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Foundations of Microeconomics, 7e (Bade/Parkin)
Chapter 9 Global Markets in Action
9.1 How Global Markets Work
1) Goods and services that the United States buys from other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.
Answer: B
Topic: International trade
Skill: Level 1: Definition
Section: Checkpoint 9.1
Status: Old
AACSB: Reflective thinking
2) Imports are defined as the goods and services that we

A) produce and consume in the United States.
B) sell to other countries.
C) buy from other countries.
D) partially produce in both the United States and another country.
E) produce abroad using U.S. owned factories and then consume in the United States.
Answer: C
Status: Old
3) Goods and services that the United States sells to other nations are called
A) exports.
B) imports.
C) bartered goods.
D) exchanges.
E) world goods.
Answer: A
Status: Old
1
Copyright © 2015 Pearson Education, Inc.
4) If you buy a DVD player produced in Japan, a
A) good was exported by Japan and imported by the United States.
B) good was imported by Japan and by the United States.
C) service was imported by Japan and exported by the United States.
D) service was exported by Japan and imported by the United States.
E) good was exported by Japan and by the United States.
Answer: A
Skill: Level 2: Using definitions
Status: Old
5) The United States exports

A) goods only.
B) services only.
C) manufactured goods only.
D) goods and services.
E) only agricultural products and high-tech goods.
Answer: D
Topic: Patterns of trade
Status: Old
6) All of the following statements about the United States are true EXCEPT:
A) The largest imports are services like royalties, license fees, and financial services, and the largest
exports are goods like crude oil, automobiles, and clothing.
B) The United States is the world's largest international trader.
C) The United States imports more than it exports.
D) Services account for a larger portion of U.S. exports than U.S. imports.
E) Imports are a larger percentage of total expenditure than exports are a percentage of total production.
Answer: A
Topic: Patterns of trade
Status: Old
2
7) Of the following, ________ account(s) for the largest share of imports into the United States.
A) food and drinks
B) clothing and footwear
C) crude oil
D) computers
E) chemicals
Answer: C
Topic: Eye on the global economy, the major items of U.S. trade
Status: Old
8) The fundamental force that generates international trade is

A) the need for more goods and services.
B) absolute advantage.
C) the sea rule.
D) comparative advantage.
E) the existence of tariffs.
Answer: D
Topic: Comparative advantage
Status: Old
9) The fundamental force that drives trade between nations is

A) the government.
B) NAFTA.
C) absolute advantage.
D) comparative advantage.
E) legal treaties.
Answer: D
Status: Old
3
10) One of the major reasons why the United States exports jet airplanes is because Boeing faces ________
opportunity cost compared with firms in other nations in the production of such aircraft.
A) a higher
B) an unrelated
C) a lower
D) a nonexistent
E) an identical
Answer: C
Topic: Opportunity cost
Status: Old
11) A nation has a comparative advantage in a good when it has a

A) lower absolute cost of producing the good.
B) higher opportunity cost of producing the good.
C) lower opportunity cost of producing the good.
D) higher absolute cost of producing the good.
E) tariff in place protecting the producers of the good.
Answer: C
Status: Old
12) How can a domestic producer determine whether or not it has a comparative advantage in the
production of a good or service?
A) It cannot.
B) by comparing the price it receives to the prices of other domestic producers
C) by comparing the price it receives to the world price
D) by comparing the quantity it produces to the quantity produced in the world
E) by comparing the total domestic quantity to the total world quantity
Answer: C
Status: Old
4
13) A country exports the goods
A) for which its domestic prices are very high compared to the world prices.
B) that the economy can produce the most of.
C) that the economy can produce at relatively lowest opportunity cost.
D) that it cannot sell domestically.
E) in which it has a comparative disadvantage.
Answer: C
Status: Old
14) If a nation can produce a good or service at the lowest opportunity cost, then it
A) can sell the product at a lower price than other nations.
B) does not want to export the good because the low cost means it makes only a low profit.
C) is best for the nation to not trade the good internationally.
D) will definitely import the good because it can beat other countries' prices.
E) might export or import the good, depending on whether or not it has a comparative advantage in the
production of the good.
Answer: A
Status: Old
15) The country with a comparative advantage in the production of a good has a
A) lower opportunity cost of production.
B) higher opportunity cost of production.
C) horizontal production possibilities frontier.
D) vertical production possibilities frontier.
E) linear production possibilities frontier.
Answer: A
Status: Old
5
16) The United States imports t-shirts because
A) it is a dangerous job to produce them.
B) foreign nations have a lower opportunity cost of production.
C) the United States has a lower opportunity cost of production.
D) foreign economies have an absolute advantage in their production.
E) the United States must import goods and services from other countries so that they can develop
economically.
Answer: B
Status: Old
17) If the United States starts to import a good that had previously been produced in the United States,
the market price of the good in the United States
A) rises.
B) falls.
C) remains constant.
D) either remains constant or rises, depending on how whether the supply of the good stays the same or
increases.
E) There is not enough information to answer the question because we need to know if the market price
in the United States had been above or below the world market price before trade began.
Answer: B
Topic: Imports
Status: Old
AACSB: Analytical thinking
18) If the United States imports purses, then the quantity of purses produced in the United States will
________ and the quantity of purses purchased by consumers in the United States will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) not change; increase
Answer: C
Topic: Imports
Status: Old
6
19) Most t-shirts bought by Americans are made in Asia. As a result of free trade, the production of t-
shirts in America
A) has increased.
B) has stayed the same.
C) has decreased.
D) has been taken over by the government.
E) might change, but more information about what else the United States imports is needed to determine
if U.S. production increased, decreased, or did not change.
Answer: C
Topic: Imports
Status: Old
20) The United States imports t-shirts from Asia. As a result, U.S. consumers pay ________ otherwise and
Asian producers receive ________ otherwise.
A) a higher price than; a higher price than
B) a higher price than; a lower price than
C) a lower price than; a higher price than
D) a lower price than; a lower price than
E) the same price as; the same price as
Answer: C
Topic: Imports
Skill: Level 3: Using models
Status: Old
21) If the world price of a good is below the no-trade domestic price, a country
A) will benefit from exporting the good.
B) will benefit from importing the good.
C) cannot benefit from trade.
D) has a comparative advantage in the production of that good.
E) will not engage in trade for that good.
Answer: B
Topic: Imports
Status: Old
7
22) Suevania opens its doors to trade with Barvania. Barvania has a comparative advantage in the
production of machinery. Hence, once trade occurs Suevania's consumers will buy ________ machinery
and pay ________ before.
A) more; a higher price than
B) more; a lower price than
C) less; a higher price than
D) less; a lower price than
E) the same amount of; the same price as
Answer: B
Topic: Imports
Status: Old
23) If a nation imports a good that can be domestically produced, what happens to the quantity
consumed of the good and why?
A) The quantity consumed increases because the market price decreases.
B) The quantity consumed decreases because the market price increases.
C) The quantity consumed remains constant because the price is unchanged.
D) The quantity consumed increases because the nation produces more of the good.
E) The quantity consumed decreases because the market price decreases.
Answer: A
Topic: Imports
Status: Old
24) A country will export a good if it

A) can sell the good to a foreigner at a higher price than the no-trade domestic price.
B) can sell the good to a foreigner at a lower price than the no-trade domestic price.
C) can dump the good on the world market.
D) has a high opportunity cost of production.
E) is impossible to import the good.
Answer: A
Topic: Exports
Status: Old
8
25) A country exports a good if
A) it has a high opportunity cost of production.
B) the world price of the good is below the country's no-trade equilibrium price.
C) the world price of the good is above the country's no-trade equilibrium price.
D) the quantity demanded of the good in the country is greater than the quantity supplied at the world
price.
E) it cannot import the good.
Answer: C
Topic: Exports
Status: Old
26) A nation will export a good if its

A) no-trade, domestic price is equal to the world price.
B) no-trade, domestic price is less than the world price
C) no-trade, domestic price is greater than the world price.
D) no-trade, domestic quantity is less than the world quantity.
E) no-trade, domestic quantity is greater than the world quantity.
Answer: B
Topic: Exports
Status: Old
27) As a result of importing a good, domestic consumers ________ the quantity consumed and the price
of the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) increase; does not change
Answer: B
Topic: Imports
Status: Old
9
28) As a result of importing a good, domestic producers ________ the quantity produced and the price of
the good ________.
A) increase; rises
B) increase; falls
C) decrease; rises
D) decrease; falls
E) decrease; does not change
Answer: D
Topic: Imports
Status: Old
29) The above figure shows the U.S. market for flip-flops. When there is no international trade, the U.S.
price is ________ per flip-flop and the U.S. quantity is ________ flip-flops.
A) $12; 300,000
B) $14; 500,000
C) $12; 700,000
D) $14; 300,000
E) $14; 700,000
Answer: B
Topic: Imports
Status: Old
10
30) The above figure shows the U.S. market for flip-flops. With international trade, the equilibrium price
in the United States is ________ and the United States ________ flip-flops.
A) $12; imports
B) $12; does not trade
C) $12; exports
D) $14; imports
E) $14; does not trade
Answer: A
Topic: Imports
Status: Old
31) The above figure shows the U.S. market for flip-flops. With international trade, the United States
imports ________ flip-flops.
A) 300,000
B) 500,000
C) 700,000
D) 0 because the United States exports flip-flops
E) 400,000
Answer: E
Topic: Imports
Status: Old
32) The above figure shows the U.S. market for flip-flops. With international trade, U.S. consumers buy
________ flip-flops and U.S. producers produce ________ flip-flops.
A) 500,000; 500,000
B) 300,000; 700,000
C) 500,000; 300,000
D) 700,000; 300,000
E) 700,000; 500,000
Answer: D
Topic: Imports
Status: Old
11
33) The above figure shows the U.S. market for flip-flops. With no international trade, the price in the
United States for flip-flops is ________. With international trade, the price in the United States for flip-
flops is ________.
A) $12; $14
B) $500; $300
C) $14; $12
D) $700; $300
E) $500; $700
Answer: C
Topic: Imports
Status: Old
34) With no international trade, the U.S. price of wheat is lower than the world price of wheat. This
indicates that the United States ________ a comparative advantage in the production of wheat and with
international trade, the United States will ________ wheat.
A) has; export
B) has; not trade
C) has; import
D) does not have; export
E) might have; export
Answer: A
Topic: Exports
Status: Old
35) Once international trade occurs, a country with a comparative advantage in the production of a good
will ________ production of the good and ________.
A) decrease; import the good
B) increase; export the good
C) not change; import the good
D) increase; import the good
E) decrease; export the good
Answer: B
Topic: Exports
Status: Old
12
36) Airlines in other countries buy airplanes from Boeing because
A) it is illegal to produce airplanes in many other countries.
B) Boeing's prices are less than what the airlines would pay for planes built in their own country.
C) trade treaties require such purchases.
D) these nations must buy something from the United States.
E) None of the above answers is correct.
Answer: B
Topic: Exports
Status: Old
37) When a country exports a good because the world price is higher than the no-trade domestic price,
domestic purchases of the good ________ and domestic production of the good ________.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
E) do not change; increases
Answer: C
Topic: Exports
Status: Old
38) The table above has the domestic demand and domestic supply schedules for a good. According to
the table, the no-trade price of the good is
A) $4.
B) $6.
C) $8.
D) $10.
E) $2.
Answer: B
Topic: Trade
Status: Old
13
39) The table above has the domestic demand and domestic supply schedules for a good. If the world
price of the good is $10 and international trade occurs, then according to the table
A) domestic production is higher before trade than after trade.
B) the country imports 16 units a day.
C) the country imports 6 units a day.
D) the country exports 6 units a day.
E) the country exports 22 units a day.
Answer: D
Topic: Trade
Status: Old
40) According to the above table, the country will import the good if the world price is less than ________
and will export the good if the world price is more than ________.
A) $4; $4
B) $6; $6
C) $8; $4
D) $10; $10
E) $4; $8
Answer: B
Topic: Trade
Status: Old
14
41) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of
international trade, cherry farmers would receive ________ per pound of cherries.
A) $0.50
B) $1.50
C) $2.50
D) $2.00
E) $1.00
Answer: B
Topic: Exports
Status: Old
42) The figure above shows the U.S. demand and U.S. supply curves for cherries. In the absence of
international trade, how many pounds of cherries would U.S. farmers produce?
A) 200,000 pounds
B) 400,000 pounds
C) 600,000 pounds
D) 800,000 pounds
E) 0 pounds
Answer: B
Topic: Exports
Status: Old
15
43) The figure above shows the U.S. demand and U.S. supply curves for cherries. Suppose the world price
of cherries is $2 per pound. At this price, U.S. consumption of cherries will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: A
Topic: Exports
Status: Old
44) The figure above shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2
per pound once international trade occurs, the production of cherries in the United States will equal
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: C
Topic: Exports
Status: Old
per pound once international trade occurs, the total exports of cherries from the United States to other
nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: B
Topic: Exports
Status: Old
16
per pound once international trade occurs, the total imports of cherries to the United States from other
nations equals
A) 200,000 pounds.
B) 400,000 pounds.
C) 600,000 pounds.
D) 800,000 pounds.
E) 0 pounds.
Answer: E
Topic: Exports
Status: Old
47) The above figure shows the U.S. market for wheat. When there no international trade, the U.S. price of
wheat is ________ per ton and the U.S. equilibrium quantity is ________ tons.
A) $14; 300,000
B) $14; 500,000
C) $16; 500,000
D) $16; 300,000
E) $16; 700,000
Answer: B
Topic: Exports
Status: Old
17
48) The above figure shows the U.S. market for wheat. With international trade, the price of wheat in the
United States is ________ per ton and the United States ________ wheat.
A) $16; exports
B) $14; exports
C) $14; imports
D) $16; imports
E) $14; does not trade
Answer: A
Topic: Exports
Status: Old
49) The above figure shows the U.S. market for wheat. With international trade, the United States exports
________ of wheat.
A) 300,000 tons
B) 500,000 tons
C) 700,000 tons
D) 400,000 tons
E) None of the above answers is correct because the United States imports wheat.
Answer: D
Topic: Exports
Status: Old
50) The above figure shows the U.S. market for wheat. With international trade, U.S. consumers buy
________ tons of wheat and U.S. producers produce ________ tons of wheat.
A) 700,000; 300,000
B) 500,000; 500,000
C) 300,000; 500,000
D) 300,000; 700,000
E) 500,000; 700,000
Answer: D
Topic: Exports
Status: Old
18
51) The above figure shows the U.S. market for wheat. With no international trade, the price of wheat in
the United States is ________ per ton. With international trade, the price of wheat in the United States is
________ per ton.
A) $16; $14
B) $500; $300
C) $14; $16
D) $700; $300
E) $500; $700
Answer: C
Topic: Exports
Status: Old
52) Goods and services that we buy from firms in other countries are called our
A) imports.
B) exports.
C) inputs.
D) raw materials.
E) obligations.
Answer: A
Status: Old
53) If the United States exports planes to Brazil and imports ethanol from Brazil, the price received by
U.S. producers of planes ________, and the price received by Brazilian producers of ethanol ________.
A) does not change; does not change
B) rises; rises
C) rises; falls
D) falls; rises
E) falls; falls
Answer: B
Status: Old
19
54) When Italy buys Boeing jets, the price Italy pays is ________ if it produced its own jets and the price
Boeing receives is ________ than it could receive from an additional U.S. buyer.
A) lower than; lower
B) higher than; higher
C) lower than; higher
D) higher than; lower
E) the same as; higher
Answer: C
Status: Old
55) A nation will import a good if its no-trade, domestic

A) price is equal to the world price.
B) price is less than the world price.
C) price is greater than the world price.
D) quantity is less than the world quantity.
E) quantity is greater than the world quantity.
Answer: C
Topic: Trade
Status: Old
56) When a good is imported, the domestic production of it ________ and the domestic consumption of it
________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) increases; does not change
Answer: C
Topic: Trade
Status: Old
20
57) The United States exports a good if its no-trade U.S. price is ________ its world price. With
international trade, U.S. production of the good ________ compared to the level of no-trade production.
A) higher than; does not change
B) higher than; increases
C) lower than; increases
D) the same as; increases
E) the same as; does not change
Answer: C
Topic: Trade
Status: Old
9.2 Winners, Losers, and Net Gains from Trades
1) International trade benefits

A) only the exporter.
B) only the importer.
C) both the exporter and the importer.
D) neither the exporter nor the importer.
E) the exporter at all times and sometimes also the importer.
Answer: C
Topic: Gains from trade
Status: Old
2) Who gains from international trade?

A) only the exporting nation
B) only the importing nation
C) both the importing and the exporting nations
D) neither the importing nor the exporting nations
E) The gains depends on which nation gets to keep the total revenue from the sale
Answer: C
Status: Old
21
3) Most t-shirts bought by Americans are made in Asia. U.S. consumers of t-shirts buy these t-shirts
because
A) they pay a higher price for t-shirts made in Asia than they would for similar shirts made in the United
States.
B) they pay a lower price for t-shirts made in Asia than they would for similar shirts made in the United
States.
C) they must buy some goods or services produced in Asia.
D) by so doing they are helping preserve U.S. jobs producing t-shirts.
E) they know that the United States has a comparative advantage in wearing t-shirts.
Answer: B
Topic: Gains from imports
Status: Old
4) After a nation starts importing a good from overseas, the domestic price of the good
A) falls.
B) stays the same.
C) rises.
D) might change, but more information about what the country exports is needed to determine if the
price rises, falls, or does not change.
E) might change, but more information about what else the country imports is needed to determine if the
price rises, falls, or does not change.
Answer: A
Status: Old
5) When a nation starts importing a good or service, domestic employment in that industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country imports is needed to determine if
employment increases, decreases, or does not change.
E) might change, but more information about what the country exports is needed to determine if
Answer: A
Status: Old
22
6) When a nation imports a good or service, the nation's consumer surplus ________, its producer surplus
________, and its total surplus ________.
A) increases; decreases; increases
B) increases; decreases; decreases
C) increases; increases; increases
D) decreases; decreases; decreases
E) decreases; decreases; increases
Answer: A
Status: Old
7) When a nation imports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; producer
B) consumer; consumer
C) producer; producer
D) producer; consumer
E) total; consumer
Answer: D
Status: Old
8) When a nation imports a good, its ________ surplus decreases and its ________ surplus increases.
D) producer; total
E) total; consumer
Answer: D
Status: Old
23
9) When a nation imports a good, its ________ surplus increases and its ________ surplus increases.
D) producer; total
E) total; consumer
Answer: E
Status: Old
10) When a nation imports a good, its consumer surplus ________, and its producer surplus ________.
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; increases
Answer: C
Status: Old
11) When a nation starts importing a good or service, the domestic production of the good or service
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what the country exports is needed to determine if
production increases, decreases, or does not change.
E) might change, but more information about what else the country imports is needed to determine if
Answer: A
Status: Old
24
12) If Country A opens up their corn market to trade with the rest of the world and the global price of
corn is lower than the equilibrium price of corn in Country A, then Country A will ________ corn, which
will ________ consumer surplus, ________ producer surplus, and ________ total surplus.
A) import; increase; decrease; increase
B) import; decrease; increase; increase
C) export; increase; decrease; increase
D) export; decrease; increase; increase
E) export; decrease; increase; decrease
Answer: A
Skill: Level 4: Applying models
Status: Old
13) The above figure shows the U.S. market for chocolate. With no international trade, consumer surplus
is equal to
A) area A + area B + area C + area D.
B) area A.
C) area B + area C + area D.
D) area C + area D.
E) area E.
Answer: B
Status: Old
25
14) The above figure shows the U.S. market for chocolate. With international trade, consumer surplus is
equal to
B) area A.
D) area C + area D.
E) area E.
Answer: A
Status: Old
15) The above figure shows the U.S. market for chocolate. With no international trade, producer surplus
is equal to
B) area B + area C + area D + area E.
D) area C + area D.
E) area E.
Answer: E
Status: Old
16) The above figure shows the U.S. market for chocolate. With international trade, the gain in total
surplus is equal to
A) area B.
B) area A + area B + area C + area D.
C) area B + area C + area D + area E.
D) area C + area D.
E) area B + area C + area D.
Answer: D
Status: Old
26
17) The above figure shows the U.S. market for chocolate. With no international trade, consumer surplus
is equal to ________ and producer surplus is equal to ________.
A) area A + area B + area C + area D; area E
B) area B + area C + area D; area A + area E
C) area A; area E
D) area C + area D; area B + area E
E) area E; area A + area B + area C + area D
Answer: C
Status: Old
18) The above figure shows the U.S. market for chocolate. With international trade, ________ is the
transfer of surplus from producers to consumers.
A) area B +area C + area D
B) area B
C) area C + area D
D) area A
E) area E
Answer: B
Status: Old
19) When a nation exports a good or service in which it has a comparative advantage, employment in that
industry
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country exports is needed to determine if
E) might change, but more information about what the country imports is needed to determine if
Answer: C
Topic: Gains from exports
Status: Old
27
20) When a nation exports a good or service in which it has a comparative advantage, production of the
good or service
A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what the country imports is needed to determine if
E) might change, but more information about what else the country exports is needed to determine if
Answer: C
Status: Old
21) When a nation exports a good or service, employment in that industry

A) decreases.
B) stays the same.
C) increases.
D) might change, but more information about what else the country exports is needed to determine if
E) might change, but more information about what the country imports is needed to determine if
Answer: C
Status: Old
22) When a nation exports a good, its consumer surplus ________, and its producer surplus ________.
E) does not change; increases
Answer: D
Status: Old
28
23) When a nation exports a good, its ________ surplus decreases and its ________ surplus increases.
E) total; consumer
Answer: A
Status: Old
24) When a nation exports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; total
E) total; consumer
Answer: A
Status: Old
25) When a nation exports a good, its ________ surplus increases and its ________ surplus increases.
A) consumer; total
D) producer; total
E) total; consumer
Answer: D
Status: Old
29
26) When a nation exports a good or service, the nation's consumer surplus ________, its producer
surplus ________, and its total surplus ________.
A) increases; decreases; increases
B) increases; decreases; decreases
C) increases; increases; increases
E) decreases; increases; increases
Answer: E
Status: Old
27) If Country A opens up their corn market to trade with the rest of the world and the global price of
corn is higher than the equilibrium price of corn in Country A, then Country A will ________ corn, which
will ________ consumer surplus, ________ producer surplus, and ________ total surplus.
A) import; increase; decrease; increase
B) import; decrease; increase; increase
C) export; increase; decrease; increase
D) export; decrease; increase; increase
E) export; decrease; increase; decrease
Answer: D
Status: Old
30
28) The above figure shows the U.S. market for wheat. When there is no international trade, consumer
surplus is equal to ________.
A) area A + area B + area C
B) area A
C) area E + area F
D) area B + area C + area D
E) area A + area B + area C + area D
Answer: A
Status: Old
29) The above figure shows the U.S. market for wheat. With international trade, consumer surplus is
equal to ________.
A) area A + area B + area C
B) area E + area F
C) area B + area C + area D
D) area A + area B + area C + area D
E) area A
Answer: E
Status: Old
31
30) The above figure shows the U.S. market for wheat. Without international trade, producer surplus is
equal to ________.
A) area B + area C + area E + area F
B) area A
C) area B + area C +area D + area E + area F
D) area E + area F
E) area A + area B + area C + area D
Answer: D
Status: Old
31) The above figure shows the U.S. market for wheat. With international trade, the gain in total surplus
is equal to ________.
A) area A
B) area B + area C
C) area D
D) area C + area F
E) area C + area D + area F
Answer: C
Status: Old
32) The above figure shows the U.S. market for wheat. With no international trade, consumer surplus is
equal to ________ and producer surplus is equal to ________.
A) area A; area B + area C + area E + area F
B) area A + area B + area C; area E + area F
C) area E + area F; area A
D) area B + area C + area D; area E + area F
E) area A + area B + area C + area D; area E + area F
Answer: B
Status: Old
32
33) The above figure shows the U.S. market for wheat. With international trade, ________ is the transfer
of surplus from consumers to producers.
A) area B + area C
B) area D
C) area C + area F
D) area C + area D
E) area B + area C + area D
Answer: A
Status: Old
34) When a nation exports a good, its total surplus ________, and when it imports a good, its total surplus
________.
E) does not change; does not change
Answer: A
Status: Old
35) When a nation exports a good, its ________ surplus increases, and when it imports a good, its
________ surplus increases.
A) total; total
E) total; consumer
Answer: A
Status: Old
33
A) consumer; total
E) total; consumer
Answer: A
Status: Old
E) total; consumer
Answer: D
Status: Old
38) When a nation exports a good, its ________ surplus decreases, and when it imports a good, its
________ surplus decreases.
E) total; consumer
Answer: A
Status: Old
34
39) International trade is definitely in the social interest if
A) consumer surplus increases.
B) producer surplus increases.
C) consumer surplus does not decreases.
D) producer surplus does not decreases.
E) total surplus increases.
Answer: E
Status: Old
40) Imports ________ consumer surplus, ________ producer surplus, and ________ total surplus.
A) decrease; decrease; decrease
B) increase; increase; increase
C) increase; decrease; decrease
D) increase; decrease; increase
E) decrease; increase; increase
Answer: D
Status: Old
41) When a country imports a good, the ________ in consumer surplus is ________ the ________ in
producer surplus.
A) decrease; larger than; increase
B) decrease; smaller than; increase
C) increase; smaller than; decrease
D) increase; equal to; decrease
E) increase; larger than; decrease
Answer: E
Status: Old
35
42) When a country exports a good, the country's producer surplus ________, consumer surplus
________, and the country ________ from the trade.
A) increases; increases; gains
B) decreases; increases; gains
C) increases; decreases; gains
D) decreases; decreases; loses
E) increases; decreases; loses
Answer: C
Status: Old
43) Which of the following is correct?

i. U.S. total surplus decreases when the United States exports a good.
ii. U.S. total surplus decreases when the United States imports a good.
iii. U.S. total surplus increases when the United States imports a good and when it exports a good.
A) i only
B) iii only
C) i and ii
D) ii only
E) None of the above because the U.S. total surplus does not change as a result of trade
Answer: B
Status: Old
9.3 International Trade Restrictions
1) A tariff is
A) a tax imposed on imports.
B) any non-tax action used to restrict trade.
C) a tax imposed on exports.
D) any non-subsidy used to increase trade.
E) a subsidy granted to imports.
Answer: A
Topic: Trade restrictions
Status: Old
36
2) A tariff is a tax
A) on an exported good.
B) on an imported good.
C) imposed on all traded goods.
D) imposed on people's income.
E) imposed on the difference between the value of the goods a firm imports and the value of the goods it
exports.
Answer: B
Status: Old
3) A tax on a good that is imposed by the importing country is called a

A) tariff.
B) nontariff barrier.
C) quantitative restriction.
D) licensing regulation.
E) trade constraint.
Answer: A
Status: Old
4) Since the mid-1970s, the average U.S. tariff rate is

A) less than 5 percent.
B) between 6 percent and 15 percent.
C) between 16 percent and 25 percent.
D) between 26 percent and 35 percent.
E) larger than 36 percent.
Answer: A
Topic: Eye on the past, the history of the U.S. tariff
Status: Old
37
5) Looking at the average tariff rate in the United States since 1930, we see that
A) at first tariffs declined, but have recently risen.
B) tariffs have trended downward for most of the period.
C) tariff levels have remained high, at over 50 percent throughout the period.
D) while we talk about free trade, tariff levels have risen over the last 30 years.
E) tariffs were made illegal in the United States in 1955.
Answer: B
Status: Old
6) During the past 70 years, the peak average tariff rate in the United States stemmed from the
A) creation of GATT in the middle of the 1940s.
B) Kennedy Administration in the early 1960s.
C) Uruguay round of GATT in the 1980s.
D) Smoot-Hawley Tariff Act in the early 1930s.
E) Clinton-Bush tariff of 2000-2001.
Answer: D
Status: Old
7) The agreement between the United States, Mexico, and Canada that sought to lower trade barriers is
known as
A) the General Agreement on Tariffs and Trade.
B) the North American Free Trade Agreement.
C) the World Trade Organization.
D) the Smoot-Hawley Tariff Act.
E) the New World Free Trade Agreement.
Answer: B
Status: Old
38
8) In the wake of worsening relations with China, some Americans called for an increase in tariffs on
Chinese products coming into America. If higher tariffs are imposed on clothing produced in China, the
price of clothing in America would
A) decrease.
B) increase.
C) not change.
D) first increase then decrease.
E) first decrease then increase.
Answer: B
Topic: Effects of tariffs
Status: Old
9) After a tariff is imposed on a good, the price of the good

A) does not change.
B) falls.
C) rises.
D) rises only if the domestic demand for the good does not change.
E) might rise, fall, or not change depending on whether the government did or did not simultaneously
impose a quota.
Answer: C
Status: Old
10) After a tariff is imposed, consumers must pay a price equal to the
A) world market price.
B) domestic equilibrium price when there is no trade.
C) world market price plus the tariff.
D) world market price less the tariff.
E) domestic equilibrium price when there is no trade plus the tariff.
Answer: C
Status: Old
39
11) Suppose the world price of widgets is $5 each. If a widget-importing country imposed a $2 per widget
tariff, what price would that country's consumers pay for widgets?
A) $10
B) $7
C) $5
D) $3
E) A price that is greater than $5 and less than $7
Answer: B
Status: Old
12) Which of the following chain of events occurs when a tariff is imposed on a good?
A) Domestic prices rise, shifting the domestic supply curve rightward.
B) Domestic prices fall, shifting the demand curve rightward, and consumers buy more of the good.
C) Domestic prices fall, decreasing the domestic quantity supplied and increasing the quantity
demanded.
D) Domestic prices rise, decreasing the quantity demanded and increasing the domestic quantity
supplied.
E) Domestic prices rise, shifting the demand curve leftward and the domestic supply curve rightward.
Answer: D
Status: Old
13) The imposition of tariffs on Korean steel has led to ________ in imports of Korean steel to the United
States and ________ the price of steel in the United States.
A) no change; raised
B) a decrease; raised
C) an increase; lowered
D) a decrease; no change in
E) an increase; raised
Answer: B
Status: Old
40
14) As a result of U.S. tariffs imposed on wool from New Zealand, the quantity of this wool that is
imported has
A) decreased.
B) increased a little.
C) not changed.
D) increased a lot.
E) changed but whether it has increased or decreased is ambiguous.
Answer: A
Status: Old
15) Imposing a tariff on a good leads to a ________ in the price of the product and ________ in imports.
A) rise; an increase
B) rise; a decrease
C) fall; an increase
D) fall; a decrease
E) rise; no change
Answer: B
Status: Old
16) As a result of U.S. tariffs on fishnets produced in other nations, the quantity of fishnets purchased in
the United States has
A) not been affected.
B) increased.
C) decreased but not to zero.
D) fallen to zero.
E) probably changed, but whether it has increased or decreased is ambiguous.
Answer: C
Status: Old
41
17) If the United States imposes a tariff on foreign chocolate, how are U.S. buyers of chocolate affected?
A) The price they pay for chocolate rises.
B) Their demand for chocolate increases because the U.S. production chocolate increases.
C) The quantity they consume is unchanged.
D) The price they pay for chocolate falls but they consume less chocolate because less is imported.
E) The price they pay for chocolate falls and they consume more chocolate.
Answer: A
Status: Old
18) If the United States imposes a tariff on a good, then

A) domestic consumption of the good decreases.
B) foreign consumption of the good decreases.
C) foreign production of the good increases.
D) domestic production of the good decreases.
E) the government makes less revenue than it would have gained if it imposed a quota.
Answer: A
Status: Old
19) When the United States imposes a tariff on an imported good, the
A) price of the good in the United States falls.
B) quantity of the good purchased in the United States decreases.
C) quantity of the good produced in the United States decreases.
D) outcome becomes more efficient.
E) amount imported increases.
Answer: B
Status: Old
42
20) U.S. tariffs on Canadian lumber have led to ________ production of lumber within the United States.
A) no change in
B) an increase in
C) the elimination of
D) a decrease in
E) making illegal the
Answer: B
Status: Old
21) If the government decides to impose a new tariff on orange juice from Brazil, the tariff would lead to
________ the tariff revenue collected by the U.S. government.
A) no change in
B) an increase in
C) a decrease in
D) an elimination of
E) making illegal
Answer: B
Status: Old
22) The imposition of a tariff will typically ________ government revenue and ________ domestic
production of the good.
E) increase; not change
Answer: A
Status: Old
43
23) Country A imports 1,000 cars per month. After imposing a $50 per car tariff, imports fall to 800 cars
per month. How much does Country A's government collect in tariff revenue?
A) $90,000
B) $50,000
C) $40,000
D) $10,000
E) $60,000
Answer: C
Status: Old
24) Of the following, which group is hurt by a tariff?

A) domestic producers of the good
B) foreign consumers of the good
C) domestic consumers of the good
D) domestic government
E) foreign government
Answer: C
Status: Old
25) Of the following, who is harmed by a tariff?

A) domestic buyers of the good or service
B) the overall domestic economy
C) the foreign exporter of the good or service
D) domestic producers of the good or service
E) Both answers A and B are correct.
Answer: E
Status: Old
44
26) Relative to free trade, domestic consumers of a good are ________ off with a tariff because of the
________.
A) better; higher price and greater quantity sold
B) better; higher price and smaller quantity sold
C) better; lower price and greater quantity sold
D) worse; lower price and smaller quantity sold
E) worse; higher price and greater quantity sold
Answer: D
Status: Old
27) If a tariff is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp
will ________ and U.S. producer surplus from shrimp will ________.
Answer: C
Status: Old
28) If a tariff is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp
will ________ and U.S. total surplus from shrimp will ________.
Answer: D
Status: Old
45
29) If a tariff is imposed on imports of shrimp into the United States, U.S. producer surplus from shrimp
will ________ and U.S. total surplus from shrimp will ________.
Answer: B
Topic: Effects of tariffs, inefficiency
Status: Old
30) A tariff makes the total economy

A) better off because it increases the domestic production of the good.
B) better off because it decreases the deadweight loss from international trade.
C) worse off because it creates a deadweight loss.
D) worse off because it creates revenue for the government.
E) worse off because it decreases both domestic consumer surplus and domestic producer surplus.
Answer: C
Status: Old
31) Relative to free trade, when a tariff is imposed in a market for an imported good,
A) the consumer surplus in that market increases.
B) the producer surplus in that market decreases.
C) the total surplus in that market decreases.
D) tariff revenue decreases.
E) deadweight loss decreases.
Answer: C
Status: Old
46
32) Of the following, who gains because of tariffs and why?
A) domestic producers of protected goods because they can sell at a higher price
B) domestic buyers because they can be sure of buying high-quality products
C) foreign producers because they earn more total revenue
D) foreign government because they gain more revenue
E) domestic buyers because they pay a lower price
Answer: A
Status: Old
33) Relative to free trade, domestic producers of a good are ________ off with a tariff because of the
________ .
A) better; higher price and greater quantity sold
B) better; higher price and smaller quantity sold
C) better; lower price and greater quantity sold
D) worse; lower price and smaller quantity sold
E) worse; higher price and greater quantity sold
Answer: A
Status: Old
34) If the United States imposes a tariff on foreign chocolate, how are U.S. producers of chocolate
affected?
A) The quantity of chocolate they sell decreases because U.S. consumption of chocolate decreases.
B) The quantity of chocolate they produce increases.
C) The price at which they sell their chocolate falls.
D) They are harmed because foreign exporters of chocolate increase their supply in response to the higher
price.
E) They are unaffected because the quota applies to foreign producers, not to U.S. producers.
Answer: B
Status: Old
47
35) If the United States imposes a tariff on foreign chocolate, how are foreign producers of chocolate
affected?
A) Their supply increases because they have to pay the tariff.
B) They export less to the United States.
C) They earn more profit because their chocolate sells for a higher price.
D) Their supply is unaffected because the quota must be met by U.S. producers.
E) The tariff has no effect on foreign producers because U.S. consumers must pay the higher price.
Answer: B
Status: Old
36) The above figure shows the U.S. market for replacement cell phone batteries. When there is no
international trade, the equilibrium price is ________ per battery and when there is international trade the
equilibrium price is ________ per battery.
A) $16; $14
B) $14; $12
C) $12; $14
D) $12; $16
E) $16; $12
Answer: E
Topic: Tariffs
Status: Old
48
37) The above figure shows the U.S. market for replacement cell phone batteries. With free international
trade, the United States
A) exports 300,000 batteries.
B) imports 400,000 batteries.
C) imports 500,000 batteries.
D) imports 800,000 batteries.
E) exports 700,000 batteries.
Answer: D
Topic: Imports
Status: Old
38) The above figure shows the U.S. market for replacement cell phone batteries. Suppose the U.S.
government imposes the tariff illustrated in the figure. The tariff is equal to ________ and the price U.S.
consumers pay ________ compared to the price paid when there was free trade.
A) $2; decreases
B) $14; decreases
C) $2; increases
D) $12; increases
E) $14; increases
Answer: C
Status: Old
39) The above figure shows the U.S. market for replacement cell phone batteries. With free trade, the
United States imports ________ batteries and once the tariff illustrated in the figure is imposed, the
United States imports ________ batteries.
A) 900,000; 700,000
B) 800,000; 400,000
C) 300,000; 100,000
D) 700,000; 300,000
E) 900,000; 100,000
Answer: B
Status: Old
49
40) The above figure shows the U.S. market for replacement cell phone batteries. With free trade, U.S.
production is equal to ________ batteries per year. When a $2 tariff is in place, U.S. production is equal to
________ batteries per year.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
Answer: A
Status: Old
41) The above figure shows the U.S. market for replacement cell phone batteries. The U.S. government
collects tariff revenue of ________ on each battery imported.
A) $4
B) $14
C) $12
D) $6
E) $2
Answer: E
Topic: Effects of tariffs, government revenue
Status: Old
42) The above figure shows the U.S. market for replacement cell phone batteries. Area C is the
A) deadweight loss from tariff.
B) decrease in consumer surplus due to the tariff.
C) increase in producer surplus due to the tariff.
D) tariff revenue.
E) loss in total surplus because of the tariff.
Answer: D
Status: Old
50
43) The above figure shows the U.S. market for replacement cell phone batteries. Area B + area D is the
A) tariff revenue.
B) decrease in consumer surplus due to the tariff.
C) deadweight loss from tariff.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
Answer: C
Status: Old
44) The above figure shows the U.S. market for replacement cell phone batteries. Area A + area E is the
A) consumer surplus when there is a tariff.
B) producer surplus when there is a tariff.
C) tariff revenue.
Answer: B
Topic: Tariffs
Status: Old
45) The above figure shows the U.S. market for replacement cell phone batteries. Area E is the
A) producer surplus when there is free trade.
B) deadweight loss from tariff.
C) tariff revenue.
Answer: A
Topic: Tariffs
Status: Old
51
46) Of the following, who gains with a tariff?
B) the importer of the good or service
D) the government of the importing nation
E) the government of the exporting nation
Answer: D
Status: Old
47) If the U.S. government imposes a tariff on imported steel, who else besides U.S. steel producers gains
from the tariff?
A) U.S. steel consumers
B) the U.S. government
C) U.S. importers of steel
D) foreign exporters of steel
E) the foreign government
Answer: B
Status: Old
48) Of the following, who gains from a tariff?

A) the government of the importing country
B) the government of the exporting country
C) consumers in the importing country
D) producers in the exporting country
E) both the government of the exporting country and the government of the importing country
Answer: A
Status: Old
52
49) Which type of policy raises the most revenue for the government?
A) tariff
B) quota
C) voluntary export restraints
D) If they are set at the same level, all of the above raise the same amount of revenue.
E) None of the above answers is correct because none of the policies raises revenue for the government.
Answer: A
Status: Old
50) The difference between a tariff and a quota is that the revenue from the tariff goes to the
A) domestic consumer.
B) domestic producer.
C) domestic government.
D) foreign producers.
E) foreign government.
Answer: C
Status: Old
51) The table above gives the domestic demand and supply schedules for a good. Suppose the world
price of the good is $40 and the government imposes a $20 per unit tariff. How much will the government
collect as tariff revenue?
A) $160
B) $320
C) $80
D) $240
E) $360
Answer: C
Status: Old
53
52) A quota is
A) a tax on imports.
B) a specified minimum amount that must be imported.
C) a specified maximum amount that can be imported.
D) a tariff on exports.
E) the minimum amount that domestic firms can dump.
Answer: C
Topic: Quotas
Status: Old
53) A quota is a
A) quantitative restriction on an import imposed by the importing country.
B) quantitative restriction on an import imposed by the exporting country.
C) restriction on how much a customer can buy of a scarce good imposed by the seller.
D) tax that is imposed on a good when it crosses an international boundary.
E) trade barrier that does not harm domestic consumers of the good or service.
Answer: A
Topic: Quotas
Status: Old
54) When governments specify the maximum amount of a good that may be imported in a given period
of time, they are establishing a
A) tariff.
B) quota.
C) dynamic tariff.
D) tax.
E) dumping limit.
Answer: B
Topic: Quotas
Status: Old
54
55) A specified maximum amount of the good that may be imported in a given period of time is a
A) forcible limit.
B) quota.
C) tariff.
D) sanction.
E) dumping limit.
Answer: B
Topic: Quotas
Status: Old
56) The imposition of a quota ________ domestic production, ________ imports, and ________ domestic
purchases.
A) increases; decreases; decreases
B) increases; decreases; increases
C) decreases; increases; decreases
E) increases; increases; increases
Answer: A
Topic: Effects of quotas
Status: Old
57) Of the following, who gains with a quota?

B) the importer of the good or service
D) the government of the importing nation
E) the government of the exporting nation
Answer: B
Status: Old
55
58) If the United States imposed a quota on the amount of salmon imported from Chile, the result would
be ________ salmon prices in the United States and ________ in the quantity of salmon demanded in the
United States.
A) higher; an increase
B) higher; a decrease
C) lower; an increase
D) lower; a decrease
E) higher; no change
Answer: B
Status: Old
59) If a quota is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp
will ________ and U.S. producer surplus from shrimp will ________.
Answer: C
Status: Old
60) If an import quota is imposed on imports of shrimp into the United States, U.S. consumer surplus
from shrimp will ________ and U.S. total surplus from shrimp will ________.
Answer: D
Status: Old
56
61) If an import quota is imposed on imports of shrimp into the United States, U.S. producer surplus from
shrimp will ________ and U.S. total surplus from shrimp will ________.
Answer: B
Status: Old
62) A quota ________ a deadweight loss and a tariff ________ a deadweight loss.
A) creates; creates
B) creates; does not create
C) does not create; creates
D) does not create; does not create
E) might create; might create
Answer: A
Status: Old
57
63) The above figure shows the U.S. market for 1 carat diamonds. With free trade, Americans buy
________ diamonds and pay a price of ________ per diamond.
A) 500,000; $4,000
B) 300,000; $3,000
C) 700,000; $3,000
D) 300,000; $4,000
E) 900,000; $2,000
Answer: E
Status: Old
64) The above figure shows the U.S. market for 1 carat diamonds. With free trade, the United States
produces ________ diamonds and imports ________ diamonds.
A) 300,000; 600,000
B) 0; 900,000
C) 100,000; 900,000
D) 100,000; 800,000
E) 500,000; 400,000
Answer: D
Status: Old
58
65) The above figure shows the U.S. market for 1 carat diamonds. Suppose the United States imposes the
import quota shown in the figure. With the import quota, how many diamonds can be imported?
A) 500,000
B) 700,000
C) 400,000
D) 900,000
E) 300,000
Answer: C
Status: Old
66) The above figure shows the U.S. market for 1 carat diamonds. The free trade, the price in the United
States for diamonds is equal to ________ and with the quota illustrated in the figure, the price in the
United States is equal to ________.
A) $4,000; $2,000
B) $2,000; $3,000
C) $4,000; $3,000
D) $2,000; $2,000
E) $2,000; $4,000
Answer: B
Status: Old
67) The above figure shows the U.S. market for 1 carat diamonds. With free trade, U.S. production of
diamonds is equal to ________ diamonds. When the quota illustrated in the figure is in place, U.S.
production is equal to ________ diamonds.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
Answer: A
Status: Old
59
68) The above figure shows the U.S. market for 1 carat diamonds. Area B + area D is the
A) decrease in consumer surplus due to the import quota.
B) importers' profit from the quota.
C) gain in total surplus due to the import quota.
D) deadweight loss from the import quota.
E) increase in producer surplus due to the import quota.
Answer: D
Status: Old
69) The above figure shows the U.S. market for 1 carat diamonds. Area A + area B + area C + area D is the
A) deadweight loss from the import quota.
C) decrease in consumer surplus due to the import quota.
D) gain in total surplus due to the import quota.
E) increase in producer surplus due to the import quota.
Answer: C
Status: Old
70) The above figure shows the U.S. market for 1 carat diamonds. Area C is the
A) decrease in consumer surplus due to the import quota.
C) deadweight loss from the import quota.
D) increase in producer surplus due to the import quota.
E) gain in total surplus due to the import quota.
Answer: B
Status: Old
60
71) The above figure shows the U.S. market for 1 carat diamonds. Area A is the
A) increase in producer surplus due to the import quota.
B) importers' profit from the import quota.
C) decrease in consumer surplus due to the import quota.
D) deadweight loss from the import quota.
E) gain in total surplus due to the import quota.
Answer: A
Status: Old
72) If the United States negotiates a voluntary export restraint with international sugar producing
nations, then
A) U.S. sugar buyers pay a lower price for sugar.
B) U.S. sugar producers produce a smaller quantity.
C) imports of sugar increase.
D) the U.S. government collects less revenue than if it imposed a tariff on sugar.
E) the foreign governments collect more revenue than if a tariff is imposed on sugar.
Answer: D
Topic: Voluntary export restraint
Status: Old
73) Which of the following methods of restricting trade does NOT create a deadweight loss?
A) a tariff
B) a quota
C) a voluntary export restraint
D) Both answers A and B are correct.
E) None of the above answers is correct because all the methods create a deadweight loss
Answer: E
Status: Old
61
74) Economists argue for free trade in import markets because
A) all consumers and producers benefit from importing goods.
B) the gains to the U.S. producers outweigh the losses to the U.S. consumers.
C) the gains to the U.S. consumers outweigh the losses to the U.S. producers.
D) no one is made worse off by importing goods.
E) importing goods decreases total surplus.
Answer: C
Skill: Level 5: Critical thinking
Status: Old
75) Economists argue for free trade in export markets because

A) all consumers and producers benefit from exporting goods.
B) the gains to the U.S. producers outweigh the losses to the U.S. consumers.
C) the gains to the U.S. consumers outweigh the losses to the U.S. producers.
D) no one is made worse off by exporting goods.
E) exporting goods decreases total surplus.
Answer: B
Status: Old
76) A tax on a good that is imposed when it is imported is called

A) an import quota.
B) a VER.
C) a tariff.
D) a sanction.
E) a border tax.
Answer: C
Status: Old
62
77) The average U.S. tariff was highest in the
A) 1930s.
B) 1940s.
C) 1970s.
D) 1980s.
E) 1990s.
Answer: A
Status: Old
78) Suppose the world price of a shirt is $10. If the United States imposes a tariff of $5 a shirt, then the
price of a shirt in the
A) United States falls to $5.
B) United States rises to $15.
C) world falls to $5.
D) world rises to $5.
E) world rises to $15
Answer: B
Status: Old
79) When a tariff is imposed on a good, the ________ increases.

A) domestic quantity purchased
B) domestic quantity produced
C) quantity imported
D) quantity exported
E) world price
Answer: B
Status: Old
63
80) When a tariff is imposed on a good, domestic consumers of the good ________ and domestic
producers of the good ________.
A) win; lose
B) lose; win
C) win; win
D) lose; lose
E) lose; neither win nor lose
Answer: B
Status: Old
81) Which of the following parties benefits from an import quota but not from a tariff?
A) the domestic government
B) domestic producers
C) domestic consumers
D) the person with the right to import the good
E) the foreign government
Answer: D
Status: Old
9.4 The Case Against Protection
1) If supporters of restrictions on imports argue that protection is needed to preserve a strategic industry,
which of the following is being used?
A) Save domestic jobs argument
B) National security argument
C) Dumping argument
D) Infant-industry argument
E) Protecting national culture argument
Answer: B
Topic: National security argument
Status: Old
64
2) Which of the following is the national security argument against free trade?
A) A country must protect industries that produce defense equipment and armaments.
B) A country must protect new industries to give them a chance to mature before facing foreign
competition.
C) A country must protect firms from dumping by foreign companies.
D) A country must protect its consumers from foreign influences.
E) A country must preserve its jobs.
Answer: A
Status: Old
3) What is the national security argument to support protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Answer: B
Status: Old
4) What is the infant-industry argument for protection from international trade?

Answer: A
Topic: Infant industry
Status: Old
65
5) When protection is encouraged to protect a growing domestic industry; which of the following is being
used?
C) Anti-dumping argument
E) Diversity and stability argument
Answer: D
Status: Old
6) The infant-industry argument is used by those who assert they want to

A) limit imports to protect new industries.
B) increase exports to encourage growth of new industries.
C) limit exports.
D) increase imports to earn money to support new industries.
E) encourage foreign firms to dump in the United States.
Answer: A
Status: Old
7) The infant-industry argument for protection is based on the idea of

A) learning-by-doing.
B) dumping.
C) absolute advantage.
D) quotas are the least harmful method of protecting domestic firms.
E) saving jobs in the U.S. economy.
Answer: A
Status: Old
66
8) What is the dumping argument for protection from international trade?
Answer: C
Topic: Dumping
Status: Old
9) When a tariff supporter argues that foreign producers are selling their products for prices below the
costs of production, which of the following is being used?
C) Dumping argument
Answer: C
Topic: Dumping
Status: Old
10) Dumping is defined as the situation in which

A) domestic producers sell a product at prices below the cost of production.
B) foreign producers sell a product at a price below the cost of production.
C) foreign producers sell a product at a price above a fair level.
D) domestic producers cut production to drive up domestic prices.
E) domestic producers are protected by tariffs.
Answer: B
Topic: Dumping
Status: Old
67
11) Which of the following is NOT a major argument for restricting international trade?
A) the promotion of dumping in America
B) the national security argument
C) the infant industry argument
D) the prevention of dumping argument
E) saves U.S. jobs argument
Answer: A
Topic: Dumping
Status: Old
12) Suppose the United States subsidizes domestic chicken production and then sells surpluses on the
world market at a price below the cost of production. In foreign countries, the argument that would made
to restrict chicken trade with the United States would be the
A) penalizes lax environmental standards argument.
B) saves jobs argument.
C) infant-industry argument.
D) dumping argument.
E) national security argument.
Answer: D
Topic: Dumping
Status: Old
13) A flawed argument for protection from foreign trade is that

i. tariffs save domestic jobs.
ii. tariffs protect the national culture.
iii. quotas bring about diversity and stability.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
Answer: E
Topic: Protection
Status: Old
68
14) Which of the following is an argument that is used for protection from free trade?
i. the national security argument
ii. the infant-industry argument
iii. the dumping argument
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Answer: E
Topic: Protection
Status: Old
15) When politicians debated the North American Free Trade Agreement (NAFTA), some told stories of
U.S. workers whose jobs would be moved to Mexico. Which of the following arguments in favor of
protection was being used?
C) Anti-dumping argument
Answer: A
Topic: Saving jobs
Status: Old
16) The argument that jobs are lost to free trade is

A) totally false because no jobs are lost to free trade.
B) correct because jobs are lost but foreign countries are helped and we can afford losses.
C) incorrect because no jobs are lost and new jobs are created by trade.
D) correct because some jobs are lost but incorrect because new jobs also are created.
E) true only when tariffs are imposed on the goods being imported.
Answer: D
Topic: Saving jobs
Status: Old
69
17) International trade decreases the demand for workers in domestic industries that
A) produce goods that are exported from the country.
B) produce goods that are imported into the country.
C) help businesses import and export.
D) service imported goods.
E) produce the goods in which the nation has a comparative advantage.
Answer: B
Topic: Saving jobs
Status: Old
18) What is an effective counter against the argument that international trade should be restricted to
protect domestic jobs?
A) A more effective policy would be to support the industry with subsidies.
B) The more diversified the economy, the more stable it is.
C) Free trade increases the number of jobs in which workers earn higher incomes.
D) Rent seeking behavior should be encouraged.
E) Free trade in "green" goods will increase jobs.
Answer: C
Topic: Saving jobs
Status: Old
19) The typical relationship between a worker's productivity and the worker's wage rate is
A) high productivity workers receive low wage rates.
B) low productivity workers receive low wage rates.
C) no link between productivity and wages earned.
D) high productivity workers find that their jobs are often outsourced.
E) that workers with high productivity need to have their high wages protected by tariffs.
Answer: B
Topic: Cheap foreign labor
Status: Old
70
20) While high-paid American workers fear competition with low-paid foreign workers, low-paid foreign
workers fear competition with high-paid American workers. Why?
A) It is completely irrational and unfounded.
B) Because America has such a large market it can protect its workers.
C) Because high wages reflect high worker productivity and the low-paid foreign workers are not as
productive.
D) Because high wages are the result of extensive tariff and other trade restrictions.
E) Because high wages mean that U.S. workers can buy more goods and services.
Answer: C
Status: Old
21) The ________ are hurt by importing a good.

A) domestic consumers of the good
B) domestic producers of the good
C) domestic governments
D) foreign producers of the good
E) foreign governments
Answer: B
Topic: Why is trade restricted?
Status: Old
22) When the United States imports goods from the rest of the world, which of the following parties is
harmed?
i. domestic producers of the good
ii. domestic consumers of the good
iii. foreign producers of the good
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Answer: A
Status: Old
71
23) The two main reasons why international trade is restricted is because restricting trade means that
governments can ________ and because domestic businesses ________.
A) create jobs; earn profits
B) obtain revenue; rent seek
C) rent seek; want to dump
D) prevent dumping; want to dump
E) rent seek; obtain revenue
Answer: B
Status: Old
24) Comparing developed and developing nations in their use of tariffs, we see that
A) the developing nations' governments get very little revenue from tariffs.
B) both governments get large amounts of revenue from tariffs.
C) many developing nations' governments get a large portion of their revenue from tariffs.
D) developing nations almost never impose tariffs because they want their people to obtain goods and
services at the lowest possible price.
E) developed nations rely much more than developing nations on tariff revenue.
Answer: C
Status: Old
25) A major reason why it is difficult to lower the barriers to free trade is
A) that total benefits are less than total costs from free trade.
B) the uneven distribution of gains and losses from free trade.
C) the loss of jobs without any gain of jobs from free trade.
D) the inability to compensate losers from free trade.
E) that the barriers allow us to compete with cheap foreign labor.
Answer: B
Status: Old
72
26) What is rent seeking with respect to restricting international trade?
A) The rent on factory buildings increases if trade is restricted.
B) The government avoids paying rent on buildings when importers pay the tariff.
C) An attempt to capture the gains from trade by imposing a tariff.
D) The government's efforts to capture tariff rents.
E) The attempt by importers to avoid paying a tariff.
Answer: C
Topic: Rent seeking
Status: Old
27) Which of the following groups gain from international trade?

i. producers of exported goods
ii. domestic consumers of imported goods
iii. workers in exporting firms
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Answer: E
Status: Old
28) Why are the losers from free international trade not fully compensated for their losses?
A) The amount of compensation needed would bankrupt the government.
B) The people who claim to lose are also the same ones who benefit.
C) Identifying all losers and the size of their losses is extremely difficult.
D) No one actually loses from international trade.
E) The losers are foreigners.
Answer: C
Status: Old
73
29) Trade is often restricted because the
A) total gain to all producers is larger than the total loss to all consumers.
B) total gain to all producers is smaller than the total loss to all consumers.
C) gain per producer is larger than the loss per consumer.
D) gain per producer is less than the loss per consumer.
E) gain per consumer is larger than the loss per producer.
Answer: C
Status: Old
30) The national security argument is used by those who assert they want to
A) increase imports as a way of strengthening their country.
B) increase exports as a way of earning money to strengthen their country.
C) limit imports that compete with domestic producers important for national defense.
D) limit exports to control the flow of technology to third world nations.
E) limit all imports.
Answer: C
Status: Old
31) The argument that it is necessary to protect a new industry to enable it to grow into a mature industry
that can compete in world markets is known as the
A) national security argument.
B) diversity argument.
C) infant-industry argument.
D) environmental protection argument.
E) national youth protection argument.
Answer: C
Status: Old
74
32) ________ occurs when a foreign firm sells its exports at a lower price than its cost of production.
A) Dumping
B) The trickle-down effect
C) Rent seeking
D) Tariff avoidance
E) Nontariff barrier protection
Answer: A
Topic: Dumping
Status: Old
33) The United States

A) needs tariffs to allow us to compete with cheap foreign labor.
B) does not need tariffs to allow us to compete with cheap foreign labor.
C) should not trade with countries that have cheap labor.
D) will not benefit from trade with countries that have cheap labor.
E) avoids trading with countries that have cheap labor.
Answer: B
Status: Old
34) Why do governments in less-developed nations impose tariffs?

A) The government gains revenue from the tariff.
B) The government's low-paid workers are protected from high-paid foreign workers.
C) The nation's total income will be increased.
D) The national security of the country definitely is improved.
E) The government diversifies its economy.
Answer: A
Status: Old
75
35) What is a major reason international trade is restricted?
A) rent seeking
B) to allow competition with cheap foreign labor
C) to save jobs
D) to prevent dumping
E) to eliminate monopolies
Answer: A
Status: Old
76
9.5 Chapter Figures
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is
the domestic demand curve. The United States trades freely with the rest of the world. The world price of
a T-shirt is $5.
1) In the figure above, with international trade U.S. consumers buy ________ million T-shirts per year at
________ per T-shirt.
A) 60; $5
B) 40; $8
C) 20; $5
D) 40; $5
E) 60; $11
Answer: A
Topic: Imports
Status: Old
77
2) Based on the figure above, as a result of international trade, U.S. domestic production ________ million
T-shirts per year.
A) decreases by 20
B) increases by 20
C) decreases by 10
D) increases by 40
E) increases by 10
Answer: A
Topic: Imports
Status: Old
3) In the figure above, with international trade the United States ________ million T-shirts per year.
A) imports 40
B) exports 40
C) exports 20
D) imports 20
E) imports 60
Answer: A
Topic: Imports
Status: Old
4) Based on the figure above, as a result of international trade, consumer surplus

A) increases by $150 million.
B) decreases by $150 million.
C) increases by $90 million.
D) decreases by $90 million.
E) remains unchanged.
Answer: A
Status: Old
78
5) Based on the figure above, as a result of international trade, producer surplus
A) increases by $150 million.
B) decreases by $150 million.
C) increases by $90 million.
D) decreases by $90 million.
Answer: D
Status: Old
6) Based on the figure above, international trade leads to

A) a net gain of surplus of $60 million.
B) a net loss of surplus of $60 million.
C) a net gain of surplus of $90 million.
D) a net loss of surplus of $90 million.
E) no net gain or loss of surplus.
Answer: A
Status: Old
79
The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and DUS
is the domestic demand curve. The United States trades freely with the rest of the world. The world price
of an airplane is $150 million.
7) Based on the figure above, as a result of international trade, U.S. domestic production ________
airplanes per year.
A) decreases by 200
B) increases by 300
C) decreases by 100
D) increases by 500
E) increases by 200
Answer: B
Topic: Exports
Status: Old
80
8) In the figure above, U.S. consumers buy ________ airplanes per year at ________ million per airplane.
A) 200; $150
B) 400; $100
C) 700; $150
D) 400; $150
E) 200; $100
Answer: A
Status: Old
9) In the figure above, the United States ________ airplanes per year.
A) imports 500
B) exports 500
C) exports 400
D) imports 400
E) exports 200
Answer: B
Topic: Exports
Status: Old
10) Based on the figure above, as a result of international trade, consumer surplus
A) increases by $15 billion.
B) decreases by $15 billion.
C) increases by $27.5 billion.
D) decreases by $12.5 billion.
Answer: B
Status: Old
81
11) Based on the figure above, as a result of international trade, producer surplus
A) increases by $15 billion.
B) decreases by $15 billion.
C) increases by $27.5 billion.
D) decreases by $12.5 billion.
Answer: C
Status: Old
12) Based on the figure above, international trade leads to

A) a net gain in surplus of $12.5 billion.
B) a net loss of surplus of $12.5 billion.
C) a net gain in surplus of $27.5 billion.
D) a net loss of surplus of $15 billion.
E) no net gain or loss of surplus.
Answer: A
Status: Old
82
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is
the domestic demand curve. The world price of a T-shirt is $5. The U.S. government imposes a $2 per
unit tariff on imported T-shirts.
13) The figure above shows that as a result of the tariff, the price of a T-shirt in the United States
________, and the quantity of T-shirts bought ________.
A) rises by $2; decreases by 15 million per year
B) rises by $2; increases by 15 million per year
C) falls by $2; increases by 5 million per year
D) does not change; decreases by 5 million per year
E) does not change; does not change
Answer: A
Status: Old
83
14) The figure above shows that as a result of the tariff, the quantity of T-shirts produced in the United
States ________, and the quantity of T-shirts imported ________.
A) increases by 15 million per year; decreases by 30 million per year
B) increases by 15 million per year; increases by 15 million per year
C) decreases by 15 million per year; decreases by 30 million per year
D) decreases by 30 million per year; increases by 30 million per year
E) does not change; decreases by 15 million per year
Answer: A
Status: Old
15) The figure above shows that as a result of the tariff, consumer surplus in the United States
A) decreases by $105 million per year.
B) increases by $55 million per year.
C) decreases by $30 million per year.
D) decreases by $20 million per year.
Answer: A
Status: Old
16) The figure above shows that as a result of the tariff, producer surplus in the United States
A) decreases by $105 million per year.
B) increases by $55 million per year.
C) decreases by $30 million per year.
D) decreases by $20 million per year.
Answer: B
Status: Old
84
17) The figure above shows that the government revenue from the tariff is
A) $20 million per year.
B) $30 million per year.
C) $15 million per year.
D) $55 million per year.
E) zero.
Answer: A
Status: Old
18) The figure above shows that the deadweight loss from the tariff is
A) $20 million per year.
B) $30 million per year.
C) $15 million per year.
D) $55 million per year.
E) zero.
Answer: B
Status: Old
19) The figure above shows that the U.S. net ________ surplus from the tariff is ________.
A) loss of; 30 million per year
B) gain in; $20 million per year
C) loss of; $10 million per year
D) gain in; $55 million per year
E) gain in; zero
Answer: A
Status: Old
85
9.6 Integrative Questions
1) Assume that the state of Missouri decided to place a tariff on every product produced outside the state
in an effort to increase the state's revenue and increase employment in the state. If Missouri did so,
A) the state's total output would definitely increase.
B) workers with jobs in new firms replacing out-of-state imports would earn high income.
C) the standard of living within Missouri would decrease.
D) other states would begin to dump in Missouri.
E) the prices of goods imported into Missouri would fall.
Answer: C
Topic: Integrative
Section: Integrative
Status: Old
2) During the 1980s, Harley-Davidson, the American motorcycle maker asked Congress for tariff
protection from large motorcycles imported from Japan. Harley-Davidson argued that their company
needed protection so the company could reorganize and, after some time had passed, could become more
competitive. Harley-Davidson's argument is similar to the ________ argument for protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) bring diversity and stability
Answer: D
Topic: Integrative
Status: Old
3) In the 1950s, crude oil and natural gas imports were restricted to keep the domestic industries viable in
case of a war. The rationale for this protection is the ________ argument for protection.
C) anti-dumping
D) infant-industry
E) penalizing lax environmental standards
Answer: B
Topic: Integrative
Status: Old
86
4) In the 1980s, the U.S. government forced Japanese automakers to limit their exports to the United
States. The union representing the autoworkers (UAW), argued that otherwise the U.S. auto industry
would have contracted. The UAW's argument is the ________ argument for protection.
C) anti-dumping
D) infant-industry
E) bringing diversity and stability
Answer: A
Topic: Integrative
Status: Old
5) In 2002, President Bush imposed a tariff on imported steel. He did so in response to rent seeking by
A) domestic steel consumers.
B) domestic steel producers.
C) foreign steel consumers.
D) foreign steel producers.
E) foreign politicians.
Answer: B
Topic: Integrative
Status: Old
6) If the opportunity cost of producing a T-shirt is ________ in China than in the United States, China has
________ advantage in producing T-shirts.
A) lower; a comparative
B) lower; an absolute
C) higher; a comparative
D) higher; an absolute
E) higher; no
Answer: A
Status: New
87
7) Because the United States has ________ advantage compared to China in producing airplanes, China
can buy airplanes from the United States at a ________ opportunity cost than that at which China can
produce them.
A) comparative; lower
B) comparative; higher
C) absolute; lower
D) absolute; higher
E) None of the above because China will produce airplanes and sell them to the United States.
Answer: A
Status: New
8) Which of the following is true?

i. Comparative advantage drives international trade.
ii. Compared to a no-trade situation, in a market with imports, producer surplus is larger.
iii. Tariffs lower the domestic price of imported goods.
A) only i
B) only ii
C) only iii
D) i and ii
E) i and iii
Answer: A
Topic: Integrative
Status: Old

i. When the world price of a good is lower than the price that balances domestic supply and demand, a
country gains from exporting the good.
ii. Compared to a no-trade situation, in a market with imports, consumer surplus is larger.
iii. Quotas raise the domestic price of imported goods.
A) only i
B) only ii
C) only iii
D) i and ii
E) ii and iii
Answer: E
Topic: Integrative
Status: Old
88
i. Compared to a no-trade situation, in a market with exports, consumer surplus is larger.
ii. Tariffs decrease consumer surplus.
iii. Trade is restricted because protection brings small losses to a large number of people and large gains
to a small number of people.
A) only i
B) only ii
C) only iii
D) i and iii
E) ii and iii
Answer: E
Topic: Integrative
Status: Old
11) We find that the world price of sugar is 20 cents a pound, the U.S. does not trade internationally, and
the U.S. equilibrium price of sugar is 30 cents a pound. If the U.S. begins to trade internationally, the price
of sugar in the U.S. ________ to the world price and U.S. consumers buy ________ sugar.
A) falls; more
B) falls; less
C) rises; more
D) rises; less
E) falls; no
Answer: A
Topic: Imports
Status: New
12) The world price of steel is $100 a ton. Before international trade, the price of steel in India is $60 a ton.
If India begins trading internationally, the price of steel in India ________ and steel mills in India
________ the quantity they produce.
A) rises; increase
B) falls; increase
C) does not change; increase
D) rises; decrease
E) falls; decease
Answer: A
Status: New
89
13) Imports ________ society's total surplus because of the ________ in price and ________ in
consumption.
A) increase; rise; increase
B) increase; rise; decrease
C) decrease; fall; increase
D) decrease; fall; decrease
E) increase; fall; increase
Answer: E
Topic: Exports
Status: New
14) Exports ________ society's total surplus because of the ________ in price and ________ in production.
A) increase; rise; increase
B) increase; rise; decrease
C) decrease; fall; increase
D) decrease; fall; decrease
E) increase; fall; increase
Answer: A
Topic: Exports
Status: New
9.7 Essay: How Global Markets Work
1) How can a nation and its producers determine whether or not it has a comparative advantage in
producing a particular good or service?
Answer: Whether a nation has a comparative advantage in the production of a particular good or service
can be determined by comparing the price the good or service sells for domestically to the world price of
the same good or service. If the domestic price is less than the world, the nation has a comparative
advantage in the production of that good or service. If the domestic price exceeds the world price, the
nation does not have a comparative advantage in the production of that good or service.
Status: Old
AACSB: Written and oral communication
90
2) After NAFTA was signed, the United States allowed more tomatoes to be imported from Mexico. What
happened to the price of tomatoes in the United States when the United States allowed more tomatoes to
be imported?
Answer: The price of tomatoes fell.
Topic: Imports
Status: Old
3) A few years ago, as oil and gas prices continued to increase, a growing number of Americans called for
the United States to become less reliant on Middle-Eastern oil. Would it make sense for the United States
to try to become totally self-reliant in the production of oil? Why or why not?
Answer: It would be foolish for the United States to try to become totally self-reliant in oil production.
There is a reason that approximately 40 percent of our oil comes from OPEC nations: Middle-Eastern
countries can produce oil at a far lower opportunity cost than U.S. producers. In the Middle East the vast
reserves of oil, combined with more lax regulations imposed by the government, have combined to drive
down the per barrel opportunity cost of oil extraction to very low levels. Hence the United States gains
from trade with these nations. Even though the price of oil was higher than in the past, that price was
much less than what would be the opportunity cost of producing enough oil domestically so that the
United States was totally self-reliant.
Topic: Imports
Status: Old
91
4) The United States imports television sets from Japan. The table above contains the U.S. demand and
U.S. supply schedules for television sets. The world price of a television set is $600 per set.
a. With no trade, what is the domestic price and quantity of television sets?
b. At the world price, what is the quantity of sets demanded in the United States?
c. At the world price, how many sets are produced in the United States?
d. At the world price, how many sets are imported into the United States?
e. What is the opportunity cost of producing the 4-millionth television set in the United States? In
Japan?
Answer:
a. In the absence of trade, the price is $1,000 per television set and the quantity is 4 million sets.
b. At the world price, 8 million sets are demanded in the United States.
c. At the world price, 2 million sets are produced in the United States.
d. At the world price, the quantity of sets imported is 6 million.
e. The opportunity cost in the United States to produce the 4-millionth set is $1,000. The opportunity
cost in Japan is $600.
Topic: Imports
Status: Old
92
5) Merck, an American pharmaceutical company, produces a vaccination that is used against chicken pox.
The table shows the domestic demand for, and supply of, this medication, measured in thousands of
doses per day. The world price of this medicine is $24 per dose.
a. With no trade, what is the U.S. price and quantity of the vaccine?
b. At the world price, how many doses are demanded in the United States?
c. At the world price, how many doses are produced in the United States?
d. At the world price, how many doses are exported?
Answer:
a. With no trade, the U.S. price is $20 a dose and the quantity is 10,000 doses per day.
b. At the world price, 8,000 doses per day are demanded in the United States.
c. At the world price, 13,000 doses per day are produced in the United States.
d. At the world price, 5,000 doses per day are exported.
Topic: Exports
Status: Old
6) The table above has the domestic supply and domestic demand schedules for a product. What is the
equilibrium price with no trade? Over what range of prices will the country export the good? Over what
range will it import the good? Suppose the world price is $20. What is the quantity demanded, the
quantity supplied, and the amount of the good exported or imported?
Answer: The price with no trade is $12. The country will import the good at world prices below $12 and
export it at world prices above $12. If the world price is $20, the quantity demanded is 160, the quantity
supplied is 220, and the quantity exported is 60.
Topic: Trade
Status: Old
93
7) The figure above shows the U.S. demand and the U.S. supply curves of canned peaches.
a. In the absence of trade, what is price of canned peaches in the United States?
b. In the absence of trade, what is the level of production in the United States?
c. If the world price of canned peaches is $1 a can and the United States engages in trade, does the
United States import or export canned peaches?
d. If the world price of canned peaches is $1 a can and the United States engages in trade, what is the
quantity produced in the United States and what is the quantity consumed? What is the quantity
imported or exported?
e. If the world price of canned peaches is $2 a can and the United States engages in trade, does the
United States import or export canned peaches?
f. If the world price of canned peaches is $2 a can and the United States engages in trade, what is the
quantity produced in the United States and what is the quantity consumed? What is the quantity
imported or exported?
Answer:
a. In the absence of trade, the price is $1.50 per can of peaches.
b. In the absence of trade, 4 million cans are produced.
c. The United States imports canned peaches.
d. The quantity produced in the United States is 2 million cans and the quantity consumed is 6 million
cans. The quantity imported is 4 million cans.
e. The United States exports canned peaches.
f. The quantity produced in the United States is 6 million cans and the quantity consumed is 2 million
cans. The quantity exported is 4 million cans.
Topic: Trade
Status: Old
94
9.8 Essay: Winners, Losers, and Net Gains from Trade
1) Who gains from imports? How do they gain? Who loses? How do they lose? Does the overall economy
gain or lose from imports?
Answer: Consumers of the good being imported gain from imports. They gain because the price they pay
falls. As a result, they buy more of the good and their consumer surplus increases. Producers of the good
being imported lose from imports. They lose because the price they receive falls. As a result, they produce
less of the good and their producer surplus decreases. The overall economy gains because the increase in
consumer surplus exceeds the decrease in producer surplus.
Topic: Imports
Status: Old
2) How do imports affect buyers' consumer surplus?

Answer: Consumer surplus increases. It increases because imports lower the price of the good being
imported, so buyers purchase more of the good and hence their consumer surplus increases.
Topic: Imports
Status: Old
3) How do imports affect sellers' producer surplus?

Answer: Producer surplus decreases. It decreases because imports lower the price of the good being
imported, so sellers produce less of the good and hence their producer surplus decreases.
Topic: Imports
Status: Old
4) Who gains from exports? How do they gain? Who loses? How do they lose? Does the overall economy
gain or lose from exports?
Answer: Producers of the good being exported gain from exports. They gain because the price they
receive rises. As a result, they produce more of the good and their producer surplus increases.
Consumers of the good being exported lose from exports. They lose because the price they pay rises. As a
result, they buy less of the good and their consumer surplus decreases. The overall economy gains
because the increase in producer surplus exceeds the decrease in consumer surplus.
Topic: Exports
Status: Old
95
5) How do exports affect buyers' consumer surplus?
Answer: Consumer surplus decreases. It decreases because exports raise the price of the good being
exported, so buyers purchase less of the good and hence their consumer surplus decreases.
Topic: Exports
Status: Old
6) How do exports affect sellers' producer surplus?

Answer: Producer surplus increases. It increases because exports raise the price of the good being
exported, so sellers produce more of the good and hence their producer surplus increases.
Topic: Exports
Status: Old
9.9 Essay: International Trade Restrictions
1) Briefly define a tariff and a quota. Do any of these methods restrict trade without harming domestic
consumers?
Answer: Governments restrict trade through the use of tariffs and quotas. A tariff is a tax imposed on a
good when it is imported into the nation. A quota is a limit on the amount of a good that may be
imported. Both of these methods restrict trade and they both harm domestic consumers by raising the
price and decreasing the quantity consumed.
Status: Old
2) "Tariffs today in the United States are much higher than in the past." Is the previous statement correct
or incorrect?
Answer: The statement is most decidedly incorrect. U.S. tariffs today are lower compared to what they
were in the past.
Status: Old
96
3) How does a tariff affect the domestic price of the import, the domestic consumption, the domestic
production, and the quantity imported?
Answer: A tariff raises the price of the good. As a result, domestic consumption decreases as domestic
consumers decrease the quantity they demand. And, also as a result, domestic production increases as
domestic producers increase the quantity they supply. Because domestic consumption decreases and
domestic production increases, the quantity imported decreases.
Status: Old
4) The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime
and the production of limes in the United States?
Answer: The tariff raises the price of limes in the United States. As a result of the higher price, U.S. lime
production increases.
Status: Old
5) How does a tariff affect the consumer surplus and the producer surplus from the imported good? Is
the overall economy helped or harmed by tariffs? Briefly explain your answers.
Answer: A tariff raises the price of the good so that domestic consumption decreases and domestic
production increases. As a result, domestic consumer surplus decreases and domestic producer surplus
increases. The overall economy is harmed. The decrease in consumer surplus is larger than the increase in
producer surplus so a deadweight loss is created.
Status: Old
6) Currently, the United States has a quota on the amount of sugar that is allowed to be imported into the
United States. What would happen to the price of sugar in the United States if the quota was removed?
What would happen to U.S. consumption and U.S. production of sugar?
Answer: If the quota is removed, the price of sugar in the United States would fall, U.S. consumption of
sugar would increase, and U.S. production of sugar would decrease.
Status: Old
97
7) How does a quota affect the domestic price of the import, the domestic consumption, the domestic
production, and the quantity imported?
Answer: A quota raises the price of the good because it decreases the amount that can be imported. As a
result, domestic consumption decreases as domestic consumers decrease the quantity they demand. And,
also as a result, domestic production increases as domestic producers increase the quantity they supply.
Status: Old
8) How does a quota affect the consumer surplus and the producer surplus from the imported good? Is
the overall economy helped or harmed by quotas? Briefly explain your answers.
Answer: A quota raises the price of the good so that domestic consumption decreases and domestic
production increases. As a result, domestic consumer surplus decreases and domestic producer surplus
increases. The overall economy is harmed. The decrease in consumer surplus is larger than the increase in
producer surplus so a deadweight loss is created.
Status: Old
98
9) The United States imports cheese from a variety of countries. The table above gives the domestic
supply of, and demand for, cheese in the United States. The world price of cheese is $12 per pound, and
trade is unrestricted.
a. How many pounds of cheese are consumed in the United States?
b. How many pounds of cheese are produced in the United States?
c. How many pounds of cheese are imported into the United States?
If a $3 per pound tariff is imposed,

d. How many pounds of cheese are consumed in the United States?
e. How many pounds of cheese are produced in the United States?
f. How many pounds of cheese are imported into the United States?
g. How much will the U.S. government collect in tariff revenue?
h. Who benefits from the tariff? Who loses?
Answer:
a. 180,000 pounds of cheese are consumed.
b. 60,000 pounds of cheese are produced.
c. 120,000 pounds of cheese are imported.
d. 140,000 pounds of cheese are consumed.
e. 80,000 pounds of cheese are produced.
f. 60,000 pounds of cheese are imported.
g. The government collects $3 per pound × 60,000 pounds = $180,000.
h. U.S. producers and the U.S. government gain while U.S. consumers and foreign producers lose.
Status: Old
99
10) The above figure shows the domestic supply of and domestic demand for an imported good. The
world price is $15 per unit.
a. At the world price of $15 per unit, what is the domestic consumption and domestic production?
b. At the world price of $15 per unit, what is the quantity imported?
c. If the government imposes a tariff of $5 per unit, what is the domestic consumption and domestic
production?
d. With the $5 per unit tariff, what is the quantity imported?
e. How much revenue does the government collect with a tariff of $5 per unit?
Answer:
a. Domestic consumption is 8 million units per year and domestic production is 0.
b. The quantity imported is 8 million units per year.
c. Domestic consumption is 6 million units per year and domestic production is 2 million units per year.
d. The quantity imported is 4 million units per year.
e. The government collects $5 per unit imported and 4 million units are imported, so the government's
revenue from the tariff is $5 × 4 million = $20 million per year.
Status: Old
100
9.10 Essay: The Case Against Protection
1) Three arguments used to promote trade barriers are the national security argument, the infant-industry
argument, and the dumping argument. Explain each of these arguments and evaluate whether each one
has any flaws.
Answer: The national security argument is that countries must protect industries that produce defense
equipment and armaments as well as those industries upon which the defense industries rely. The
problem with this argument is that all industries contribute to national defense, though some do so more
indirectly than others. For instance, the pillow industry can claim that it contributes to national defense
because without good pillows, plant workers will be unable to sleep well and hence their efficiency will
be lowered. The pillow industry therefore can make a claim for protection-which, incidentally, it did in
the 1950s using the argument just described!
The infant-industry argument is that it is necessary to protect a new industry to enable it to grow into a
mature industry that can compete in world markets. The problem with this argument is that if an
industry can eventually compete, then its backers should be willing to fund it until that time. In addition,
if the industry has benefits that spill over to other industries, then the more efficient government policy is
to subsidize the industry rather than protect it from competition.
Finally, the dumping argument asserts that protection is needed to protect domestic industries from
foreign dumping practices designed to eliminate competition. (Dumping is selling a good for a price that
is less than its cost of production.) The problems with this argument are two-fold. First, it is extremely
difficult to determine if a firm is dumping because determining the cost of production is difficult. Second,
even if a firm is dumping, its success in establishing a monopoly is in doubt and its success in
maintaining its global (!) monopoly is even more doubtful. Hence dumping to obtain a monopoly is likely
a very uncommon practice.
Topic: Case against protection
Status: Old
2) What is the national security argument for restricting international trade? What is its flaw?
Answer: The national security argument is that the nation must protect and maintain industries that
produce defense equipment and armaments as well as those industries upon which the defense
industries rely. The problem with this argument is that all industries contribute to national defense,
though some do so directly while others do so indirectly. For instance, the sugar industry contributes to
national defense because factory workers and armed service men and women drink colas made using
sugar, but protecting the sugar industry for reasons of national defense is ludicrous.
Topic: National security
Status: Old
101
3) What is dumping?
Answer: Dumping is the situation in which a firm sells its export goods and services for a lower price
than its cost of production.
Topic: Dumping
Status: Old
4) Because wage rates are so low in Africa, why don't Microsoft, Cisco and other major corporations close
down their American operations and move to Africa?
Answer: Wage rates must be weighed against productivity. It is not just wages that influence where
production occurs. Wages divided by the productivity of the workers gives the average cost of
production. In Africa, workers have low levels of skill, education, and training so their productivity is
much less than in the United States. Therefore the cost of production would be far higher in Africa than in
America. So even though U.S. wage rates are high, industries stay here because the cost of production is
lower because U.S. productivity is so high.
Status: Old
5) Explain how governments restrict international trade and who benefits as well as who loses from the
restrictions.
Answer: Governments use tariffs and nontariff barriers, such as quotas, to restrict trade. Tariffs and
quotas both boost the domestic price of the protected good. Consumers in that country lose because of the
higher price. The domestic suppliers, however, gain from the higher price. Tariffs are source of revenue
for the government that imposes it on imported goods, so the domestic government gains from a tariff.
Quotas, on the other hand, do not create revenue for government so the government does not gain from a
quota.
Status: Old
6) What is "rent seeking"? How does it apply to restricting imports?

Answer: Rent seeking is lobbying and other political activity that seeks to capture the gains from trade.
When imports are restricted, some people gain from the restrictions. Rent seekers, such as domestic
producers of import-competing goods or services, lobby the government to impose import restrictions
because restrictions allow the rent seekers to gain revenue and/or profit.
Topic: Rent seeking
Status: Old
102
7) Economics demonstrates that opening up unrestricted free international trade is beneficial to all
nations. However, are there any losers from such a policy change?
Answer: Yes, there are losers from opening up to free trade. Domestic suppliers of imported goods lose
from allowing free trade. Owners of the businesses lose as do workers who had jobs in the import-
competing industries. However, it is important to realize that although there are losers from free trade,
there also are substantial gains and the gains exceed the loses so that the nation as a whole is made better
off with free trade.
Status: Old
8) How does the United States attempt to compensate losers from lower trade restrictions?
Answer: The U.S. government attempts to compensate workers who lose from lowering U.S. trade
restrictions. For instance, the U.S. government set up a fund to support and retrain workers who lost their
jobs because of NAFTA. Job losers can also collect unemployment compensation benefits.
Topic: Compensating losers
Status: Old
9) Suppose that elimination of tariffs on agricultural products means that 1,000 farm workers lose jobs
that pay an average of $20,000 per year. At the same time, because of the importation of relatively
cheaper foreign vegetables, 150 million consumers save $2 per year on their grocery bills.
a. What is the total income lost by farm workers because of the free trade?
b. What is the total dollar amount saved by all consumers combined?
c. Which is greater, the lost income or the consumer savings? Do the benefits of free trade outweigh the
costs in this simple example?
d. Which group is most likely to become politically involved over the issue of removing the tariffs, the
farm workers or the consumers? Why?
Answer:
a. The total income lost by farm workers is 1,000 × $20,000 = $20,000,000.
b. The total saving by all consumers is 150,000,000 × $2 = $300,000,000.
c. The consumer savings is much larger than the lost income, so the benefits of free trade outweigh the
costs.
d. The farm workers are more likely to become involved, because their individual loss is much greater
than an individual consumer's gain.
Topic: Rent seeking
Status: Old
103
Another random document with
no related content on Scribd:
And on the lonely mountain,
How many wild spontaneous flowers
Hang o’er each flood and fountain!
The glowing furze—the “bonny broom,
The thistle and the heather;
The bluebell, and the gowan fair,
Which childhood loves to gather.
Oh, for that pipe of silver sound,

On which the shepherd lover,
In ancient days, breathed out his soul,
Beneath the mountain’s cover!
Oh, for that Great Lost Power of Song,
So soft and melancholy,
To make thy every hill and dale
Poetically holy!
And not alone each hill and dale,

Fair as they are by nature,
But every town and tower of thine,
And every lesser feature;
For where is there the spot of earth,
Within my contemplation,
But from some noble deed or thing
Has taken consecration?
First, I could sing how brave thy sons,

How pious and true-hearted,
Who saved a bloody heritage
For us in times departed;
Who, through a thousand years of wrong,
Oppress’d and disrespected,
Ever the generous, righteous cause
Religiously protected.
I’d sing of that old early time,

When came the victor Roman,
And, for the first time, found in them
Uncompromising foemen;
When that proud bird, which never stoop’d
To foe, however fiery,
Met eagles of a sterner brood
In this our northern eyry.
Next, of that better glorious time,
When thy own patriot Wallace
Repell’d and smote the myriad foe
Which storm’d thy mountain palace;
When on the sward of Bannockburn
De Bruce his standard planted,
And drove the proud Plantagenet
Before him, pale and daunted.
Next, how, through ages of despair,

Thou brav’dst the English banner,
Fighting like one who hopes to save
No valued thing but honour.
How thy own young and knightly kings,
And their fair hapless daughter,
Left but a tale of broken hearts
To vary that of slaughter.
How, in a later, darker time,

When wicked men were reigning,
Thy sons went to the wilderness,
All but their God disdaining;
There, hopeful only of the grave,
To stand through morn and even,
Where all on earth was black despair,
And nothing bright but heaven.
And, later still, when times were changed,

And tend’rer thoughts came o’er thee,
When abject, suppliant, and poor,
Thy injurer came before thee.
How thou did’st freely all forgive,
Thy heart and sword presented,
Although thou knew’st the deed must be
In tears of blood repented.
Scotland! the land of all I love,

The land of all that love me;
Land, whose green sod my youth has trod,
Whose sod shall lie above me!
Hail! country of the brave and good,
Hail! land of song and story;
Land of the uncorrupted heart,
Of ancient faith and glory!
R. C.
STORY OF MRS MACFARLANE.
——“Let them say I am romantic—so is every one said to be, that
either admires a fine thing or does one. On my conscience, as the
world goes, ’tis hardly worth any body’s while to do one for the honour
of it. Glory, the only pay of generous actions, is now as ill paid as
other great debts; and neither Mrs Macfarlane, for immolating her
lover, nor you for constancy to your lord, must ever hope to be
compared to Lucretia or Portia.”—Pope, to Lady M. W. Montague.
It was formerly the fashion in Scotland for every father of a family to
take all the people under his care along with him to church, leaving
the house locked up till his return. No servant was left to cook the
dinner, for it was then judged improper to take a dinner which
required cooking. Neither, except in the case of a mere suckling, was
it considered necessary to leave any of the children; every brat about
the house was taken to church also; if they did not understand what
was said by the minister, they at least did not prevent the attendance
of those who did; and moreover—and this was always a great
consideration—they were out of harm’s way. One Sunday, in autumn
1719, Sir John Swinton of Swinton, in Berwickshire, was obliged to
omit his little daughter Margaret from the flock which usually followed
him to church. The child was indisposed with some trifling ailment,
which, however, only rendered it necessary that she should keep her
room. It was not considered requisite that a servant should be left
behind to take charge of her, for she was too sagacious a child to
require any such guardianship; and Sir John and Lady Swinton
naturally grudged, with the scruples of the age, that the devotions of
any adult member of their household should be prevented on such
an account. The child, then, was left by herself in one of the upper
bed-rooms of the old baronial mansion of Swinton, no other measure
being taken for her protection than that of locking the outer door.
For a girl of ten years of age, Margaret Swinton was possessed of
much good sense and solidity of character. She heard herself
doomed to a solitary confinement of six hours without shrinking; or
thought, at least, that she would have no difficulty in beguiling the
time by means of her new book—the Pilgrim’s Progress. So long as
the steps and voices of her kindred were heard about the house, she
felt quite at her ease. But, in reality, the trial was too severe for the
nerves of a child of her tender age. When she heard the outer door
locked by the last person that left the house, she felt the sound as a
knell. The shot of the bolt echoed through the long passages of the
empty house with a supernatural loudness; and, next moment after,
succeeded that perceptible audible quiet, the breath-like voice of an
untenanted mansion, which, like the hum of the vacant shell, seems
still as if it were charged with sounds of life. There was no serious
occasion for fear, seeing that nothing like real danger could be
apprehended; nor was this the proper time for the appearance of
supernatural beings: yet the very loneliness of her situation, and the
speaking stillness of all around her, insensibly overspread her mind
with that vague negative sensation which is described by the native
word eeriness. From her window nothing was visible but the cold
blue sky, which was not enlivened by even the occasional transit of a
cloud. By and by the desolating wind of autumn began to break upon
the moody silence of the hour. It rose in low melancholy gusts, and,
whistling monotonously through every chink, spoke to the mind of
this little child, of withering woods, and the lengthened excursions of
hosts of leaves, hurried on from the scene of their summer pride into
the dens and hollows where they were to decay. The sound
gradually became more fitful and impetuous, and at last appeared to
her imagination as if it were the voice of an enemy who was running
round and round the house, in quest of admission—now and then
going away as if disappointed and foiled, and anon returning to the
attack, and breathing his rage and vexation in at every aperture. She
soon found her mind possessed by a numerous train of fantastic
fancies and fearful associations, drawn from the store of nursery
legends and ballads which she was in the habit of hearing night after
night, at the fireside in the hall, and which were infinitely more
dreadful than the refined superstitions of modern children. She
thought of the black bull of Norway, which went about the world
destroying whatever of human life came within its reach; of the
weary well at the World’s End, which formed the entrance into new
regions, from whence no traveller ever returned; and of the fairies or
good neighbours, a small green-coated race of supernatural
creatures, who often came to the dwellings of mortals, and did them
many good and evil turns. She had been told of persons yet alive,
who in their childhood had been led away by these fays into the
woods, and fed for weeks with wild berries and the milk of nuts, till at
length, by the po’orfu’ preaching of some great country divine, they
were reclaimed to their parents, being in such cases generally found
sitting under a tree near their own homes. She had heard of a queen
of these people—the Queen of Elfinland—who occasionally took a
fancy for fair young maidens, and endeavoured to wile them into her
service; and the thought occurred to her, that, as the fairies could
enter through the smallest aperture, the house might be full of them
at this moment.
For several hours the poor child suffered under these varied
apprehensions, till at last she became in some measure desperate,
and resolved at least to remove to another part of the house. The
parlour below stairs commanded from its window a view of the
avenue by which the house was approached; and she conceived
that, by planting herself in the embrasure of one of those windows,
she would be at the very border of the eerie region within doors, and
as near as possible to the scene without, the familiarity of which was
in itself calculated to dispel her fears. From that point, also, she
would catch the first glimpse of the family returning from church,
after which she would no longer be in solitude. Trying, therefore, to
think of a merry border tune, she opened her own door, walked along
the passage—making as much noise as she could—and tramped
sturdily and distinctly down stairs. The room of which she intended to
take possession was at the end of a long passage leading from the
back to the front of the house. This she traversed slowly—not
without fear of being caught from behind by some unimaginable
creature of horror; an idea which, on her reaching the chamber door,
so far operated upon her, that, yielding to her imaginary terrors, and
yet relying for safety upon getting into the parlour, she in the same
moment uttered a slight scream and burst half joyfully into the room.
Both of these actions scarcely took up more than the space of a
single moment, and in another instant she had the door closed and
bolted behind her. But what was her astonishment, her terror, and
her awe, when, on glancing round the room, she saw distinctly
before her, and relieved against the light of the window, the figure of
a lady, in splendid apparel, supernaturally tall, and upon whose
countenance was depicted a surprise not less than her own! The girl
stood fixed to the spot, her breath suspended, and her eyes wide
open, surveying the glorious apparition, whose beauty and fine attire,
unlike aught earthly she had ever seen, made her believe it to be an
enchanted queen—an imaginary being, of which the idea was
suggested to her by one of the nursery tales already alluded to.
Fortunately, the associations connected with this personage were
rather of a pathetic than an alarming character; and though she still
trembled at the idea of being in the presence of a supernatural
object, yet as it was essentially beautiful and pleasing, and supposed
to be rather in a condition of suffering than in the capacity of an
injurer, Margaret Swinton did not experience the extremity of terror,
but stood for a few seconds in innocent surprise, till at length the
vision completely assured her of its gentle and pacific character, by
smiling upon her, and, in a tone of the most winning sweetness,
bidding her approach. She then went forward, with timid and slow
steps; and becoming convinced that her enchanted queen was
neither more nor less than a real lady of this world, soon ceased to
regard her with any other sentiment than that of admiration. The lady
took her hand, and addressed her by name—at first asking a few
unimportant questions, and concluding by telling her that she might
speak to her mother of what she had seen, but by no means to say a
word upon the subject to any other person, and that under pain of
her mother’s certain and severe displeasure. Margaret promised to
obey this injunction, and was then desired by the lady to go to the
window, to see if the family were yet returning from church. She did
so, and found that they were not as yet in sight; when, turning round
to give that information to the stranger, she found the room empty,
and the lady gone. Her fears then returned in full force, and she
would certainly have fainted, if she had not been all at once relieved
by the appearance of the family at the head of the avenue, along
which the dogs—as regular church-goers as their master—ran
barking towards the house, gratifying her with what she afterwards
declared to have been the most welcome sounds that ever saluted
her ear.
Miss Swinton, being found out of her own room, was sharply
reprimanded by her mother, and taken up stairs to be again confined
to the sick-chamber. But before being left there, she found an
opportunity of whispering into her mother’s ear, that she had seen a
lady in the low parlour. Lady Swinton was arrested by the words,
and, immediately dismissing the servant, asked Margaret, in a kindly
and confidential tone, what she meant. The child repeated, that in
the low parlour she had seen a beautiful lady—an enchanted queen
—who had afterwards vanished, but not before having exacted from
her a promise that she would say nothing of what she had seen,
except to her mother. “Margaret,” said Lady Swinton, “I see you have
been a very good girl; and since you are so prudent, I will let you
know a little more about this enchanted queen, though her whole
story cannot properly be disclosed to you at present.” She then
conducted Margaret back to the parlour, pushed aside a sliding
panel, and entered a secret chamber, in which the child again saw
the tall and beautiful woman, who was now sitting at a table with a
large prayer-book open before her. Lady Swinton informed the
stranger, that, as Margaret had kept her secret so far according to
her desire, she now brought her to learn more of it. “My dear,” said
her ladyship, “this lady is unfortunate—her life is sought by certain
men; and if you were to tell any of your companions that you have
seen her, it might perhaps be the cause of bringing her to a violent
death. You could not wish that the enchanted queen should suffer
from so silly an error on your part.” Margaret protested, with tears,
that she would speak to none of what she had seen; and after some
farther conversation, she and her mother retired.
Margaret Swinton never again saw this apparition; but some years
afterwards, when she had grown up, and all fears respecting the
unfortunate lady were at an end, she learned the particulars of her
story. She was the Mrs Macfarlane alluded to in the motto to this
paper; a person whose fatal history made a noise at the time over all
Britain, and interested alike the intelligent and the ignorant, the noble
and the mean.
Mrs Macfarlane was the only daughter of a gentleman of
Roxburghshire, who had perished in the insurrection of 1715. An
attempt was made by his surviving friends to save the estate from
forfeiture, so that it might have been enjoyed by his orphan daughter,
then just emerged into womanhood. But almost all hope of that
consummation was soon closed, and, in the meantime, the
unfortunate young lady remained in a destitute situation. The only
arrangement that could be devised by the generosity of her friends,
was to permit her to reside periodically for a certain time in each of
their houses—a mode of subsistence from which her spirit recoiled,
but to which, for a little while, she was obliged to submit. It was while
experiencing all the bitter pangs of a dependent situation,
encountered for the first time, and altogether unexpectedly, that Mr
Macfarlane, a respectable and elderly law agent, who had been
employed by her father, came forward and made an offer of his
hand. Glad to escape from the immediate pain of dependency, even
at the hazard of permanent unhappiness, she accepted the proposal,
although her relations did every thing they could to dissuade her
from a match so much beneath her rank. The proud spirit of
Elizabeth Ker swelled almost to bursting, when she entered the
dwelling of her low-born husband; and the humble marriage-feast
which was there placed before her, seemed in her eyes as the first
wages of her degradation. But her own reflections might have been
endured, and in time subdued, if they had not been kept awake by
the ungenerous treatment which she received from all her former
friends. The pride of caste was at this period unbroken in Scotland,
and it rigorously demanded the exclusion of “the doer’s wife” from all
the circles in which she had previously moved. The stars made a
conspiracy to banish the sun. If Mrs Macfarlane had been educated
properly, she would have been able to repel scorn with scorn, and, in
these tergiversations of the narrow-spirited great, would have only
seen their degradation, not her own. But under her deceased
mother, a scion of a better house than even her father’s, she had
grown up in the full participation of all the ridiculous notions as to
caste, and of course was herself deeply sensible of the advantages
she had forfeited. Rendered irritable in the highest degree by
consciousness of her own loss, she received every slight thrown
upon her by society into her innermost heart, where it festered and
fed upon her very vitals. She found that she had fallen, that the step
was irretrievable; and as factitious degradation, imposed by the
forms of society, always in a short time becomes real, her character
suffered a material deterioration. She took refuge from offended self-
love in a spirit of hatred and contempt for her fellow-matrons, and
began to entertain feelings from which, in earlier and happier years,
she would have shrunk as from actual crime.
There was at least one branch of the better sort of Edinburgh
society which never manifested any disinclination to her
acquaintance. This was the class of loose young men of good birth,
who daily paraded at the Cross with flowing periwigs and glancing
canes, and nightly drowned their senses in a vulgar debauch, from
which they occasionally awoke in the morning with the duty of
settling scores by a rencontre in St Ann’s Yards, or at St Leonard’s
Crags. This set of brawlers, the proper successors of those drunken
cavaliers who disgraced a preceding age, subsisted in a state of
pure antagonism to the stayed and decorous habits of the general
community; many of them were literally the children of cavaliers, and
indebted in a great measure for their idle way of life to the
circumstances of the government, which dictated an exclusive
distribution of its patronage among its own adherents, and of course
left the poor Jacobites exposed to all the temptations of idleness.
Dicing and golfing were the employments of their forenoons; in the
evening they would stagger from table into Heriot’s Green, or Lady
Murray’s garden in the Canongate, where they would make a point
of staring out of countenance such sober citizens and their
daughters as ventured to frequent those fashionable promenades.
According to a Presbyterian writer of the day, they sent to London
regularly for the last fashions and the newest oaths; but perhaps the
latter part of the report is only a scandal. If such personages were to
revive now-a-days, and appear some forenoon among the modern
beaux esprits of Prince’s Street, they would be looked upon, with
their long wide-skirted coats, and buckles, and cravats, as a set of
the most solemn looking gentlemen; but in their own time, there were
no ideas associated with them but those of reckless, hot-headed
youth, and daily habits the most opposite to those of decency and
virtue.
Mrs Macfarlane, while she sunk from the society of gentlewomen
of her own rank, still retained such acquaintance as she had ever
happened to possess, of their wild sons and brothers. With them,
she was in her turn an object of great interest, on account of her
transcendant beauty, or rather its fame—for the fame with such
persons is of far more importance than the reality. It was not
disagreeable to Mrs Macfarlane, when she walked with her husband
on the Castle Hill, and found herself passed with dry recognition by
persons of her own sex, to be made up to by some long-waisted Sir
Harry Wildair, who, in language borrowed from Congreve or
Farquhar, protested that the sun was much aided in his efforts to
illuminate the world by the light of her eyes. A rattle of the fan was
the least favour that could be dispensed in reward for such a
compliment; and then would ensue a conversation, perhaps only
interrupted by a declaration from Mr Macfarlane, that he felt the air
getting rather cold, and was afraid to stay out any longer on account
of his rheumatism. The society of these fops was never farther
encouraged by Mrs Macfarlane; indeed, it was only agreeable to her
in public places, where it consoled her a little for the ungenerous
slights of more respectable persons. Yet it had some effect upon her
reputation, and was partly the cause of all her misfortunes.
About two years after the insurrection of 1715, the host of
Edinburgh fops received an important accession in Mr George
Cayley, a young English gentleman, who was sent down as one of
the commissioners upon the forfeited estates. Cayley brought with
him a considerable stock of cash, an oath of recent coinage, said to
be very fashionable in Pall Mall, and a vest of peculiar cut, which he
had lately got copied at Paris from an original belonging to the
Regent Orleans. As he also brought a full complement of the most
dissolute personal habits, he might be considered as recommended
in the strongest manner to the friendship of the native beaux; if,
indeed, his accomplishments were not apt rather to produce
displeasure from their superiority. Some days after his arrival, he
was introduced to Mrs Macfarlane, to whom he was an object of
some interest on account of his concern in the disposal of her
father’s estate. If she felt an interest in him on this account, he was
not the less struck by her surpassing beauty and elegant manners,
which appeared to him alike thrown away upon her husband, and the
city in which she dwelt. He rushed home from the first interview in a
state of mind scarcely to be imagined. That such a glorious creature
should squander her light upon the humble house of an attorney,
when she seemed equally fit to illuminate the halls of a palace, was
in his eyes a perversion of the designs of nature. He wished that it
was in his power to fly with her away—away from all the scenes
where either was known, to some place far over this world’s
wilderness, where every consciousness might be lost, except that of
mutual love. Over and over again he deplored the artificial bonds
imposed by human laws, and protected by the virtuous part of the
human race, by which hearts the most devoted to each other were
often condemned to eternal separation. His heart, he found, was
possessed by sensations such as had never before moved it. It
worshipped its object as a kind of idol, instead of, as formerly,
regarding it as a toy. He flung himself in idea before the shrine of her
splendour, in breathless, boundless, despairing passion.
It is probable that if Cayley had been fortunate enough to meet
Mrs Macfarlane before she was married, he might have been
inspired with an attachment equally devoted, and which, being
indulged innocently, might have had the effect of purifying him from
all his degrading vices, and raising him into a worthy member of
society. As it was, the passion which, in proper circumstances, is apt
to refine and humanise, only lent a frantic earnestness to his usual
folly. He made it his endeavour to obtain as much of her society as
possible—an object in which he was greatly favoured by his official
character, which caused him to be treated with much less coolness
by Mr Macfarlane than was otherwise to have been expected. That
individual had not altogether lost hope of regaining the property to
which his wife was entitled, and he therefore met Mr Cayley’s
advances with more than corresponding warmth, every other
sentiment being for the time subordinate to this important object. The
young Englishman, in order to cultivate this delightful intimacy with
the greater convenience, removed from his former lodgings to a
house directly opposite to Mrs Macfarlane’s, in the High Street,
where, at such times as a visit was out of the question, he would sit
for hours watching patiently for the slightest glimpse of her through
the windows, and judging even a momentary gleam of her figure
within the dim glass as an ample compensation for his pains. He
now became much less lively than before—forsook, in some
measure, the company of his gay contemporaries—and seemed, in
short, the complete beau ideal of the melancholy, abstracted lover. It
was his custom to spend most of his evenings in Mrs Macfarlane’s
house; and, except during those too quickly flying hours, time was to
him the greatest misery. Existence was only existence in that loved
presence; the rest was a state of dormancy or watchfulness only to
be spent in pain. If he applied at all to the business for which he was
commissioned by the government, it was only to that part of it which
related to the inheritance of Mrs Macfarlane, in order that he might
every night have an excuse for calling upon that lady, to inform her of
the progress he was making in her cause. His attachment in that
quarter was soon whispered abroad in society; and while it served as
a grateful theme for the tongues of Mrs Macfarlane’s former
compeers, the favour with which he seemed to be received was
equally the subject of envy to the young men, few of whom had ever
found much countenance in her house, for want of something to
recommend them equally to her husband.
Scarcely any thing is calculated to have so deteriorating an effect
upon the mind as the constant fret of an unlawful passion. In every
one of the clandestine and stealthy operations by which it is sought
to be gratified, a step is gained in the downward descent towards
destruction. Cayley, who was not naturally a man of wicked
dispositions, and who might have been reclaimed by this passion,
had it been virtuous, from all his trivial follies, gradually became
prepared, by the emotions which convulsed his bosom, for an
attempt involving the honour of his adored mistress, and,
consequently, her whole happiness in life, as well as that of many
innocent individuals with whom she was connected. This he now
only waited for an opportunity of carrying into effect, and it was not
long ere it was afforded.
Called by the urgent request of a Highland client, Mr Macfarlane
had left town somewhat suddenly, and was not expected to return for
upwards of a week. During his absence, Mrs Macfarlane
endeavoured to repress the attentions of Mr Cayley as much as
possible, from a sense of propriety, and contented herself with a kind
of society—dumb, yet eloquent—which she felt to be much more fit
for her situation—the society of her infant child. One evening,
however, as she sat with her tender charge hushed to sleep upon
her bosom, Mr Cayley was unexpectedly ushered in, notwithstanding
that she had given directions for his exclusion after a certain hour,
now past. To add to her distress, he appeared a little excited, as she
thought, by liquor, but, in reality, by nothing but the burning and
madly imprudent passion which had taken possession of him. He sat
down, and gazed at her for a few moments without speaking, while
she remonstrated against this unseasonable intrusion. She then rung
her bell, in order to chide her servant for disobedience of her orders;
but Mr Cayley tranquilly told her, that he had taken the liberty of
sending the girl away upon an errand.
“In the name of heaven,” said the lady, “what do you mean?”
“I mean, my dear Madam,” answered he, “to have a little
conversation with you upon a subject of great importance to us both,
and which I should like to discuss without the possibility of
interruption. Know, Madam, that, ever since I first saw you, I have
fondly, madly loved you. You are become indispensable to my
existence; and it depends upon you whether I shall hereafter be the
most happy or the most miserable of men.”
“Mr Cayley,” cried the lady, “what foolery is this? You are not in
your senses—you have indulged too much in liquor. For heaven’s
sake, go home; and to-morrow you will have forgot that such ideas
ever possessed your brain.”
“No, never, my angel!” cried he, “can I forget that I have seen and
loved you. I might sleep for ages; and, if I awakened at all, it would
be with your image imprinted as strongly as ever upon my heart. You
now see a man prepared for the most desperate courses in order to
obtain you. Listen for a moment. In the neighbourhood, a coach
stands ready to carry us far from every scene where you have
hitherto been known. Consent, and I procure for you (which is now
within my power) a reversal of your father’s attainder. You shall again
possess the domains where your fathers for ages back have been
held in almost regal veneration, and where you spent the pleasant
years of your own youth. Deny me, and to-morrow your reputation is
blasted for ever. The least plausible tale, you well know, would be
received and believed by society, if told respecting Mrs Macfarlane.”
“Profligate wretch!” exclaimed the unfortunate lady; “can I believe
my ears when they tell me that such wickedness exists in a human
bosom? Look, Sir, at this infant—were there no principles of virtue
within me to dictate a contemptuous rejection of your proposals, do
you think that I could leave this innocent to pine and die under the
cold neglect of strangers, or to survive to a less blessed life with the
stigma of a disgraced mother fixed for ever upon her? Were I the
basest woman that ever lived, as you seem to think me, would
nature permit so awful a violation of her laws? Could I leave my
child, and not next moment be struck dead by fire from heaven for
my crime? The alternative, indeed, is awful. Well you know the point
upon which I am most easily affected. Base, however, as you avow
yourself, I cannot yet suppose that you could be guilty of a trick so
worthy of the devil himself, as to blast the reputation, where you
could not fix the real cause of infamy.”
“Do not flatter yourself too much on that score,” rejoined Cayley;
“you do not now see a man actuated by ordinary principles. I am
tortured and confounded by an impetuous passion, which you have
excited. If you take from me all hope of a consent to my first
proposal, I must endeavour to bring you into my power by the
second. To-morrow, did I say? Nay, I will go this night, and tell every
man I know that you are the slave of my passion. Not a lady in
Edinburgh but will know of it to-morrow before she has left her pillow.
You will then, I think, see the necessity of consenting to the scheme
of flight which I now put into your power.”
He pronounced these words in such a disordered and violent
manner, that the unhappy lady sat for some time unable to reply. She
hardly recovered her senses till she heard the outer door clang
behind him, as he went upon the demoniac purpose which he had
threatened.
The first place that Mr Cayley went to was John’s Coffeehouse, a
fashionable tavern in the Parliament Square, where he found a large
group of his dissolute young friends, drinking claret out of silver
stoups. The company was in an advanced stage of intoxication and
riot, very much to the annoyance, apparently, of a few smaller knots
of decent citizens, who were indulging in some more moderate
potations after the fatigues of the day, and endeavouring to
understand as much as they could of the London Intelligencer, the
Flying Post, and other little sheets of news which lay upon the
various tables. “Well, Cayley,” cried one of the young roisterers,
“come and tell us how you are getting on now with the fair lady over
the way—husband not at home—must be making great advances, I
suppose?” “Make yourself quite at ease on that subject; I am so, I
assure you.” This he said in so significant a tone, that it was at once
understood. A flood of raillery, however, was immediately opened
upon him; no one would believe what he said, or rather implied; and
thus, as they designed, he was drawn to make much more explicit
declarations of his supposed triumph. No attempt was made by
himself or others to conceal the subject of their conversation from
the rest of the individuals present. It was understood distinctly by the
sober citizens above mentioned, some of whom shrugged their
shoulders, knocked their cocked hats firmly down upon their heads,
took staff in hand, and strode consequentially and indignantly out of
the room. As Cayley had predicted, the whole affair was blazoned
abroad before next morning.
Mrs Macfarlane, as might be supposed, enjoyed little sleep after
the agitations of the preceding evening. She could hardly believe
that anything so wicked as what had been threatened by Mr Cayley
could be perpetrated by a being in human shape; but yet,
recollecting the extraordinary state in which he seemed to be, she
could not altogether assure herself of the contrary. In the forenoon
she went to pay a visit in a distant part of the town; and she could
not help remarking, that while she seemed to have become an object
of additional interest to the male sex, the ladies, even those with
whom she had formerly been on terms of civil recognition, averted
their eyes from her, with an expression, as she thought, of contempt.
The lady upon whom she called received her in the coldest
manner, and, on an explanation being asked, did not hesitate to
mention what she had heard as the town’s talk that morning, namely,
that Mr Cayley professed himself to be her favoured lover. The
unfortunate lady burst into a passion of tears and lamentations at
this intelligence, protested her innocence a thousand times, and
declared herself to be only the victim of a profligate; but still she saw
that she did not produce an entirely exculpatory effect upon the mind
of her friend. She went home in a state of distress bordering on
despair. Her early misfortunes through the severity of the
government; her dependent situation in the houses of her kinsfolk;
her unhappy marriage to a man she could never love; and, finally,
the cruel coldness with which she had been treated by her former
friends in the days of her depression, all recurred upon her mind,
and united with the more awful grief which had now overtaken her,
prepared her mind for the most desperate resolutions.
Early in the afternoon she sent a note to Mr Cayley, requesting, in
the usual terms, the favour of his company. The receipt of her billet
threw him into transports of joy, for he believed that his scheme had
already taken effect, and that she was now prepared to accede to his
proposals. He therefore dressed himself in his best style, and at the
proper hour (he felt too secure of his prey to go sooner) walked
across the street to his appointment. He was shown into a room at
the back of the house, where he had never before been, and where
there was little furniture besides a picture of Mrs Macfarlane, painted
by Sir John Medina, an Italian artist who long practised his trade at
the Scottish capital. This portrait, which he began to gaze upon with
all the enthusiasm of a lover, represented his mistress in a style and
manner strikingly beautiful. The utmost serenity, united with the
utmost innocence, shone in those sweetly noble features. The fair
open brow glowed like the summer sky, calmly and cloudlessly
beautiful. The eyes shone with the lustre of gladness and
intelligence, and the whole expression was resolved into an exquisite
and killing smile. The lover stood in a sort of transport before this
image of all he held dear on earth, as if he were yielding to an
idolatrous contemplation of its extraordinary loveliness, when the
door was opened—and behold the original! Instead of the voluptuous
smile which shone on the canvass of Medina, a Beautiful Fury stood
before him—a Hecate not yet grown old. He started with horror; for
not only did she bear in her countenance the most threatening
ensigns of passion, but she carried in her hand two large pistols, one
of which she held extended to him, while with the other hand she
locked the door behind her, at the same time keeping a watchful and
glaring eye upon her victim.
“Wretch,” she said, “you have ruined one who never did you
wrong. You have destroyed me as completely as if you had stretched
me lifeless beneath your hand. More than this, you have rendered
others who are dear to me unhappy for ever. My child—you have
deprived her of the nurture of a mother; you have fixed upon her
name a stain which will never be washed out. And yet for all this,
society, cruel as it is to the victims, provides no punishment—hardly
even any censure—to the criminal. Were it now my will to permit
you, you might walk away scatheless from the fair scene you have
ravaged, with nothing to disturb your triumph, but the lamentations of
so many broken hearts. You shall not, however, enjoy this triumph—
for here you shall die!”
Cayley had stood for a few moments, gazing alternately at her
face and at the weapon she held extended towards him. He heard
her address as if he had heard it not. But at the last word, he
recovered a little of his presence of mind, and made an effort to
approach her. She at that moment fired, but without effect. The effort
of drawing the trigger had depressed the muzzle of the weapon, and
the ball entered the floor at his feet. She lost not an instant to
present and fire the other, the shot of which penetrated his breast,
and he fell next moment before her, with but one indistinct murmur of
agony—and then all was still.
One brief embrace to her child—a moment at the toilet to arrange
her travelling dress, which she had previously prepared, and the
beautiful murderess was ready to fly. She instantly left town for the
south, and, as already mentioned, received shelter and concealment
in the house of her distant kinsman, Sir John Swinton. How long she
was there protected, is not known, but it was probably as long as the
search of justice continued to be in the least eager. It was always
understood, by those aged persons who knew her story, and from
whom the preceding facts have chiefly been derived, that she
ultimately escaped to some remote continental state, where she was
supported by contributions from her relations. So closes one of the
most tragical tales that stain the domestic annals of Scotland during
the last century.
THE DOWNDRAUGHT.
Side by side with victims, might be placed the kindred species

downdraughts, who are only different from the accident of their
having friends who will rather be weighed down by them to the very
earth—to the grave itself—than permit them to sink by themselves.
The downdraught is in reality a victim, and one of the darkest shade,
being generally a person totally worthless in character, and
abandoned in habits; but then he has not altogether cut the cables
which bound him to his native grade in society—he has not all forgot
himself to disgrace—he is still domesticated with his friends—he has
a mother, or a wife, or a brother, or a sister, or perhaps an old aunt,
who will try to keep him in food and clean linen, and, having lost all
hope of his ever being actively good, will do anything for him, if he
will only preserve a neutrality, and not be positively evil. He is a
victim in appearance (always excepting the clean shirt), but he
enjoys the happy superiority over that class, of having an open door
to fly to when he pleases, and either a kind relation, who considers
him “only a little wild in the meantime,” or else one who, for the sake
of decent appearances, will endeavour to patch up all his
peccadiloes, and even be tyrannised over by him, rather than shock
society by an open rupture. The personal tendencies of a
downdraught to victimization are strong as the currents of the great
deep, but he is withheld from it by others. He has always some
anchorage or other upon decent life, to keep him back from the gulf
to which he would otherwise hurry on. In many cases, the very
kindness and indulgence of friends was the original cause of his
becoming a downdraught. He had every thing held to his head. He
was encouraged in his pretences of headaches as an excuse for
staying away from school. When afterwards an apprentice, he was
permitted to break off, on the score of being compelled to put on fires
and sweep out the shop. Or, perhaps, it was from none of those
causes. Possibly, he was just one of those persons who seem to be
totally destitute of all perception of the terms upon which men are

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9.1 How Global Markets Work

2) Imports are defined as the goods and services that we

5) The United States exports

8) The fundamental force that generates international trade is

9) The fundamental force that drives trade between nations is

11) A nation has a comparative advantage in a good when it has a

24) A country will export a good if it

26) A nation will export a good if its

55) A nation will import a good if its no-trade, domestic

9.2 Winners, Losers, and Net Gains from Trades

1) International trade benefits

2) Who gains from international trade?

21) When a nation exports a good or service, employment in that industry

43) Which of the following is correct?

9.3 International Trade Restrictions

3) A tax on a good that is imposed by the importing country is called a

4) Since the mid-1970s, the average U.S. tariff rate is

9) After a tariff is imposed on a good, the price of the good

18) If the United States imposes a tariff on a good, then

24) Of the following, which group is hurt by a tariff?

25) Of the following, who is harmed by a tariff?

30) A tariff makes the total economy

48) Of the following, who gains from a tariff?

57) Of the following, who gains with a quota?

75) Economists argue for free trade in export markets because

76) A tax on a good that is imposed when it is imported is called

79) When a tariff is imposed on a good, the ________ increases.

9.4 The Case Against Protection

4) What is the infant-industry argument for protection from international trade?

6) The infant-industry argument is used by those who assert they want to

7) The infant-industry argument for protection is based on the idea of

10) Dumping is defined as the situation in which

13) A flawed argument for protection from foreign trade is that

16) The argument that jobs are lost to free trade is

21) The ________ are hurt by importing a good.

27) Which of the following groups gain from international trade?

33) The United States

34) Why do governments in less-developed nations impose tariffs?

4) Based on the figure above, as a result of international trade, consumer surplus

6) Based on the figure above, international trade leads to

12) Based on the figure above, international trade leads to

8) Which of the following is true?

9) Which of the following is true?

9.7 Essay: How Global Markets Work

2) How do imports affect buyers' consumer surplus?

3) How do imports affect sellers' producer surplus?

6) How do exports affect sellers' producer surplus?

9.9 Essay: International Trade Restrictions

If a $3 per pound tariff is imposed,

6) What is "rent seeking"? How does it apply to restricting imports?

Oh, for that pipe of silver sound,

And not alone each hill and dale,

First, I could sing how brave thy sons,