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.With trade,what is the total gain in belt production?

In general,the costs tariffs and quotas impose on consumers are

A quota is

Suppose in Vietnam a worker can produce either 16 units of cloth or 2 bicycles while in China a worker can produce either 20 units of cloth or 5 bicycles. a.Which country has an absolute advantage in cloth production? In bicycle production? b.What is the opportunity cost of 1 unit of cloth in Vietnam? In China? c.What is the opportunity cost of 1 bicycle in Vietnam? In China? d.Which country has a comparative advantage in cloth production? In bicycle production? e.Suppose each country has 1,000 workers.Currently,each country devotes 40 percent of its labor force to cloth production and 60 percent to bicycle production.What is the output of cloth and bicycles for each country and what is the total output of cloth and bicycles between the two countries? f.Suppose each country specializes in the production of the good in which it has a comparative advantage.What is the total output of cloth and bicycles in the two countries? g.Provide a numerical example to show how Vietnam and China can both gain from trade.Assume that the terms of trade are established at 6 units of cloth for 1 bicycle.

A tariff is a tax imposed by a government on imports.

A tax imposed by a government on imports of a good into a country is called

In the 1930s the United States charged an average tariff rate

Table 7-1 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 7-1.Use the table above to select the statement that accurately interprets the data in the table.

________ is the ability to produce more of a good or service than competitors when using the same amount of resources.

U.S.factories produce ________ of the shoes New Balance sells in the United States.

Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade.These examples are misleading because

Domestic producers require time to gain experience and lower their unit costs;this will allow these producers to compete successfully in international markets.This statement describes the ________ argument for protectionism.

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.The increase in domestic producer surplus as a result of the tariff is equal to

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.

Dumping refers to countries exporting unwanted and inferior products to other countries.

What was the GATT,why was it established,and why and with what was it replaced?

A consequence of increasing marginal costs of producing laptop computers in the United States is

Which of the following statements is true?

A voluntary export restraint is an agreement negotiated by two countries that places ________ that can be imported by one country from another country.

Table 7-5 Table 7-5 shows the output per week for pens and pencils by Tran and Farah. -Refer to Table 7-5.Fill in the following table with the opportunity costs of producing bows and arrows for Tran and Farah.