Exam 19: International Trade and Finance

Refer to the table Comparative and Absolute Advantage II. The table summarizes the amount of baseball bats and bobblehead dolls that can be produced per unit of labor in Stewarton and Colberton. If both countries have the same amount of labor, then it can be concluded that Colberton has a comparative advantage in producing _____ and has an absolute advantage in producing:

Refer to the table Comparative and Absolute Advantage II. The table summarizes the amount of baseball bats and bobblehead dolls that can be produced per unit of labor in Stewarton and Colberton. If both countries have the same amount of labor, then it can be concluded that Stewarton has _____ advantage in producing:

A summary of a nation's transactions with other countries over a specified time period is known as the:

Refer to the figure Import Tariffs. The figure shows the U.S. demand, U.S. supply, and world supply curves for baseball bats. If the United States imposes a $8 tariff on imports, then the price paid by consumers will be _____, and consumers will purchase _____ million bats. ​ Figure: Import Tariffs

Portugal specializes in the production of wine and produces 10 million bottles. The United Kingdom specializes in the production of cheese and produces 100 million pounds. If the terms of trade is 10 pounds of cheese for a bottle of wine and Portugal consumes 40 million pounds of cheese, then England consumes _____ million pounds of cheese and _____ million bottles of wine.

Consider the market for automobiles in the United States. In the absence of trade, the equilibrium price of an average sedan is $20,000, and the equilibrium quantity is 100 million cars per year. A. Illustrate this situation on a supply-demand graph with quantity of cars (in millions) on the x-axis and price (in thousands) on the y-axis. Mark the supply curve as the U.S. supply. B. Suppose that the world price of an average sedan is $16,000. At this price, the domestic suppliers can supply 60 million cars, and the demand is 140 million cars. On the graph, illustrate the world supply curve, the domestic supply, the domestic demand, and the quantity of imports. C. Suppose the United States imposes a 60 million unit quota on the import of cars. That is, the United States can import at most 60 million cars. Illustrate the impact of this quota on the equilibrium price and quantity of the cars.

A country produces bobblehead dolls and baseball bats using only labor as input. One unit of labor can produce four dolls or two bats, and the country has 100 units of labor. If the country is operating on its production possibility frontier (PPF) and producing 80 dolls, then how many bats is it producing?

A country produces tennis rackets and tennis balls using only labor as input. One unit of labor can produce one tennis racket or four tennis balls, and the country has 200 units of labor. If the country uses all its labor to produce tennis rackets, then it can produce _____ rackets.

Refer to the figure Currency Appreciation and Depreciation. The figure shows the supply and demand of U.S. dollars in the euro-U.S. dollar foreign exchange market. A shift in the equilibrium from A to D implies that the U.S. dollar is _____ and the euro is: ​ Figure: Currency Appreciation and Depreciation

Refer to the table Comparative Advantage and Trade. The table shows the number of laptops and phones that can be produced per unit of labor (the only input) in the United States and Brazil. Suppose that both countries have 100 million units of labor. A. In the absence of trade, the United States produces and consumes 170 million laptops. Given this, how many phones can it produce and consume? B. In the absence of trade, Brazil produces and consumes 300 million phones. How many laptops can it produce and consume? C. If both countries trade according to their comparative advantage, then in what range would the terms of trade for laptops fall? Explain your answer. D. With the opening of trade, the terms of trade of laptops for phones is three phones per laptop. If the United States now consumes 170 million laptops, how many can it consume? E. With the opening of trade, the terms of trade of laptops for phones is three phones per laptop. If Brazil now consumes 300 million phones, how many laptops can it consume? F. Represent your answers for parts A through E using the production possibility frontier (PPF) and consumption possibility frontier (CPF) for the United States and Brazil, clearly marking the points of production and consumption pre- and post-trade.

A country produces tennis rackets and tennis balls using only labor as input. One unit of labor can produce one tennis racket or four tennis balls, and the country has 200 units of labor. If the country uses all its labor to produce tennis balls, then it can produce _____ balls.

Refer to the figure Mutually Beneficial Trade II. The figure shows the production possibility frontier (PPF) for producing tennis rackets and tennis balls in Stewarton and Colberton. The opportunity cost of producing tennis balls in Colberton is: ​ Figure: Mutually Beneficial Trade II

Refer to the figure Mutually Beneficial Trade II. The figure shows the production possibility frontier (PPF) for producing tennis rackets and tennis balls in Stewarton and Colberton. In the absence of trade, if Stewarton produces and consumes 15 million tennis rackets, how many tennis balls can it produce and consume? ​ Figure: Mutually Beneficial Trade II

A country produces tennis rackets and tennis balls using only labor as input. One unit of labor can produce one tennis racket or four tennis balls. What is the opportunity cost of producing a tennis racket?

Suppose that the equilibrium exchange rate between U.S. dollar and the Indian rupee is 70 rupees per dollar. A. Draw the foreign exchange market graph, clearly marking the supply and demand curve for dollars and the equilibrium exchange rate. B. What will happen to the value of the dollar (appreciate or depreciate) if the interest rate in India rises relative to the interest rate in the United States? Justify your answer. C. Illustrate your answer to part B on the graph.

Which of the following can lead to a depreciation in the U.S. dollar compared to the Indian rupee?

If a country exports less than it imports, then the _____ will be negative.

Refer to the figure Mutually Beneficial Trade I. The figure shows the production possibility frontier (PPF) and consumption possibility frontier (CPF) for baseball bats and bobblehead dolls in Stewarton and Colberton. Based on the figure, the opportunity cost of producing one bat in Colberton is: ​ Figure: Mutually Beneficial Trade I

Consider the market for automobiles in the United States. In the absence of trade, the equilibrium price of an average sedan is $20,000, and the equilibrium quantity is 100 million cars per year. A. Illustrate the above-mentioned situation on a supply-demand graph with quantity of cars (in millions) on the x-axis and price (in thousands) on the y-axis. Mark the supply curve as the U.S. supply. B. Suppose that the world price of an average sedan is $16,000. At this price, the domestic suppliers can supply 60 million cars, and the demand is 140 million cars. On the graph, illustrate the world supply curve, the domestic supply, the domestic demand, and the quantity of imports. C. Suppose that the United States imposes a $2,000 per car tariff on imports. As a result, domestic supply increases to 80 million cars, and domestic demand decreases to 120 million cars. On the graph, show the impact of this tariff and the resulting changes in supply, demand, and imports. D. What is the total revenue of the government because of the import tariffs?

Refer to the figure Currency Appreciation and Depreciation. The figure shows the supply and demand of U.S. dollars in the euro-U.S. dollar foreign exchange market. Which of the following shifts in the equilibrium represents an appreciation in the U.S. dollar? ​ Figure: Currency Appreciation and Depreciation