Exam 19: Comparative Advantage, International Trade, and Exchange Rates

Explain whether it is possible for a country to have a comparative advantage in the production of a product without having an absolute advantage in the production of that product.

Table 19-2 Pies Cakes Sarita 15 25 Gabriel 12 16 Sarita and Gabriel own S&G Bakery. Table 19-2 lists the number of pies and cakes Sarita and Gabriel can each bake in one day. -Refer to Table 19-2.Select the statement that accurately interprets the data in the table.

Table 19-12 Output per hour Production and Production of work Consumption without Trade with Trade Swords Belts Swords Belts Swords Belts Estonia 5 3 100 40 200 0 Morocco 2 2 60 60 0 120 Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. -Refer to Table 19-12.What is the opportunity cost to produce 1 sword in Estonia?

Which of the following is not a source of comparative advantage?

Table 19-12 Output per hour Production and Production of work Consumption without Trade with Trade Swords Belts Swords Belts Swords Belts Estonia 5 3 100 40 200 0 Morocco 2 2 60 60 0 120 Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. -Refer to Table 19-12.What is the opportunity cost to produce 1 belt in Estonia?

Figure 19-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 19-2 shows the impact of this tariff. -Refer to Figure 19-2.With the tariff in place,the United States produces

Which of the following is the best example of a quota?

What is dumping? Who benefits and who loses from dumping?

Which of the following is common to both tariffs and quotas?

Figure 19-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota. -Refer to Figure 19-3.What is the area of consumer surplus after the imposition of the quota?

A quota

Table 19-12 Output per hour Production and Production of work Consumption without Trade with Trade Swords Belts Swords Belts Swords Belts Estonia 5 3 100 40 200 0 Morocco 2 2 60 60 0 120 Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. -Refer to Table 19-12.All of the following are terms of trade that could possibly benefit both countries except

Holding all else constant,a rise in interest rates in the United States will cause the dollar to appreciate in international exchange markets.

In the United States during the Great Depression,tariffs were ________ than they were following World War II,and ________ than they are today.

Under autarky,consumer surplus is represented by the area

Countries that engage in trade will tend to specialize in the production of goods and services in which they have ________ and will ________ these goods and services.

Which of the following is the best example of a quota?

If American demand for purchases of Mexican goods has increased,how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Citing excessive currency regulation under the nation's previous regime, Uzbekistan's recently elected president, Shavkat Mirziyoev, announced a 50 percent devaluation of the Central Asian nation's currency, the soum, in September 2017. The devaluation changed the official exchange rate from 4,210.35 soum per U.S. dollar to 8,100 soum per U.S. dollar, putting it in line with the black market exchange rate. Economic slowdowns and falling currency values in China, Russia, and Kazikstan, Uzbekistan's largest export markets, have hurt this nation's economy which depends on commodity exports and remittances. According to Oleg Kouzmin, an economist at Renaissance Capital in Moscow, "The decision … helps reduce extreme disparities between official and 'grey market' exchange rates that were witnessed in Uzbekistan in the previous years. Economists generally love to see devaluations -- one of the things than makes them different from politicians - devaluation always gives the country a chance for a fresh start." Source: Ksenia Galouchko "This Currency's Sudden 50% Devaluation May Attract Bargain Hunters," bloomberg.com, September 5, 2017. -Refer to the Article Summary.All else equal,a depreciation of the Uzbekistani soum relative to a currency such as the U.S.dollar should ________ foreign investment in Uzbekistan and ________ exports from Uzbekistan.

What are the three main sets of factors that cause the supply and demand curves in the foreign exchange market to shift?