Chapter 8 Quiz

Which is not a source of comparative advantage?

In general, France has absolute advantage in production of all goods and services when compared to Italy.

When an economy moves from autarky to free international trade, in the export sector:

consumer surplus falls, producer surplus rises, and the economy as a whole gains.

The job creation argument for protection against free trade:

is that keeping out foreign imports allows the goods and services to be produced by domestic workers.

The infant industry argument for trade protection essentially states that:

new industries should be protected temporarily from foreign competition until they become established.

The World Trade Organization:

organizes the negotiations involved in trade agreements and resolves disputes among members.

If the United States placed larger tariffs on all textiles, then:

producer surplus would increase.

Tariffs and import quotas always:

reduce total surplus as compared to free trade.

If the executives of the U.S. silicon-chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips, they are using:

the national security argument.

If labor is scarce in Northlandia but capital is abundant, when Northlandia opens to trade:

the price of labor will fall, and the price of capital will rise.

Many countries engage in trade protection by imposing import tariffs or quotas for at least some goods. This is because:

while such restrictions harm consumers, they benefit producers who are usually a more cohesive and politically influential group.