Exam 8: International Trade

Explain the difference between comparative advantage and absolute advantage.

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. Indonesia has a comparative advantage in producing _____, while Malaysia has a comparative advantage in producing _____.

An example of a tariff is a:

Use the following to answer questions: Figure: The Market for Roses -(Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that P_A is the autarky price and P_W is the world price. Consumer surplus without international trade would be area:

France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. Using this information, we can conclude that:

Use the following to answer questions: Figure: The Market for Tea in Sri Lanka -(Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri Lanka. In autarky, the price is P₁. When the economy is opened to trade, the price rises to P_W and the change in total surplus is:

Honduras exports clothing to the United States, and the United States exports bulldozers to Honduras. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by stating that:

According to the infant industry argument, import protection is needed because:

Economists claim that opening up a market to imports leads to an increase in total surplus but that trade makes winners and losers. How does this work?

Suppose in a single year, Brazil can produce 100 tons of beef or 1,000 boxes of tulips. Suppose in the world market, one ton of beef costs eight boxes of tulips. Brazil will import beef.

Use the following to answer questions: Scenario: The Production of Wheat and Toys The table describes the production of two goods, wheat and toys, in country A and country B. Each country has a linear production possibility frontier with respect to its production of the two goods. The numbers in each column represent the total number of units each country could produce if it used all of its resources to produce the good. -(Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. If each country specializes completely in the good for which it has the comparative advantage, which combination represents a maximum possible amount of total production of the two goods, given the specialization?

Use the following to answer questions: -(Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In Mexico the opportunity cost of producing 150,000 barrels of crude oil is _____ tractors.

Use the following to answer questions: Figure: The Market for Roses -(Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that P_A is the autarky price and P_W is the world price. Producer surplus without international trade would be area:

Imports are good and services that are:

In a Ricardian model of international trade, the production possibility frontiers are _____, indicating that the opportunity cost of increasing the production of one item relative to another _____.

Use the following to answer questions: Figure: Comparative Advantage and the Production Possibility Frontier -(Figure: Comparative Advantage and the Production Possibility Frontier) Look at the figure Comparative Advantage and the Production Possibility Frontier. _____ has an absolute advantage in the production of _____ and a comparative advantage in the production of _____.

Use the following to answer questions: Figure: The Production Possibilities for Two Countries -(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Malaysia specializes completely in the production of the good of its comparative advantage, it will produce:

Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _____, and the equilibrium price of shoes in Italy will most likely _____.

Use the following to answer questions: Figure: A Tariff on Oranges in South Africa -(Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in South Africa. When the government imposes a tariff on imported oranges, the price of oranges in South Africa rises from P_W to P_T and domestic producer surplus _____ to _____.

Use the following to answer questions: Figure: The Market for Melons in Russia II -(Figure: The Markets for Melons in Russia II) Look at the figure The Market for Melons in Russia II. Suppose Russia opens to trade and finds the world price to be $10. Russia will: