Exam 7: Comparative Advantage and the Gains From International Trade

Table 7-6 Output per hour Production and Production of work Consumption without Trade with Trade 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 7-6 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 belt in Morocco?

A tariff is the same as a quota.

Protectionism is usually justified on the basis of one of four arguments.What are those four arguments?

Figure 7-5 -Refer to Figure 7-5.Fenwick currently both produces and imports pistachios.The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year.Figure 7-5 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota.Answer questions a-j using the figure. a.If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers? b.If there is no quota how many pounds of pistachios would domestic producers supply and what quantity would be imported? c.If there is no quota what is the dollar value of consumer surplus? d.If there is no quota what is the dollar value of producer surplus received by producers in Fenwick? e.If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick? f.With a quota in place what is the price that consumers of Fenwick must now pay and what is the quantity demanded? g.With a quota in place what is the dollar value of consumer surplus? Are consumers better off? h.With a quota in place what is the dollar value of producer surplus received by producers in Fenwick? Are domestic producers better off? i.Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota. j.Calculate the deadweight loss as a result of the quota.

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

Table 7-2 Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. -Refer to Table 7-2.Select the statement that accurately interprets the data in the table.

Table 7-3 Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. -Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff. -Refer to Figure 7-2.With the tariff in place,the United States produces

Costa Rica is a leading exporter of bananas.What explains the comparative advantage of this country in banana production?

Examples of comparative advantage often begin with two countries that each produce the same two goods.Each country is then shown to have a comparative advantage in producing the good it can produce at a lower opportunity cost,and specializes in the production of the good for which it has a comparative advantage.How do these examples prove that both nations are made better off as a result of trade than they would be without trade?

An economic principle that explains why people pursue different occupations is

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Refer to the Article Summary.Assume countries initially enacted protectionist measures against Chinese steel imports.If these protectionist measures were eventually eliminated,then all else equal,the price of steel in those countries would________ and the quantity of steel demanded in those countries would ________.

One of the main sources of comparative advantage is natural resources.

Dumping refers to

Table 7-6 Output per hour Production and Production of work Consumption without Trade with Trade 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 7-6 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded,how many swords will Estonia gain compared to the "without trade" numbers?

Which of the following is an example of a trade restriction?

International trade

A tariff

Globalization is the process of countries imposing trade restrictions on other countries.