Econ 2302: Chapters 19-20

There are nontariff barriers in the form of _______________ regulations, in which certain textiles are made in the United States, shipped to other countries, combined in making apparel with textiles made in those other countries—and then re-exported back to the United States at a lower tariff rate.

"rules of origin"

The United States national minimum wage is _____________.

$7.25/hour

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:

0.5 apples; 0.25 apples.

The membership of the WTO includes about __________ nations.

150

Despite interlocking import quotas, tariffs, and nontariff barriers, the share of apparel sold in the United States that is imported rose from about _________ in 1999 to about ________ today.

50%; 75%

Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be:

8 wine; 16 cloths

Which statement describes an absolute or comparative advantage correctly?

A country has an absolute advantage in producing a good over another country if it uses fewer resources to produce that good.

Which of the following is true?

A nation cannot have a comparative advantage in the production of every good.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?

Alland has an absolute advantage in producing food but will not trade with Georgeland.

Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:

Canada has a comparative advantage in the production of hockey sticks.

____________ means selling goods below their cost of production.

Dumping

Which statement describes the concept of absolute advantage?

Even when one country has an absolute advantage in all goods and another country has an absolute disadvantage in all goods, both countries can still benefit from trade.

Which is not an example of a factor that has made it easier to split up the value chain?

Financial exchange improvements

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?

Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true?

Georgeland has an absolute but not a comparative advantage in producing clothing.

Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true?

Georgeland has an absolute disadvantage, but not a comparative disadvantage, in producing clothing.

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following statements is true?

If Alpha specializes in growing apples and Beta specializes in growing oranges, they could both gain by specialization and trade.

Which statement describes how worker productivity is determined in intra-industry trade?

In intra-industry trade, the level of worker productivity is determined by how firms engage in specific learning about specialized products, including taking advantage of economies of scale.

Which statement describes the best public policy regarding disruptions of foreign trade?

In thinking about the disruptions of foreign trade, or any of the other possible costs and tradeoffs of foreign trade discussed in this chapter, the best public policy solutions typically do not involve protectionism, but instead involve finding ways for public policy to address the particular issues, while still allowing the benefits of international trade to occur.

What does not describe one of the World Bank guidelines on infant industry protection?

Limit protectionism to areas like computers, where many other industries rely on having the best products available, because it is sometimes useful to help one industry by imposing high costs on many other industries.

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.

National Interest Argument

__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products.

Nontariff barriers

Which statement describes the impact of protectionism on jobs?

Protectionism reshuffles jobs from industries without import protections to industries that are protected from imports, but it does not create more jobs.

Suppose that the USA can make 15,000,000 cars or 20,000,000 bottles of wine with one year's worth of labor. France can make 10,000,000 cars or 18,000,000 bottles of wine with one year's worth of labor. From these numbers, we can conclude:

The USA has an absolute advantage in the production of cars.

If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Which statement describes the common belief among economists about the tradeoffs of trade policy?

The common belief among economists is that it is better to embrace the gains from trade, and then deal with the costs and tradeoffs with other policy tools, than it is to cut off trade to avoid the costs and tradeoffs.

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.

The infant industry argument

Why would foreign firms export a product at less than its cost of production—which presumably means making a loss?

This may be part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time, and when they have driven out the domestic U.S. competition, they would then raise prices.

Which of the following is the best example of a tariff?

a $1000-per-car fee imposed on all small cars imported

Which of the following is the best example of a quota?

a limit imposed on the number of men's suits that can be imported from a foreign country

A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________.

a non-tariff barrier

Jethro has a(n) __________________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up.

absolute advantage

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product.

absolute advantage

When nations increase production in their area of _________________ and trade with each other, both sides can benefit.

comparative advantage

_____________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least.

comparative advantage

What matters most in determining the efficient distribution of production over the world is:

comparative advantage.

As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.

comparative; comparative

During the second half of the twentieth century, trade barriers have in general:

declined quite substantially both in the U.S. economy and in the global economy.

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow them to compete in world markets.

The concept of _________________ means that as the measure of output goes up, average costs of production decline—at least up to a point.

economies of scale

Which of the following is not a short-run impact of imposing quotas on the American industries they seek to protect?

government tax revenues increase

According to international trade theory, a country should:

import goods in which it has a comparative disadvantage.

Raising an existing tariff on grapes from Argentina will:

increase American consumption of domestically produced grapes.

Introducing a tariff on vitamin Z would:

increase American consumption of domestically produced vitamin Z.

An import quota does which of the following?

increases the price of the domestic goods to consumers

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:

is essentially correct.

If a nation has a comparative disadvantage in the production of some commodity:

it can still gain from international trade in that commodity, by getting it at a lower opportunity cost than if it produced it domestically.

Intra-industry trade between similar trading partners allows the gains from ______________________ that arise when firms and workers specialize in the production of a certain product.

learning and innovation

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then:

there are no incentives for Alpha to specialize and trade with Beta.

The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result:

there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.