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

Table 19-3 Candles Soap Bryce 150 450 Tina 200 450 Bryce and Tina are artisans who produce homemade candles and soap. Table 19-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month. -Refer to Table 19-3.Select the statement that accurately interprets the data in the table.

A quota is a numerical limit on the quantity of a good that can be imported.

Figure 19-8 -Refer to Figure 19-8.Suppose the U.S.government imposes a $0.25 per pound tariff on rice imports.Figure 19-8 shows the demand and supply curves for rice and the impact of this tariff.Use the figure to answer questions a-i. a.Following the imposition of the tariff,what is the price that domestic consumers must now pay and what is the quantity purchased? b.Calculate the value of consumer surplus with the tariff in place. c.What is the quantity supplied by domestic rice growers with the tariff in place? d.Calculate the value of producer surplus received by U.S.rice growers with the tariff in place. e.What is the quantity of rice imported with the tariff in place? f.What is the amount of tariff revenue collected by the government? g.The tariff has reduced consumer surplus.Calculate the loss in consumer surplus due to the tariff. h.What portion of the consumer surplus loss is redistributed to domestic producers? To the government? i.Calculate the deadweight loss due to the tariff.

Table 19-4 Berries Fish Rob 20 80 Bill 30 60 Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. -Refer to Table 19-4.Use the table above to select the statement that accurately interprets the data in the table.

An economic principle that explains why countries produce different goods and services is

If a country has an absolute advantage in producing a product,it may not have a comparative advantage in producing that product.

Figure 19-5 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 19-5 shows the impact of this tariff. -Refer to Figure 19-5.The tariff causes domestic consumption of coffee

Examples of comparative advantage show how trade between two countries can make each better off.Compared to their pre-trade positions,trade makes both countries better off because in each country

The trade model described in the text demonstrates that countries can expand consumption by specializing in the production of goods and services in which they have a comparative advantage.In reality we do not see complete specialization in production.State three reasons why this is case.

A rise in the dollar price of the Chinese yuan signals an appreciation of the yuan and a depreciation of the dollar.

Table 19-11 Output per hour Production and Production of work Consumption without Trade with Trade Clocks Hats Clocks Hats Clocks Hats Denmark 6 3 900 150 1,200 0 Belize 1 2 150 100 0 400 Denmark and Belize can produce both clocks and hats. Each country has a total of 200 available labor hours for the production of clocks and hats. Table 19-11 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. -Refer to Table 19-11.What is the opportunity cost to produce 1 hat in Denmark?

Table 19-9 Output Per Hour of Work Light Bulbs Flash Drives Mexico 20 5 Canada 8 32 Table 19-9 shows the output per hour of work for light bulbs and flash drives in Mexico and in Canada. -Refer to Table 19-9.Fill in the following table with the opportunity costs of producing light bulbs and flash drives for Mexico and Canada. Light Bulbs Flash Drives Mexico Canada

The terms of trade refers to

________ refers to reductions in a firm's costs that result from an increase in the size of an industry.

You're traveling in Japan and are thinking about buying a new kimono.You've decided you'd be willing to pay $175 for a new kimono,but kimonos in Japan are all priced in yen.If the kimono you're looking at costs 14,000 yen,under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

a.What is the World Trade Organization? b.When was it established? c.How many countries are members of the World Trade Organization?

a.Define the term "globalization." b.Describe the benefits of globalization. c.Who is likely to oppose globalization and why?

Autarky is a situation where one country does not trade with other countries.

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.One reason for these anti-globalization protests is

A tariff is