Exam 7: Global Markets in Action

Tariffs and import quotas both decrease the amount of a good consumed and raise the price paid by domestic residents for the good.

Discuss reasons why we see trade restrictions. Are any of these reasons valid?

A country specializes in the production of goods for which it has a comparative advantage, so

Most economists agree that valid reasons for protecting trade include which of the following? I. The economies of scale argument II) The saving jobs argument III) The protection of high wages argument

A country opens up to trade and becomes an exporter of wheat. In the wheat market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.

How does a tariff affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. -In the figure above, with the tariff the United States imports ________ million shirts per year.

Voluntary export restraints (VERs)

When NAFTA was approved, Congress attempted to soften the losses suffered by some industries by

Tariffs ________ the domestic price of the good and import quotas ________ the domestic price of the good.

Which of the following is an explanation for the existence of trade restrictions?

The goods and services that our country buys from other countries are termed

Which of the following is an effective counter argument to the claim that protectionism saves domestic jobs?

Suppose the country of Mooland imposes a tariff on imported beef from the country of Aqualand. As a result of the tariff, the

A situation in which when one country raises its tariff, other countries retaliate with increases of their own, which trigger yet further increases of tariffs from the first country, is termed

Which of the following statements is TRUE?

A tariff hurts

Dumping occurs when a foreign firm sells its exports at a lower price than it costs to produce them.

The Smoot-Hawley tariff triggered a trade war during the Great Depression of the 1930s.

-Suppose that elimination of tariffs on agricultural products means that 1,000 farm workers lose jobs that pay an average of $20,000 per year. At the same time, because of the importation of relatively cheaper foreign vegetables, 150 million consumers save $2 per year on their grocery bills. a) What is the total income lost by farm workers because of the free trade? b) What is the total dollar amount saved by all consumers combined? c) Which is greater, the lost income or the consumer savings? Do the benefits of free trade out-weigh the costs in this simple example? d) Which group is most likely to become politically involved over the issue of removing the tariffs, the farm workers or the consumers? Why?