Chapter 9 — Quiz

Multiple choice

Q1. Comparative advantage at the country level says: a) Countries should always be self-sufficient b) Countries gain from specializing in goods where they have lower opportunity costs and trading c) Countries with absolute advantage in everything do not need to trade d) Trade is zero-sum

Q2. A tariff is: a) A subsidy paid to exporters b) A tax on imports c) A quota on imports d) A regulation on labor standards

Q3. When a tariff is imposed, the effect on the importing country is: a) Consumer surplus rises b) Domestic producer surplus rises, government collects revenue, but the net welfare effect is negative c) Total surplus rises d) Imports rise

Q4. A tariff creates how many deadweight loss triangles? a) None b) One c) Two d) Four

Q5. A quota is generally worse than a tariff because: a) Quotas raise less revenue (the surplus that would have been tariff revenue goes to quota holders) b) Quotas are easier to enforce c) Quotas affect more goods d) Quotas are illegal

Q6. The China shock refers to: a) China's economic stimulus in 2008 b) The rapid increase in Chinese imports to the U.S. after China's 2001 WTO accession c) The Chinese stock market crash of 2015 d) The U.S.-China trade war

Q7. Autor, Dorn, and Hanson found that the China shock: a) Caused no measurable damage to U.S. communities b) Caused larger and more persistent local labor-market damage than economists had predicted c) Was beneficial for everyone d) Disproved comparative advantage

Q8. Despite the China shock, most leading economists still: a) Support free trade in principle, with the caveat that distributional damage is real and adjustment assistance is needed b) Have abandoned free trade c) Support pure protectionism d) Have no opinion on trade

Q9. Why are the losers from free trade more politically organized than the winners? a) They have more money b) Concentrated benefits and concentrated losers organize more easily than diffuse winners c) Government bias d) Media coverage

Q10. A "voluntary export restraint" (VER) is: a) A tax exemption b) An agreement by foreign exporters to limit exports voluntarily, usually to avoid harsher trade restrictions c) A subsidy for exports d) A tariff in disguise

Q11. A small importing country imposes a tariff. Who pays most of the tariff? a) Domestic consumers b) Foreign producers c) Domestic government d) Foreign government

Q12. Trade Adjustment Assistance (TAA) is: a) A trade tariff b) The main U.S. federal program for helping workers displaced by trade c) A subsidy to exporters d) A regulation

Short answer

SA1. Why does a tariff create two deadweight loss triangles?

SA2. What were the key findings of Autor, Dorn, and Hanson on the China shock?

SA3. Explain why the standard "long-run adjustment" assumed by simple trade theory failed for many workers displaced by the China shock.

SA4. Why are the political consequences of trade so large compared to the economic consequences?

SA5. Why do most economists prefer tariffs to quotas?

True / False

TF1. A country with absolute advantage in everything has no incentive to trade. (True / False)

TF2. A tariff always benefits the country imposing it. (True / False)

TF3. The China shock disproves comparative advantage. (True / False)

TF4. Free trade increases total welfare even when distribution is uneven. (True / False)

TF5. Trade Adjustment Assistance fully compensates workers displaced by trade. (True / False)

Selected answers in appendices/answers-to-selected.md.