Question1

When evaluating the size of the deadweight loss due to a tax, what do we know?

Select one:

a.the smaller the elasticities of supply and demand, the greater the deadweight loss

b.the greater the elasticities of supply and demand, the greater the deadweight loss

c.the smaller the decrease in both quantity demanded and quantity supplied, the greater the deadweight loss

d.the greater the elasticities of supply and demand, the smaller the deadweight loss

Question2

With reference to the figure below, what is the per-unit burden of the tax on buyers?

Select one:

a.$5

b.$10

c.$11

d.$16

Question3

What is trade among nations ultimately based on?

Select one:

a.absolute advantage

b.technical advantage

c.comparative advantage

d.political advantage

Question4

Refer to the figure below. When the price falls from 8 to 6, which area represents the increase in consumer surplus to existing buyers?

Select one:

a.ABD

b.ACF

c.BCED

d.DEF

Question5

Refer to the figure below. Without trade, what would producer surplus be?

Select one:

a.$3600

b.$7200

c.$24

d.$300

Question6

The total surplus in a market is

Select one:

a.the total value to buyers of the goods less the total costs to sellers of providing those goods.

b.greater than consumer surplus plus producer surplus.

c.less than consumer surplus plus producer surplus.

d.the total costs to sellers of providing the goods less the total value to buyers of the goods.

Question7

Refer to the figure below. What does the world price for pencil sharpeners represent?

Select one:

a.the demand for pencil sharpeners from the rest of the world

b.the level of inefficiency in the domestic market caused by trade

c.the supply of pencil sharpeners from the rest of the world

d.the gap between domestic quantity demanded and domestic quantity supplied, and the resulting shortage of pencil sharpeners

Question8

Which area identified in the answers below represents the total surplus in a market?

Select one:

a.the total area under the price and up to the point of equilibrium

b.the total area under the demand curve and above the price

c.the total area between the demand and supply curves up to the point of equilibrium

d.the total area above the supply curve and up to the equilibrium price

Question9

What can be said if Canada exports cars to France and imports cheese from Switzerland?

Select one:

a.Canada has a comparative advantage in producing cheese, and Switzerland has a comparative advantage in producing cars.

b.Canada and France would both be better off if they both produce cars.

c.Canada has a comparative advantage in producing cars, and Switzerland has a comparative advantage in producing cheese.

d.Canada and France would both be better off if they both produce cheese.

Question10

Total surplus with a tax is equal to

Select one:

a.consumer surplus plus producer surplus.

b.consumer surplus minus producer surplus.

c.consumer surplus plus producer surplus, plus tax revenue.

d.consumer surplus minus tax revenue, plus producer surplus.

Question6

The total surplus in a market is

Select one:

a.the total value to buyers of the goods less the total costs to sellers of providing those goods.

b.greater than consumer surplus plus producer surplus.

c.less than consumer surplus plus producer surplus.

d.the total costs to sellers of providing the goods less the total value to buyers of the goods.

Question7

Refer to the figure below. What does the world price for pencil sharpeners represent?

Select one:

a.the demand for pencil sharpeners from the rest of the world

b.the level of inefficiency in the domestic market caused by trade

c.the supply of pencil sharpeners from the rest of the world

d.the gap between domestic quantity demanded and domestic quantity supplied, and the resulting shortage of pencil sharpeners

Question8

Which area identified in the answers below represents the total surplus in a market?

Select one:

a.the total area under the price and up to the point of equilibrium

b.the total area under the demand curve and above the price

c.the total area between the demand and supply curves up to the point of equilibrium

d.the total area above the supply curve and up to the equilibrium price

Question9

What can be said if Canada exports cars to France and imports cheese from Switzerland?

Select one:

a.Canada has a comparative advantage in producing cheese, and Switzerland has a comparative advantage in producing cars.

b.Canada and France would both be better off if they both produce cars.

c.Canada has a comparative advantage in producing cars, and Switzerland has a comparative advantage in producing cheese.

d.Canada and France would both be better off if they both produce cheese.

Question10

Total surplus with a tax is equal to

Select one:

a.consumer surplus plus producer surplus.

b.consumer surplus minus producer surplus.

c.consumer surplus plus producer surplus, plus tax revenue.

d.consumer surplus minus tax revenue, plus producer surplus.

Question11

Of the areas identified in the answers below, which area is producer surplus?

Select one:

a.the area under the demand curve and above the price

b.the area between the supply and demand curves

c.the area under the supply curve

d.the area below the price and above the supply curve

Question12

Cost is a measure of

Select one:

a.the seller's willingness to buy.

b.the producer's shortage.

c.the seller's willingness to sell.

d.the seller's producer surplus.

Question13

Which of the following outcomes will occur as a result of a tax, whether the tax is placed on the buyer or the seller?

Select one:

a.the price the seller receives will be higher

b.the size of the market will be reduced

c.the demand curve will shift upward

d.the supply curve will shift upward

Question14

When a country takes a unilateral approach to free trade, what happens?

Select one:

a.It reduces its trade restrictions while other countries do the same.

b.It removes all trade restrictions.

c.It removes trade restrictions on its own.

d.It does not remove trade restrictions.

Question15

Refer to the figure below. What price do sellers receive after the tax?

Select one:

a.12

b.8

c.4

d.6

Question16

As the size of a tax increases, what will happen to tax revenue?

Select one:

a.It will increase.

b.It will increase and then decrease.

c.It will remain the same.

d.It will decrease.

Question17

When a country allows trade and becomes an importer of a good, what happens to consumer and producer surpluses?

Select one:

a.Consumer surplus will increase, and producer surplus will decrease.

b.Both consumer surplus and producer surplus will decrease.

c.Consumer surplus will decrease, and producer surplus will increase.

d.Both consumer surplus and producer surplus will increase.

Question18

What is the effect of a tariff on the market price?

Select one:

a.It keeps the price of the exported good the same as the world price.

b.It raises the price of the imported good above the world price.

c.It lowers the price of the exported good below the world price.

d.It lowers the price of the imported good below the world price.

Question19

What does willingness to pay measure?

Select one:

a.the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

b.the maximum amount that a buyer will pay for a good

c.the maximum amount a buyer is willing to pay for a good minus the minimum amount a seller is willing to accept for the good

d.the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good

Question20

What is welfare economics?

Select one:

a.the study of how the allocation of resources affects economic well-being

b.the study of welfare programs in Canada

c.the study of the well-being of unfortunate people

d.the study of the effect of income redistribution on work effort

Question21

Australia is an importer of computer chips and is also a price taker in the chip market. The world price of these computer chips is $25. If Australia imposes a $5 tariff on chips, who will lose and/or gain?

Select one:

a.Consumers and producers will both lose.

b.Consumers will lose, and producers will gain.

c.Consumers and producers will both gain.

d.Consumers will gain, and producers will lose.

Question22

When technology improves in the ice cream industry, what happens to consumer surplus?

Select one:

a.It increases.

b.It decreases.

c.It increases and then decreases.

d.It does not change, since technology affects suppliers and not consumers.

Question23

Inefficiency exists in any economy when a good

Select one:

a.is not being produced by the highest-cost producer.

b.is not distributed fairly among buyers.

c.is not being consumed by the buyers who value it most highly.

d.is being consumed by the buyers who value it most highly.

Question24

Aquilonia has decided to end its policy of not trading with the rest of the world. When it ends its trade restrictions, it discovers that it is importing cinnamon, exporting steel, and neither importing nor exporting rugs. What can we conclude about consumer surplus in Aquilonia?

Select one:

a.It is now higher than it used to be for cinnamon, lower for steel, and the same for rugs.

b.It is now higher than it used to be for cinnamon and rugs, but not for steel.

c.It is now higher than it used to be for steel, lower for cinnamon, and the same for rugs.

d.It is now higher than it used to be for cinnamon and steel, but not rugs.

Question25

Why is trade beneficial?

Select one:

a.It allows each nation to specialize in doing what it does best.

b.It creates jobs for shippers.

c.It allows each nation to apply economic pressure on other nations.

d.It creates jobs for foreigners.

Question26

To correctly analyze the welfare effects of free trade on an economy, economists must assume

Select one:

a.that the country has an absolute advantage in the product.

b.that the country has a comparative advantage in the product.

c.that the country is the only producer of the product.

d.that the country is a price taker.

Question27

What does the Laffer curve do?

Select one:

a.It relates income to unemployment.

b.It relates income tax rates to total income taxes collected.

c.It relates tax rates to deadweight welfare losses.

d.It relates government welfare payments to the birth rate.

Question28

Critics of free trade sometimes argue that allowing imports from foreign countries costs jobs domestically. What would an economist argue?

Select one:

a.Foreign competition may cause unemployment in import-competing industries, but the increase in producer surplus due to free trade is more valuable than the lost jobs.

b.Foreign competition may cause unemployment in import-competing industries, but the increase in the variety of goods consumers can choose from is more valuable than the lost jobs.

c.Foreign competition may cause unemployment in import-competing industries, but the effect is temporary because other industries, especially exporting industries, will be expanding.

d.Foreign competition may cause unemployment in import-competing industries, but the increase in consumer surplus due to free trade is more valuable than the lost jobs.

Question29

When a good is taxed, how does this affect buyers and sellers?

Select one:

a.Both buyers and sellers are better off.

b.Buyers are worse off, and sellers are better off.

c.Both buyers and sellers are worse off.

d.Sellers are worse off, and buyers are better off.

Question30

When Ford and General Motors import automobile parts from Mexico at prices below those they must pay in Canada, who is worse off?

Select one:

a.Mexican consumers, as a group

b.Canadian companies that manufacture automobile parts

c.workers who assemble Ford and General Motors vehicles

d.Canadian consumers, as a group

30 25 DomesticSupply 20 World Price Price of Pendl Sharpeners 15 10 5 Domestic Demand 100 160 500 600 Quantity of Pencil Sharpener