Exam 35: International Trade and Comparative Advantage

Trade between nations usually means that

If every country uses tariffs, everyone is likely to lose.

As a result of pure free trade in a commodity the

If Japan imposes a quota on imports of rice, the effect will be

Cheap labor is the source of comparative advantages.

Which of the following is an extreme form of risk associated with investing in a foreign country?

Variability in exchange rates of currencies used in international trade

Baumol and Blinder offer some reasons why countries trade with each other.List three of the reasons, and give an example of each to illustrate the reason.

By tradition, Japanese employers cannot "lay off" workers.As a result they have goods that they cannot sell on the domestic market without driving down prices.To minimize losses, they sell goods such as steel and televisions in foreign markets at prices well below those in Japan.This is called

A country has a comparative advantage over another in the production of gadgets if it can produce

Specialization permits larger outputs and offers economies of large-scale production.

The two primary reasons to adopt measures to restrict trade are that

Figure 18-9 -In Figure 18-9, hostilities break out between Pastaland and Pestoland after Pestoland violates the Treaty of Basil.Consequently, trade stops and the price of pasta

The infant industry argument is valid when

A quota ordinarily specifies both minimum and maximum amounts of goods that can come into a country.

Figure 18-9 -In Figure 18-9, Pestoland exports pasta to Pastaland.Equilibrium will occur when

The United States can produce 1,000 shoes if it specializes in shoe production.Alternatively, it can produce 500 shirts.Taiwan can produce 500 shoes or 200 shirts.Explain which country will specialize in shoe production and which in shirt production.What are the possible terms of trade?

Comparative advantage is the rule that ordinarily prevents a nation from independently producing all of the goods it requires.

Dumping is a trade practice in which countries sell goods in a foreign market at cheaper prices than the goods can be produced domestically.

What would be the output combination for two products A and B on the production possibility frontier, if a country uses its entire resources for producing A?