Ch.9

The World Trade Organization (WTO) provides a way for all its member nations to:

jointly agree to reduce or eliminate trade barriers.

Opening up to international trade only has a temporary effect on unemployment because:

the workers can retrain and find new jobs.

The general public view international trade differently from the economists. They believe that:

trade is a threat, and not just an opportunity.

An economist mentions that "if we can import apples more cheaply, we can bake a bigger apple pie; this is the beauty of international trade." This economist believes that:

trade reallocates tasks so that they're done more efficiently.

Compared to the general public, economists have different views on international trade such as:

"People trade. Countries don't."

What is a welfare effect of imposing a tariff?

-Consumers lose consumer surplus due to the higher price. -The government receives tax revenue from imposing the tariff. -Producer surplus increases because of the higher price.

Why is there almost no international trade in medical services, and no international trade in houses?

Their trade costs are prohibitively expensive, and it is nearly impossible to transport a house.

Which is an argument for limiting international trade?

-National security needs to be preserved. -Infant industries need to be protected. -Domestic jobs need to be saved.

_____ prevent(s) unfair competition.

Antiâ€dumping laws

The United States has negotiated free-trade agreements with various neighbors, but the most important agreement is the:

North American Free Trade Agreement.

Globalization is one of the most important forces in your lifetime. What is NOT causing economic opportunities to extend across national borders?

Opportunity costs have risen.

Trade costs occur as a result of buying or selling your goods overseas. Which one of these is NOT considered as a trade cost?

Prices of products

International trade has been a growing share of the U.S. economy throughout the entire postwar period. This trend has transformed the economy largely due to:

declining trade costs.

"Fair-trade" advocates argue that we should pay higher prices for imports—high enough to:

ensure a reasonable standard of living for the workers involved.

Comparative advantage yields a pretty stark piece of advice: Produce what you're good at and buy what you aren't. Applied to international trade, this says to _____ the stuff you can produce at _____, and _____ other stuff.

export, lower opportunity cost, import

According to the cost-benefit principle, you should only export a good if the price you'll get for it overseas is sufficiently _____ your local price as to offset _____.

far above; exportâ€related trade costs

Red tape ultimately has the same effect as a tariff; that is, red tape:

increases trade costs and thus raises the price of imports.

The five arguments for limiting international trade that are the discussed in the chapter all argue whether or not international trade:

is good for Americans.

China imported some airplanes from the United States. In turn, the United States also imported shirts produced in China. Even though American and Chinese laborers don't directly compete with each other, their labor does compete because:

labor is embodied in the goods that are traded between countries.

On average, U.S. manufacturing workers earn $39 per hour, compared to $43 in Germany. This means that the _____ of an average American manufacturing worker is _____ than that of their German counterpart.

productivity; lower

People argued that we should build cars in Detroit, and stop growing them in Iowa. They were arguing for:

protecting jobs for Americans.

International trade has transformed the economy. When we allow imports, it:

raises consumer surplus.

Economists believe that trade increases the size of the pie in the long run. However, they should also pay more attention to the short-run disruption in order to:

reassign people to different pie-making roles.

In the importâ€competing sectors, the greater openness to trade leads those firms that lack a comparative advantage to shrink. This common argument against free trade is about _____.

saving jobs

A tariff is a _____.

tax on imported products