Test Prep For AP® Courses
“Protectionism might work in the short run to help firms develop and gain a competitive edge in their market.” This perspective is best summarized as the ____________.
- infant industry argument
- advanced economy argument
- antidumping argument
- national interest argument
- environmental protection argument
A country increases its tariff on automobile imports. This is most likely to have what effect on the country’s market for automobiles?
- No effect
- Increase equilibrium price and quantity
- Decrease equilibrium price and quantity
- Increase equilibrium price and decrease equilibrium quantity
- Decrease equilibrium price and increase equilibrium quantity
Suppose that there are two countries, Country A and Country B, currently producing wheat. Initially, there is no trade between the two countries. The price of wheat in Country A is currently higher than in Country B.
- Draw a diagram showing the market for wheat in Country A and Country B. Be sure to show in your diagram that the equilibrium price for wheat is currently higher in Country A.
- List and explain two policies that either Country A or Country B (or both) might have enacted in order to stop trade between the two countries.
- Suppose that all trade barriers between the two countries were now removed and a new world price of wheat exists that is common to both countries. Specify the world price of wheat on your diagram from part a.
- Explain whether the new world price results in Country A importing or exporting some of its wheat.
- Explain whether the new world price results in Country B importing or exporting some of its wheat.