Exam 5: International Trade 5

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____ and the equilibrium price of suits in Scotland will most likely _____.

Since labor is relatively scarce in Canada, free trade should cause the wages paid to Canadian labor to rise.

Use the following to answer questions : Figure: The Production Possibility Frontiers for Jackson and Tahoe -(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. _____ has a(n) _____ advantage in the production of _____.

Comparative advantage arises from:

Use the following to answer questions : Figure: The Market for Laptop Sleeves -(Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is P_W. Identify the area of government tax revenue when a tariff raises the domestic price from the world price to P_T.

Lower wages in China reflect _____ labor productivity in China than in the United States. This means that if the United States moved high-tech industries to China, the overall cost of production would be _____ in China than in the United States.

Suppose a nation is considering two alternative policies to protect a domestic industry from world trade. The two policies are an import quota of X units and a per-unit tariff that would reduce imports to X units. Though either policy would result in only X imported units of this good, there is a fundamental difference in the outcome. Explain this difference.

Explain the difference between comparative advantage and absolute advantage.

Use the following to answer questions : Figure: The Market for Melons in Russia -(Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons in Russia. Suppose the world price of melons is D. Russia will _____ of melons.

Use the following to answer questions: -(Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico of producing 10 units of machinery is _____ units of petroleum.

In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the total surplus from beef consumption and production to:

If labor is scarce in Sri Lanka but capital is abundant, when Sri Lanka opens to trade, the price of labor will _____ and the price of capital will _____.

Chile has a comparative advantage over the United States in copper. Which of the following is a source of this comparative advantage?

Use the following to answer questions : -(Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. In the United States the opportunity cost of producing 40 tractors is _____ barrels of crude oil.

If the United States can produce 30 computers for every car it produces and Japan can produce 15 computers for every car it produces, _____ has the _____ advantage in car production.

Canada, Mexico, and the United States have:

Which of the following is an example of an import quota?

Use the following to answer questions: Figure: The Market for Calculators -(Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, P_W, equals $100. When the economy moves from autarky, under which the price is $150, to free trade, consumer surplus rises by area _____ and producer surplus falls by _____.

Goods and services purchased from abroad are _____, while goods and services sold abroad are _____.

Use the following to answer questions: Figure: The Domestic Market for Digital Cameras -(Figure: Domestic Market for Digital Cameras) Look at the figure The Domestic Market for Digital Cameras. Assume that P_A is the autarky price and P_W is the world price. Total surplus after international trade _____ by the area _____.