Econ Chapter 9

gains from trade

exceed the losses

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

gain $150 of producer surplus.

when a country allows trade and becomes an exporter of a good

producers of the good are better off and consumers of the good are worse off

arguments for restricting trade

protecting jobs, defending national security, helping infant industries, preventing unfair competition, and responding to foreign trade restrictions

A tariff

raises the domestic price of the imported good above the world price.

A tariff is a

tax on an imported good.

most economists believe that trade is

the better policy

Figure 9-6: The figure illustrates the market for roses in a country. With trade and without a tariff,

the domestic price is equal to the world price.

world price

the price of a good that prevails in the world market for that good

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard produces which of the following results for Boxland?

It increases consumer surplus, decreases producer surplus, and increases total surplus.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $60. Then, relative to the no-trade situation, international trade in cardboard

harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864.

domestic producers are better off and the government raises revenue but

the losses to consumers exceed these gains

Domestic producers of a good become better off, and domestic consumers of a good become worse off, when a country begins allowing international trade in that good and

the world price exceeds the domestic price of the good that prevailed before international trade was allowed.

If the United States imports televisions and the U.S. government imposes a tariff on televisions, then

total surplus in the American television market decreases, producer surplus in the American television market increases, U.S. imports of foreign televisions decrease

Which of the following tools and concepts is useful in the analysis of international trade?

total surplus, domestic supply, equilibrium price

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $60 and international trade is allowed. Then Boxland's consumers demand

80 tons of cardboard and Boxland's producers supply 120 tons of cardboard.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $60. Then, relative to the no-trade situation, international trade in cardboard produces which of the following results for Boxland?

It decreases consumer surplus, increases producer surplus, and increases total surplus.

Figure 9-6: The figure illustrates the market for roses in a country. The size of the tariff on roses is

$1.

Figure 9-6: The figure illustrates the market for roses in a country. The amount of deadweight loss caused by the tariff equals

$100.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $45. Then Boxland's gains from international trade in cardboard amount to

$122.50.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $60. Then Boxland's gains from international trade in cardboard amount to

$160.

Figure 9-6: The figure illustrates the market for roses in a country. The amount of revenue collected by the government from the tariff is

$200.

Figure 9-6: The figure illustrates the market for roses in a country. Without trade, the equilibrium price of roses is

$4 and the equilibrium quantity is 300.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, If Boxland prohibits international trade in cardboard, then the equilibrium price of a ton of cardboard is

$52 and the equilibrium quantity of cardboard is 96 tons.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $45 and international trade is allowed. Then Boxland's consumers demand

110 tons of cardboard and Boxland's producers supply 75 tons of cardboard.

tariff

a tax on goods produced abroad and sold domestically

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard

benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.

a tariff moves a market

closer to the equilibrium that would exist without trade and reduces the gains from trade

the effects of free trade of free trade cabe be determined by

comparing the domestic price before trade with the world price

When a country allows trade and becomes an importer of a good

consumers are better off ad producers are worse off

Figure 9-6: The figure illustrates the market for roses in a country. The imposition of a tariff on roses

decreases the number of roses imported by 200.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $60. Then, if Boxland goes from prohibiting international trade in cardboard to allowing international trade in cardboard,

domestic producers of cardboard become better off and domestic consumers of cardboard become worse off.

Scenario 9-2• For a small country called Boxland, the equation of the domestic demand curve forcardboard is, Suppose the world price of cardboard is $45. Then, if Boxland goes from prohibiting international trade in cardboard to allowing international trade in cardboard,

domestic producers of cardboard become worse off and domestic consumers of cardboard become better off.

A country has a comparative advantage in a product if the world price is

higher than that country's domestic price without trade.

For any country, if the world price of copper is lower than the domestic price of copper without trade, that country should

import copper.

Figure 9-6: The figure illustrates the market for roses in a country. Before the tariff is imposed, this country

imports 400 roses.

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

lose by $450.

Assume, for Mexico, that the domestic price of beets without international trade is higher than the world price of beets. This suggests that, in the production of beets,

other countries have a comparative advantage over Mexico and Mexico will import beets.

A major difference between tariffs and import quotas is that

tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import.

a low domestic price indicates that

the country has a comparative advantage in producing the good and the country will become an exporter

a high domestic price indicates that

the rest of the world has a comparative advantage in producing the good and the country will become an importer

Suppose Brazil has a comparative advantage over other countries in producing almonds, but other countries have an absolute advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil

will export almonds.