In the exporting country model, before trade is allowed, the total surplus is represented by which areas?
Explanation
Before trade, the market operates at the domestic equilibrium. Total surplus is the sum of consumer surplus (the area below the demand curve and above the price) and producer surplus (the area above the supply curve and below the price).
Other questions
According to Chapter 9, what key factor determines whether a country will become an importer or an exporter of a good when it allows free trade?
If the domestic price of textiles in Isoland is lower than the world price, and Isoland opens to free trade, what will be the outcome?
When a country allows trade and becomes an exporter of a good, which of the following is a correct statement about the welfare effects?
In the graphical analysis of an exporting country presented in Figure 2 of Chapter 9, what does area D represent?
If a country allows free trade and becomes an importer of a good, how does the domestic price of the good change and who benefits?
In the graphical analysis of an importing country (Figure 3), the increase in total surplus due to trade is represented by:
What is a tariff?
When a country that imports a good imposes a tariff, what is the effect on the domestic price and quantity of imports?
What is the deadweight loss of a tariff?
In the graphical analysis of a tariff in Figure 4, which areas represent the deadweight loss?
According to the FYI box on page 179, what is the primary difference between a tariff and an import quota?
Which of the following is NOT listed in Chapter 9 as a benefit of international trade?
What is the 'jobs argument' for restricting trade?
How do most economists respond to the 'jobs argument' against free trade?
The 'infant-industry argument' for trade restrictions claims that:
What is a primary reason economists are often skeptical of the infant-industry argument?
The 'unfair-competition' argument is used to justify trade restrictions when foreign firms:
What is the economic response to the claim that a country should restrict trade with a country that subsidizes its producers?
Using a trade restriction as a 'bargaining chip' is an example of:
What is the primary risk associated with the protection-as-a-bargaining-chip strategy?
When a country removes its trade restrictions on its own, this is known as a:
What is the primary function of the World Trade Organization (WTO)?
A country has a comparative advantage in a good if its domestic price is:
Before trade, the price of a wool suit in Autarka is 3 ounces of gold. In the rest of the world, the price is 2 ounces of gold. If Autarka allows free trade, it will:
When a country becomes an importer of a good, what happens to consumer and producer surplus?
Which of the following is an effect of a tariff on an imported good?
The national-security argument for trade restrictions is most likely to be considered valid by economists when:
What does a small-economy assumption mean in the context of international trade analysis?
According to Chapter 9, what was the effect of the General Agreement on Tariffs and Trade (GATT) on average tariffs among member countries?
Why might a multilateral approach to free trade have a political advantage over a unilateral approach?
If the world price of a good is $10 and a country imposes a $2 tariff on imports, what will be the domestic price of that good?
When a country becomes an importer of a good, who are the 'winners' and who are the 'losers' from free trade?
In the summary of the effects of a tariff in the table in Figure 4, the change in producer surplus is represented by what area?
The story of Isoland's 'inventor' who secretly trades wheat for textiles illustrates that:
Why do economists generally support free international trade?
If a country that imports a good imposes a tariff, what happens to the quantity produced by domestic firms and the quantity consumed by domestic consumers?
The 'In the News' article 'Should the Winners from Free Trade Compensate the Losers?' suggests that from an economic perspective, being forced to buy a high-priced domestic good instead of a low-priced foreign good is a form of:
An import quota on cars from Japan that is 'voluntarily' implemented by the Japanese government is likely worse for U.S. welfare than a U.S. tariff on Japanese cars because:
In the importing country model, after free trade is allowed, consumer surplus is represented by which areas?
The 'In the News' article 'Trade Skirmishes' about U.S. tariffs on Chinese tires illustrates which argument for trade restrictions?
Suppose a country that imports televisions sees the world price fall by $100 due to a technological advance abroad. What is the overall effect on the country's welfare?
How does an import quota differ from a 'voluntary export restraint' (VER)?
If a country's domestic price for a good is above the world price, allowing free trade will cause the country to become an importer and will:
What is the primary conclusion that the standard economic analysis of international trade reaches?
When a tariff is imposed on an imported good, who benefits?
If a country has a domestic price of steel of $500 per ton and the world price is $600 per ton, and this country opens to trade, what will happen?
The deadweight loss from a tariff is created because the tariff:
According to the 'Second Thoughts about Free Trade' article by Paul Krugman, growing trade between the U.S. and much poorer, low-wage countries tends to:
If a tariff on an imported good is imposed, what is the impact on total surplus in the importing country?