econ

Comparative advantage refers to:

Being the lowest relative opportunity cost producer of a good.

____revenue equals a tariff times the quantity imported. (Use one word for the blank.)

Tariff

One of the major themes in economics is that trade creates wealth.

True

___effects are generally found by comparing changes in consumer and producer surplus. (Enter one word in the blank.)

Welfare

__ is/are generally found by comparing changes in consumer and producer surplus.

Welfare effects

When a domestic country is small relative to world markets, is a price taker, and its consumption and production do not affect the world price, it can be studied using:

a small-country model

A(n) __to __ is any policy that is designed to reduce the competitiveness of foreign producers that wish to sell their goods or services in the domestic market.

barrier --- trade

Any policy that is designed to reduce the competitiveness of foreign producers who wish to sell their goods or services in the domestic market is a:

barrier to trade.

Consider the two production possibilities frontiers (PPFs) shown in the graphs. If the two countries do not specialize, Country A would likely ______.

choose point MA

Specialization is based on ____ advantage

comparative

____ advantage is the foundation of establishing the benefits of trade.

comparative

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the __ loss.

deadweight

In the small-country model, the ___ price equals the world price if the country is open to trade.

domestic

The price of a good, service, or resource that prevails in the domestic market is the __ price

domestic

Goods and services that are manufactured domestically but sold abroad are called

exports

___trade is trade between nations that is free from barriers such as regulations tariffs or quotas.

free

Trade between nations without barriers such as regulations, tariffs, or quotas is called:

free trade.

A quota is a numerical limit on the amount of a good that can be

imported

Tariff revenue equals a tariff times the quantity

imported

Goods services or resources produced abroad and sold domestically are called

imports

For two parties to be willing to trade, the terms of trade must be:

less than the buyer's opportunity cost, but greater than the seller's opportunity cost.

If the terms of trade are the same as your _____ cost, you will receive no gains from the trade.

opportunity

If the terms of trade are the same as your __cost, you will receive no gains from the trade.

opportunity

The producer with the lowest relative _____ cost has a comparative advantage and should specialize in the production of that good.

opportunity

The value of the next-best forgone alternative is called the __ cost.

opportunity

Consider the two production possibilities frontiers (PPFs) shown in the graphs. If the two countries do specialize, Country A would likely ______, while Country B would likely ______.

produce at point CA; produce at point WB

A numerical limit on the amount of a good that can be imported is a(n)

quota

There is a(n) ___ on sugar imports in the United States.

quota

__ __ is the income earned by whoever has the right to import the good at the world price and sell it in the domestic market at the higher quota price.

quota rent

The income earned by whoever has the right to import the good at the world price and sell it in the domestic market at the higher quota price is:

quota rent.

The dollar value of a quota ____ is equal to the size of the quota times the difference between the quota price and the world price.

rent

When using the ___ -country model, the country adopts the world price for any good service or resource as the domestic price. (Use only one word.)

small

Quotas can have unintended consequences, such as:

substituting less expensive goods for the good that has a quota.

A tax or fee that must be paid on goods imported from other countries is called a(n)

tariff

A tax or fee that must be paid on goods imported from other countries is called a(n) ____

tariff

When the United States imposes a(n) __ on foreign steel, any foreign producers who want to sell their steel in the United States have to pay an extra fee, making it more expensive for them to sell their products.

tax

A person benefits less from trade than he or she did before if:

the terms of trade move closer to the person's opportunity cost.

Deadweight loss is the:

the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

Opportunity cost is:

the value of the opportunity that you give up when you choose one activity instead of another.

Comparative advantage is the foundation for establishing the benefits of ___

trade

When __ occurs, wealth is created.

trade

Tariff revenue is the product of the tariff rate and the quantity of goods imported.

true

The effects that a change in market conditions, usually price, has on the welfare or economic well-being of market participants are ___ effects.

welfare

The effects that a change in market conditions, usually price, has on the welfare or economic well-being of market participants are ____ effects.

welfare

If the terms of trade are the same as your opportunity cost, you will receive ___ gains from the trade.

zero