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

What is trade among nations ultimately based on?

Select one:

a.absolute advantage

b.technical advantage

c.comparative advantage

d.political advantage

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.

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.

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.

What will a tariff and an import quota do to the quantity of imports and the domestic price?

Select one:

a.increase the quantity of imports and raise the domestic price

b.reduce the quantity of imports and lower the domestic price

c.reduce the quantity of imports and raise the domestic price

d.increase the quantity of imports and lower the domestic price

How is the benefit received by sellers in a market measured?

Select one:

a.by the sellers' costs

b.by the amount sellers receive for their product

c.by the supply curve

d.by producer surplus

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

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.

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.

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

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.

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

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

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.

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.

What does deadweight loss represent?

Select one:

a.the reduction in producer surplus when a tax is placed on buyers

b.the decline in government revenue when taxes are reduced in a market

c.the loss of profit to businesses when a tax is imposed

d.the reduction in total surplus that results from a tax

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.

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.

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.

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.

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.

What happens as elasticities of supply and demand increase?

Select one:

a.the deadweight loss from a tax becomes smaller

b.the deadweight loss from a tax becomes greater

c.tax on a market becomes less intrusive

d.the distribution of a tax between buyers and sellers becomes more equitable

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