econ final ch 2.1 & 7
The first discussion of comparative advantage appears in a book written by
David Ricardo.
Which of the following is an example of a trade restriction?
Japan places a tax on all Korean automobiles.
In the 1980s, Japan agreed to limit the quantity of automobiles it would export to the United States. Why did the Japanese government agree to this trade restriction?
The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S. government.
Which of the following statements about the importance of trade to the U.S. economy is false?
The U.S. economy is highly dependent on international trade for growth in its gross domestic product.
Countries gain from specializing in producing goods in which they have ________ and trading for goods in which other countries have ________.
a comparative advantage; a comparative advantage
A quota is
a limit placed on the quantity of goods that can be imported into a country
Which of the following is the best example of a voluntary export restraint?
a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan
The ________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.
attainable
Which of the following is the best example of a tariff?
a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States
Trade that is within a country or between countries is based on the principle of
comparative advantage.
Many economists ________ protectionism because it ________ consumers and ________ jobs in domestic industries that use protected products.
criticize; causes losses to; eliminates
Autarky is a situation in which a country
does not trade with other countries.
As percentage of imports, the largest product category of U.S. imports from China is
electronic products.
Domestically produced goods and services sold to other countries are referred to as
exports.
To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Tesla's Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers
face a trade-off, because producing more of one model means producing less of the other.
T/F: Dumping refers to countries exporting unwanted and inferior products to other countries.
false
Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets. This statement describes the ________ argument for protectionism.
infant industry
Members of Congress promising to support each other's legislation is known as
logrolling
A quota
makes domestic consumers worse off
A tariff
makes domestic producers better off.
If the production possibilities frontier is linear, then
opportunity costs are constant as more of one good is produced.
In the 1930s the United States charged an average tariff rate
that exceeded 50 percent.
T/F: If a country has an absolute advantage in producing a product, it may not have a comparative advantage in producing that product.
true
T/F: One of the main sources of comparative advantage is natural resources.
true
T/F: One reason a country does not specialize completely in production is that production of most goods involves increasing opportunity costs.
true
T/F: The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called comparative advantage.
true
Whenever a buyer and a seller agree to trade, both must believe they will be made better off
whether the buyer and seller live in the same (or different) city or country.
If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania
will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.
Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions?
Consumers pay a high cost for jobs saved through trade restrictions.
saddles spurs(pairs) Mateo: 75 225 Celeste 100 225 Mateo and Celeste produce custom saddles and spurs. The table above lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. Select the statement that accurately interprets the data in the table.
Mateo has a greater opportunity cost than Celeste for making saddles.
Imports are goods and services bought domestically
but produced in other countries
An economic principle that explains why people pursue different occupations is
comparative advantage
International trade
helps consumers but hurts firms that are less efficient than their foreign competitors.
Protectionism is the use of ________ to protect domestic firms from foreign competition.
trade barriers
Output per hour of work swords belts Estonia: 5 2 Morocco: 3 3 Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. The table above shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. What is the opportunity cost to produce 1 belt in Morocco?
1 sword
empanadas tacos madison: 30 50 austin: 24 32 Madison and Austin own Cafe Ole'. The table above lists the number of empanadas and tacos Madison and Austin can each make in one hour. Select the statement that accurately interprets the data in the table.
Austin has a comparative advantage in making empanadas
berries fish rob: 20 80 bill: 30 60 Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table.
Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish.
All but one of the following statements is used to justify protectionism. Which statement is not used to justify protectionism?
Free trade leads to higher prices for imported goods.
The first example of comparative advantage appeared in a book that was published in 1817. This example showed that mutually beneficial trade between two countries (England and Portugal) was possible. The example assumed that two goods (wine and cloth) could be produced by both countries. Which of the following describes the conclusion of this example?
Portugal had a comparative advantage in wine and England had a comparative advantage in cloth
T/F: Globalization is the process of countries imposing trade restrictions on other countries.
false
The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. All of the following are reasons for these anti-globalization protests except
protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.
In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by passing the Smoot-Hawley Tariff. In response to this tariff, other countries ________ and international trade ________.
raised their tariffs; collapsed
In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except
some countries have more resources than other countries.
Free trade refers to trade between countries
that is without restrictions.
T/F: A quota is a numerical limit on the quantity of a good that can be imported.
true
T/F: Although the United States is the second largest exporting country, international trade is less important to the U.S. than it is to most other countries.
true
T/F: Assume that Finland and Latvia produce only two goods. If Finland has an absolute advantage in the production of these two goods compared to Latvia, Finland can still benefit from trade with Latvia.
true