Chapter 8 my Econ lab
Acme Supply is analyzing a Production Possibilities Curve that compares production of wrenches (x-axis) to production of pliers (y-axis). If the slope of the PPC is 22, the opportunity cost of producing pliers in terms of wrenches is
.5 (1/2)
The mercantilist economic doctrine was widely followed from the sixteenth to the eighteenth centuries in Europe. Mercantilists advocated the use of tariffs to restrict trade, as they believed that countries that export more than they import will increase wealth. What could be the problem with such an economic policy?
Consumers pay a price that is higher than the world price, reducing consumer surplus.
Which of the following is not a source of a country's comparative advantage
Exports
How has the pattern of trade changed in the United States since 1960?
Imports have grown faster than exports, and the United States has become a net importer.
What are the types of goods that are causing the shift in the balance of imports and exports in the United States?
Manufactured goods have played an important role in the shift, even though the number of manufactured goods has increased.
Why is free trade controversial
Some individuals may lose.
What is the problem with the argument that infant industries need to be protected from foreign competition
Starting a company in isolation may deprive it of "technological spillovers" that its competitors, all located near one another, may enjoy.
In which of the following scenarios would a country export a good?
The domestic price for the good is below the world price.
All of the following are factors that contribute to a country's comparative advantage except:
aging population
When economies open up to free trade, trading partners _________ benefit
always
On the Production Possibilities Curve, possible production levels are represented
at any point on or below the curve.
When a country engages in free trade, the "winners" compensate the "losers
can
Is it true that a country needs to have an absolute advantage in the production of a good in order to benefit from trade in that good? Countries that do not have an absolute advantage in the production of a good:
can benefit from trade
A linear PPC would show, a PPC that is curved away from the origin would show
constant opportunity cost, increasing opportunity cost
One reason economists in general_________, favor protectionism is because it, ____________ prices for consumers and ________ social surplus
do not, raises, lowers
Terms of trade is the
exchange rate of goods for goods.
Many service-sector jobs in the United States have moved to other countries where these jobs are done at a fraction of the cost. The outsourcing of jobs overseas is heavily debated by politicians, policymakers, and economists in the United States. In the domestic economy when outsourcing exists, prices __________, social surplus __________, and labor market welfare ________.
fall, increases, decreases
The economy as a whole benefits from outsourcing if the gain in social surplus is _______ the losses in labor welfare
greater than
If the domestic price for a good is lower than the world price when a country opens itself to trade, domestic suppliers will ___________, the price of the good, which in turn will _______ the domestic demand for the good.
increase, decrease
According to the principle of comparative advantage, both parties will engage in a trade if the trading price
lies between their opportunity costs
National security concerns might cause a nation to
maintain a variety of agricultural industries
One reason a country might seek to implement protectionist policies could be to
maintain its culture's uniqueness.
Absolute advantage is the ability of an individual, firm, or country to produce
more of a certain good than other competing producers, given the same number of resources
If a country had exports of 320 billion and imports of 130 billion, they would be considered a net
net exporter
All of the following shift the Production Possibilities Curve outward except
new competitors in the marketplace.
Terms of trade are determined
on the basis of opportunity costs.
Complete specialization occurs when each individual, firm, or country
produces only what it has a comparative advantage in
When a country opens itself to trade and becomes an importer of goods and services, sellers _______ and buyers __________.
sellers lose, buyers win
The US labor force will consist of people over the age of 65, what will the production curve do:
shift inward
A production possibilities curve (PPC)
shows the relationship between the maximum production of one good for a given level of production of another good.
Which of the following is not one of the common arguments against free trade
taxes decrease, depriving government of needed revenues
If there are no "losers" in free trade, does it matter if wages and employment fall when a country engages in free trade?
yes, the government may not be able to effectively carry out such welfare transfers
