1. Subsidies to domestic firms may lead to

A) An increase in prices

B) Higher volume of exports

C) Higher volume of imports

D) Increase in welfare of the trading partner

2. Export quotas, placed on Japanese auto shipments to the United States in the 1980s, led to rising prices of both Japanese autos and U.S.-produced autos purchased by the U.S. consumer.

A) True

B) False

3. Figure 1 illustrates the demand and supply schedules for calculators in Mexico, a small nation that is unable to affect the world price.

What are the market price, the quantity supplied by Mexican producers, Qs, and the quantity demanded by Mexican consumers, Qd, if this market is at equilibrium without international trade.

A) P = 3.50, Qs = 10, Qd = 110

B) P = 6, Qs = 40, Qd = 80

C) P = 8, Qs = 40, Qd = 80

D) P = 8, Qs = 60, Qd = 60

4. Based on Figure 1, at equilibrium without international trade, Mexico's producer surplus equals the area

A) c2 + b1 + b2

B) c2 + c3 + c4

C) c1 + c2 + c3 + c4

D) a1 + a2 + a3