Exam 9: Application: International Trade

If the world price of a good is greater than the domestic price in a country that can engage in international trade, then that country becomes an importer of that good.

Figure 9-13 -Refer to Figure 9-13. With trade, domestic production and domestic consumption, respectively, are

Most economists support the infant-industry argument because it is so easy to implement in practice.

Scenario 9-2 • For a small country called Boxland, the equation of the domestic demand curve for cardboard is where represents the domestic quantity of cardboard demanded, in tons, and represents the price of a ton of cardboard. • For Boxland, the equation of the domestic supply curve for cardboard is where represents the domestic quantity of cardboard supplied, in tons, and again represents the price of a ton of cardboard. -Refer to Scenario 9-2. Suppose the world price of cardboard is $60 and international trade is allowed. Then Boxland's consumers demand

Figure 9-2 The figure illustrates the market for calculators in a country. -Refer to Figure 9-2. This country

The imposition of a tariff on imported wine will increase the domestic price of wine, decrease the quantity of wine imported, and increase the quantity of wine produced domestically.

The results of a 2008 Los Angeles Times poll suggest that a significant majority of Americans believe that free international trade helps the American economy.

According to the principle of comparative advantage, all countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

Assume the nation of Teeveeland does not trade with the rest of the world. By comparing the world price of televisions to the price of televisions in Teeveeland, we can determine whether

Figure 9-6 The figure illustrates the market for roses in a country. -Refer to Figure 9-6. When a tariff is imposed in the market, domestic producers

The rules established under the General Agreement on Tariffs and Trade GATT) are enforced by an international body called the World Trade Organization WTO).

Figure 9-8. On the diagram below, Q represents the quantity of cars and P represents the price of cars. -Refer to Figure 9-8. The price corresponding to the horizontal dotted line on the graph represents the price of cars

Scenario 9-3 Suppose domestic demand and domestic supply in a market are given by the following equations: -Refer to Scenario 9-3. Suppose the world price in this market is $8 per unit, and suppose the country imposes a $1 per unit tariff. If the country allows trade with a tariff, how much is the deadweight loss caused by the tariff?

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of pistachios decreases to equal the world price of pistachios, then

Suppose Iceland goes from being an isolated country to being an exporter of coats. As a result,

Figure 9-27 The following diagram shows the domestic demand and supply curves in a market. Assume that the world price in this market is $20 per unit. -Refer to Figure 9-27. With no trade allowed, what are the equilibrium price and equilibrium quantity in this market?

When, in our analysis of the gains and losses from international trade, we assume that a particular country is small, we are

Figure 9-7. The figure applies to the nation of Wales and the good is cheese. -Refer to Figure 9-7. The equilibrium price and the equilibrium quantity of cheese in Wales before trade are

Figure 9-17 -Refer to Figure 9-17. When the country moves from free trade to trade and a tariff, consumer surplus

Countries that restrict foreign trade are likely to