89 belts
   	c.	1.12 belts
   	d.	3 belts

3 points   

QUESTION 17

1. Consider a product for which the international product cycle model holds. Which of the following is true regarding the maturing product stage?

   	a.	learning from the experience of production often helps reduce the costs of production
   	b.	low-wage, low-skill type labor is most commonly used
   	c.	production techniques have become standardized
   	d.	all of the above are true

3 points   

QUESTION 18

1. Suppose there are two countries, Country K and Country L and there are two products, cheese and toothpaste. In 10 labor hours, Country K can produce 200 pounds of cheese or it can produce 50 packs of toothpaste. Meanwhile, in 10 labor hours, Country L can produce 150 pounds of cheese or it can produce 30 packs of toothpaste. Suppose both countries want both products. If they specialize and trade,   

   	a.	Country K will produce and export cheese; and Country K will produce and export toothpaste
   	b.	Country K will produce and export cheese; and Country L will produce and export toothpaste
   	c.	Country L will produce and export cheese; and Country K will produce and export toothpaste
   	d.	Country L will produce and export cheese; and Country L will produce and export toothpaste

3 points   

QUESTION 19

1. Intraindustry trade is common between countries,

   	a.	when it reduces the costs of transporting a given product to the buyers
   	b.	in financial services
   	c.	for agricultural products between northern hemisphere and southern hemisphere countries
   	d.	all of the above

3 points   

QUESTION 20

1. Suppose the country of Plymouth is joining a customs union. It can buy Product M from the country of Valverde or from the country of Sangh. Sangh is in the customs union, while Valverde is not. Plymouth has a tariff of $6 on Product M, unless it is in the customs union and buys from a member of the customs union (when there is no tariff). The price of Product M from Valverde is $36 and the price of Product M from Sangh is $33. (The Basic Tariff Model holds and assume no retaliation on the product.) When Plymouth joins the customs union,

   	a.	there is a trade diversion effect and its total surplus can rise, fall, or stay the same
   	b.	there is a trade diversion effect and its total surplus rises
   	c.	there is no trade diversion effect and its total surplus can rise, fall, or stay the same
   	d.	there is no trade diversion effect and its total surplus rises

Answer 1

Question 11) The total surplus of foreign producer countries falls and the world total surplus falls. Option a is the correct answer.

Question 12) For free trade areas, there are no trade barriers on substantially all merchandise and services trade among members. So option B is the correct answer.

Question 13) regarding international trade it is false that to have the highest standard of living a country should produce each of the products for which it can produce more units than other countries.

So option C is the correct answer.

Question 16) The Opportunity cost of producing t shirts un country A is 30/90 = 0.33 belts.

So option A is the correct answer.