Test Prep For AP® Courses

58.

“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 ____________.

  1. infant industry argument
  2. advanced economy argument
  3. antidumping argument
  4. national interest argument
  5. environmental protection argument
59.

A country increases its tariff on automobile imports. This is most likely to have what effect on the country’s market for automobiles?

  1. No effect
  2. Increase equilibrium price and quantity
  3. Decrease equilibrium price and quantity
  4. Increase equilibrium price and decrease equilibrium quantity
  5. Decrease equilibrium price and increase equilibrium quantity
60.

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.

  1. 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.
  2. 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.
  3. 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.
  4. Explain whether the new world price results in Country A importing or exporting some of its wheat.
  5. Explain whether the new world price results in Country B importing or exporting some of its wheat.