IT Econ Exam 2
The pattern of protection in industrial countries is particularly harmful to the interests of
lowminus−income developing countries.
Trade models built exclusively on the idea of comparative advantage have a ___________ record when it comes to predicting a country's trade patterns.
mixed
In the figure to the right the curve labeled P shows, for a "typical" monopolistically competitive market, the relationship between product price and the number of firms. This curve is negatively sloped because
more firms give rise to more intense competition, and hence a lower price.
If a home country forces home firms to follow home environmental standards when home firms operate at home or in a foreign location,
pressures for a race to the bottom will decrease.
If a nation protects an industry because it believes that there are positive externalities in the production process, it is asserting that the free market will
produce less than is optimal from society's point of view.
One reason why producers have an incentive to organize in favor of protection is because
producer gains are relatively concentrated.
The international labor organization ( ILO) proposes that five labor standards are basic rights. these include
prohibition of forced labor the right to organize and bargagin collectively
The International Labor Organization (ILO) proposes that five labor standards are basic rights. These include
prohibition of forced labor. the right to organize and bargain collectively.
Compared with free trade, large countries may increase national welfare when they place a tariff on imports. What unique aspect of large countries, explains this conclusion? Large countries
reduce the world price of the import when they levy a tariff
A "race to the bottom" refers to a situation where countries try to compete against each other for investment by
reducing their standards on labor, environmental, or other policy issues
A "Race to the Bottom" refers to a situation where countries try to compete against each other for investment by
reducing their standards on labor, environmental, or other policy issues.
When it comes to the gains from trade, economies of scale that are external tend to produce
results that are uncertain and even potentially harmful
Separate standards refers to
separate standards held by different trading partners which other partners refuse to recognize.
Internal economies of scale means that
simply expanding the size of the market the firm serves reduces overall per unit costs, since the firm can spread costs over more output
A countervailing duty is a tariff that is levied to counteract
subsidies given to foreign firms by their own governments.
Which of the following is not a tariff pattern of the major world traders?
tariffs are higher to economically hostile countries
A product is produced in a monopolistically competitive industry with economies of scale. If this industry exists in two countries, and these two countries engage in trade one with the other, then we would expect:
that this trade will lead to greater product differentiation.
Under free trade, a digital SLR camera sells for $1000. If the U.S. imported the parts to produce a digital SLR, the free trade price of the parts would be $550. U.S. digital SLR producers will receive the highest "Effective Rate of Protection" if
the U.S. introduces a 25% tariff on imported digital SLR cameras.
All of the following are responsible for the removal of the formal trade barriers except
the World Bank and the IMF.
mutual recognition of standards refers to
the acceptance or keeping of a trading partners standards as valid and sufficient by another trading partner
An economic sanction is least likely to succeed when
the alleged violating country is a large, not-so-friendly trading partner.
What factor(s) can cause private returns from production to be smaller than social returns of production?
-Capital market imperfections, where firms with new and sound ideas are unable to attract financing. -Knowledge spillovers, where firms learn from each other. -The inability to coordinate activities between firms, when the success of an industry requires multiple players to enter simultaneously.
If output more than doubles when all inputs are doubled, production is governed by:
increasing returns to scale.
high-income industrial nations such as the United states and japan tend to have their highest tariffs in
agriculture, clothing, and textiles
Free trade in goods is predicted to
all above
A pollution haven is said to exist when
an economic activity becomes concentrated in countries or regions having less strict environmental controls than elsewhere.
Dumping occurs when
an exporter sells a product in a foreign market below its domestic cost.
Internal economies of scale:
are more likely to be associated with an imperfectly competitive industry.
Using the HO model, assume that the United States is capital abundant and Mexico is labor abundant. If soybeans are capital intensive and avocados are labor intensive,
avocado prices in the United States will fall once trade begins.
Monopoly powers given to domestic utility companies to create economies-of-scale might unintentionally
be an obstacle to increased international trade.
A country may choose to levy a countervailing duty on imported products if the imported products
benefit from subsidies.
Suppose that Brazil is capital abundant and Chile is natural resource abundant. If timber is natural resource intensive and computers are capital intensive, then according to the Stolperminus−Samuelson Theorem, the incomes of the owners of __________ are likely to rise in Brazil after trade with Chile begins.
capital
A country, such as the U.S., is allowed to use anti-dumping duties if the price a foreign exporter
charges for the products it sells in the U.S. is less than the price charged in the exporters market, and U.S. firms are harmed by import of the product
A country, such as the U.S., is allowed to use anti-dumping duties if the price a foreign exporter
charges for the products it sells in the U.S. is less than the price charged in the exporters market, and U.S. firms are harmed by import of the product.
When countries try to ban child labor,
child labor often goes underground, with children working in the informal economy, family enterprises and remote areas.
Harmonization of standards refers veto
common product safety, environment, labor, and fair competition standards agreed upon by trading partners
what advantage is the foundation of our understanding of the gains from trade and the potential income distribution effects of trade.
comparative advantage
Comparing U.S. trade with France and Chile, trade with ChileChile is more likely to be based on _______. The basis of trade between the U.S. and Chile, as revealed above, follows from the fact that the two countries have
comparative advantage dissimilar productivity, technology, and factor endowments
The figure to the right shows the effects of a tariff on imports in the case of a country not large enough to affect the world price. According to this graph, the income distribution effects are The imposition of a tariff on imports also has resource allocation effects. In the figure to the right, these effects are
consumer surplus falls by (a + b + c + d), with some transferred to producers (a), some transferred to government (c), and some destroyed (b + d). a production inefficiency (b) and a consumption inefficiency (d).
The Uruguay Round of the GATT (1986-93) began a process of phasing out the use of voluntary export restraints (VERs). This form of quota came into widespread use in the 1980s because governments came to see them as being Given that VERs are a form of quotas, and that they create quota rents and a larger reduction in national welfare than a tariff, nations still used them instead of tariffs because voluntary export restraints avoid the obligations nations share under the rules of the GATT to .
"politically safe to use" not raise tariffs
What factor(s) can cause private returns from production to be smaller than social returns of production?
-Knowledge spillovers, where firms learn from each other. -Capital market imperfections, where firms with new and sound ideas are unable to attract financing. -The inability to coordinate activities between firms, when the success of an industry requires multiple players to enter simultaneously.
What problems may be created by home country tariff policies?
-Limited innovation by home firms. -Trade policy retaliation by trade partners. -Rent seeking.
When the social returns from production are larger than the private returns from production
-Market output is below the social optimum. -Prices are too high.
What are ways to realize the benefits of trade and resolve standards conflicts?
-Require labels for exports. -Used home country standards for home country firms operating in a foreign country. -Use international organizations as a forum for negotiations.
When the United States signed a free-trade agreement with Canada (1989), no one thought twice about it. When the agreement with Mexico was signed (1994), there was significant opposition. The concepts of interindustry and intraindustry trade can explain the differences in opposition to the two trade agreements in the following manner:
-Substantial productivity, technology, and factor endowment differences between the U.S. and Mexico make trade between them interindustry, and this type of trade is seen as more threatening to jobs and firms. -Given the productivity, technology, and factor endowment similarities between the U.S. and Canada, trade between the two is intraindustry, and such trade generally yields greater benefits than interindustry trade. -Trade between the U.S. and Mexico is interindustry trade, and such trade is comparative advantage-based. While consumers get the benefit of lower import prices with such trade, they also face the hardship of paying higher prices for export goods.
When high-definition television (HDTV) was first considered a possibility in the United States, the U.S. government held a competition to select the technical standards that would be used nationwide. Why would the government see an advantage to setting one standard? For the private businesses that were interested in producing for the U.S. market, a "pro" was the chance to have Alternatively, a "con" for those early producers was the possibility of
-The adoption of common standards allows states to work together and expand their commercial ties. -Shared standards permit manufacturers to capture economies of scale. -With a newly introduced product (such as HDTV) where the "best standards" are unknown, it may be wise to hold a competition to prevent locking into or adopting inferior standards. their product adopted as the standard both of the choices posed risks for early producers
Which of the following is a reason why the use of trade barriers to enforce labor or environmental standards may be less efficient than other measures?
-The imposition of trade barriers may make conditions worse rather than better, since some producers may move their facilities into the informal sector of the economy. -Without a coalition of countries, which are difficult to assemble, the trade barriers may be ineffectual. -Trade barriers are very costly, creating deadweight losses in consumption and production at home. -The trade barriers may come to be exploited by special interest groups for ulterior motives.
The creation of an integrated market as a result of international trade results in
-a wider range of choices for consumers. -more firms, each operating at a larger scale. -lower prices.
Standards vary across countries because In the area of labor standards, variation tends to be substantial. For which of the following labor standards is there no variation?
-economic conditions and living standards vary dramatically across countries, and standards undoubtedly reflect these underlying conditions. -many standards reflect history and culture, and these clearly vary widely across countries. -national laws and regulations are usually initially adopted for strictly domestic reasons, and these reasons obviously differ from country to country. none of above
If an industry has technological externalities, an infant industry policy is justified
-if the industry experiences falling costs. -if the protection offered is temporary.
The labor argument for tariffs, argues that it is unfair for a country to face imports from countries that have lower wages. The problem(s) with this argument
-it ignores the fact that tariffs or quotas are an expensive method of saving jobs. -is that it ignores the fact that cross country wage differences reflect productivity differences.
A country may actually make itself better off by levying a tariff if
-it is large enough to affect the world price when it imposes a tariff. -there are no harmful effects on innovation. -no rent seeking behavior occurs. -other nations do not retaliate.
some proponents of trade sanctions argue for changes in policy because they fear low standards will be used to capture markets and foreign investment. while theoretically possible, there is little or no support for the view that countries use low labor standards in this way, because
-low standards can reduce costs, but they cannot change a country's comparative advantage -countries with low labor standards generally have trouble attracting foreign investment
The "Uruguay Round" of trade talks resulted in
-measures regulating the treatment of intellectual property. -new measures for trade dispute settlement. -the formation of the World Trade Organization.
what externalities may arise in low income country after trade barriers are removed?
-more incentives exist to exploit differences in environmental regulations to gain a cost advantage -more incentives exist to exploit certain low-wage sectors of the population, such as children, to gain a cost advantage -more incentives to increase specialization to exploit comparative advantage, leading to bigger losses to less productive sectors of the economy
The creation of an integrated market as a result of international trade results in
-more firms, each operating at a larger scale. -a wider range of choices for consumers. -lower prices.
Market failures occur whenever
-social returns may be greater than private returns. -monopolies exist in a market. -the free market produces less than what is socially optimal. -private returns may be greater than social returns.
Given that tariffs and quotas cost consumers and that they are a grossly inefficient means for creating or preserving jobs, citizens nevertheless allow these policies to exist because
-the costs of tariffs and quotas are diffused throughout an entire nation, while the benefits are concentrated. -incentives to organize around the issue of trade policy are asymmetric.
External economies of scale happen when
-there is a dense network of input suppliers. -the presence of a large number of producers in one area helps to create a deep labor market for specialized skills. -there are knowledge spillovers.
Your text mentions several ways that international trade flows are qualitatively different than they were a century ago. Which of the following is NOT one of those ways?
. International trade in raw commodities and agricultural products is more important than it was in the past.
The primary mission of the World Bank today is to
. provide capital to underdeveloped countries.
Scenario 6.1 Suppose that United States furniture makers import $100 of wood and parts in order to make a dining room table selling for $500. The imports have no tariff of quota restrictions. Based on Scenario 6.1 above, if a tariff of 20 percent is placed on imports of dining room tables, the effective rate of protection is
25 percent
Which of the following kinds of agreements between two or more countries would be an example of a deep integration measure?
A. An agreement to impose the same limits on cartels and monopolies
If two countries agree to specialize and trade based on comparative advantage, which of the following is most likely to be TRUE?
A. Both of the countries will consume outside their respective production possibilities curves.
If a nation has no absolute advantage, then it
A. still gains from trade.
An essential feature of geographical concentration is its self-reinforcement. Why does this occur mostly?
Agglomeration economies.
The agreement signed after the Uruguay Round of the General Agreement on Tariffs and Trade included coverage in several new areas of trade and investment. Which of the following is not one of those new areas?
Agriculture and agriculture support policies
The inverse relationship between market size and product price occurs because:
An increase in market size allows each firm to produce more and thus have a lower average cost. The resulting economic profit entices new firms to enter, putting downward pressure on price.
Of the industries listed below, which one does not receive significant protection from either or both the United States and Japan? American and Japanese trade barriers have their greatest effect upon ________ nations.
Automobiles low- income
What obstacles to increased international economic integration begin to appear after trade barriers are removed?
A country's domestic regulations may unintentionally limit international commerce for that country. Each country may set up different standards, generating conflicts over enforcement and application.
Which of the following DOES NOT help to reduce the frequency of child labor?
A country's movement away from manufacturing and towards more agricultural production.
When are preferential trade agreements welfare-improving?
B. When they lead to net trade creation.
A free trade agreement plus a common set of tariffs toward nonminus−members is called
B. a customs union.
Assume the U.S. currently grows 2.52.5 million tons of fresh winter fruit and that the resources absorbed in the production of this fruit could have produced 275 comma 000275,000 laptop computers. Therefore, the opportunity cost of those 2.52.5 million tons of fruit is 275000275000 computers. Suppose that South America could have instead produced those 2.52.5 million tons of fruit at an opportunity cost of 150,000 laptops. Because of the difference in opportunity costs between the two regions, it can be shown that trade gives the possibility of
B. a mutually beneficial rearrangement of world production.
Suppose a country has two factors, land and labor, and assume that wheat is a land-intense product. If the relative price of wheat increases by 10 percent, the "magnification effect" implies that
B. the income earned by land owners will increase by more than 10 percent.
Suppose the "Effective Rate of Protection" for Brazilian automobile producers is calculated to be
Brazilian automobile producers would be better off if Brazil adopted free trade for all parts and final goods.
Which of the following is FALSE?
C. A common market is more deeply integrated than an economic union.
Which of the following kinds of agreements between two or more countries would be an example of a shallow integration measure?
C. An agreement to unify customs forms in order to speed up crossminus−border traffic
Why was the IMF created?
C. To manage the system of fixed exchange rates after World War II.
The trademinus−tominus−GDP ratio is calculated by
C. exports plus imports divided by GDP.
The international organization that serves as a forum for trade discussions and the development of trade rules is called
C. the WTO.
A country possesses a comparative advantage in the production of a product if
C. the opportunity cost, in terms of the amount of other products that it gives up to produce this product, is lower than it is for its trading partners.
One important difference between the international economy of today and the economy of 100 years ago is
C. the presence of international bodies such as the IMF and World Bank.
International economics can be divided into two broad subfields:
C. trade of production output (products and services), and trade of production input (capital and labor).
Which of the following is not among the measures economists examine to assess the degree of globalization and international economic integration?
D. Number and complexity of trade agreements
Assume the U.S. currently grows 2.52.5 million tons of fresh winter fruit and that the resources absorbed in the production of this fruit could have produced 275 comma 000275,000 laptop computers. Therefore, the opportunity cost of those 2.52.5 million tons of fruit is 275000275000 computers. Suppose that South America could have instead produced those 2.52.5 million tons of fruit at an opportunity cost of 150,000 laptops. Because of the difference in opportunity costs between the two regions, it can be shown that trade gives the possibility of
D. a mutually beneficial rearrangement of world production.
Made in the USA or Made in China has less meaning for products that
D. are a product that is technological and involves assembling many different types of sometimes sophisticated components.
The economic philosophy that favors strict limits on imports and strong support for exports is called
D. mercantilism.
The Stolperminus−Samuelson Theorem predicts
D. the income distribution effects of trade.
Trade and capital flows were described and measured in relative terms rather than absolute terms. The difference between the two is that
D. the latter are the dollar amounts of trade and capital flows and the former are the ratio of dollar values to GDP. Your answer is correct. With respect to indicating the importance of trade and capital flows to an economy, the terms that seem more valid are relative terms because such terms are proportional to the size of national economies.
The Heckscherminus−Ohlin Theorem predicts
D. which goods will be exported.
Which of following is TRUE?
GENERALly, the lower the country's average income, the less administrative, scientific, and technical capacity it has to design and enforce standards
An import quota:
Generates rents that might go to foreigners.
With respect to the size of firms, external and internal economies of scale have
differing implications; with internal economies, large firms are likely to emerge while external economies tend to yield smaller-sized firms.
Why do critics of trade want to use trade barriers to enforce environmental regulations?
Environmental standards reduce competitiveness. Polluting industries in countries with standards relocate to countries with lower standards.
Which of the following is NOT a reason social returns might be greater than private returns?
Excess competition between firms
"Cheap foreign wages" is a poor argument for protection because it fails to recognize the importance of productivity. Which of the following does NOT contribute to increasing productivity?
Government subsidies
How do economies of scale give rise to international trade? These economies of scale are ________ economies of scale.
International trade occurs because economies of scale make a comparative advantage. internal
Which of the following is NOT true about the VER?
It benefits the exporting country as a whole
Which of the following is TRUE about monopolistic competition?
It is competition among many firms producing similar but differentiated products.
Why do internal economies of scale lead to imperfectly competitive industries?
Large firms have cost advantages over small firms.
vWhy do internal economies of scale lead to imperfectly competitive industries?
Large firms have cost advantages over small firms.
Which of the following is not the reason for external economies of scale?
Large fixed costs.
Table 3.1 Output per Hour Worked Based on Table 3.1, which country or countries has an absolute advantage and a comparative advantage in shoes?
Mexico has a comparative advantage, and the United States has an absolute advantage in shoes.
What externalities may arise in a low income country after trade barriers are removed?
More incentives exist to exploit differences in environmental regulations to gain a cost advantage. More incentives exist to exploit certain low-wage sectors of the population, such as children, to gain a cost advantage. More incentives to increase specialization to exploit comparative advantage, leading to bigger losses to less productive sectors of the economy.
Labor and environmental interests differ on which complaints against trade?
None of the above. Labor and environmental agree on all of the above complaints. . -Lower standards create a "race to the bottom" in standards. -High standards countries either lower their standards or lose business. -Differing standards result in a lack of fairness, giving those with lower standards an advantage.
Which of the following is not one of the three ways for countries to handle different standards abroad? In order for countries to be integrated, standards
Optimization of standards can differ, even persistently
What problems may be created by home country tariff policies?
Rent seeking. Limited innovation by home firms. Trade policy retaliation by trade partners.
Sales and excise taxes are an alternative to tariffs as a method of government revenue generation. Why can't government simply subsidize a protected industry by taxing unprotected industry?
Tariffs are easier to collect at boundary lines (country borders).
Which of the following would be a deadweight loss from a tariff?
The decrease in consumer surplus due to a drop in consumption
In addition to the production and consumption side of deadweight losses, a variety of other potential costs of tariffs have been identified. Which of the following is not one of those costs?
The likelihood of excessive growth in the protected industry.
The figure above indicates that when the country moves from free trade to the tariff equilibrium
The net effect on the country's welfare is a loss whose magnitude is given by the area "b + d"
Which of the following would NOT be associated with the LATE PHASE of the product cycle?
There is experimentation and improvement in design and manufacturing.
What is the main problem with imposing environmental standards?
They can cause potential export industries to shut down in poor countries.
The two industries most commonly receiving protection are:
agriculture and clothing.
Most regional trade and WTO agreements practice
a combination of harmonization, mutual recognition, and separate standards.
The figure to the right shows Home's monopolistically competitive software market. Suppose that initially the market contains 9 firms. In this case the software market can be expected to experience
a decrease in the number of firms.
The figure to the right shows Home's monopolistically competitive software market. Suppose that initially the market contains 99 firms. In this case the software market can be expected to experience
a decrease in the number of firms.
Harmonization of standards implies that countries decide to
adopt a common set of standards in an area of concern, such as product safety or labor.
An industry in which economies of scale are predominantly external will tend toward a market structure known as
agglomerations
following the completion of the uruguay round in 1993
direct agricultural subsidies were curtailed,. but indirect payments to support farmer income were allowed
Following the completion of the Uruguay round in 1993,
direct agricultural subsidies were curtailed, but indirect payments to support farmer income were allowed.
The GATT strongly favors tariffs as a protective measure over quotas or other nontariff measures. It encourages new members to convert quotas to their tariff equivalents. One of the main reasons that tariffs are preferred is because they are more transparent, particularly by comparison to nontariff measures. Transparency refers to the ability of all participants to easily Nontariff barriers such as quotas, health and safety codes, product standards, etc. tend to be less transparent than tariffs because they
discover and understand the rules . -are often associated with special circumstances known only to a select few. -often require careful and precise interpretation.
Comparing U.S. trade with Germany and Brazil, trade with Germany is more likely to be based on The basis of trade between the U.S. and Germany, as revealed above, follows from the fact that the two countries have
economies of scale similar productivity, technology, and factor endowments
Most of the world's aluminum is smelted in Norway or Canada. Half of the world's large jet aircraft are assembled in Seattle. Most semiconductors are manufactured in either the United States or Japan. Most Scotch whiskey comes from Scotland. Much of the world's best wine comes from France.
economies of scale economies of scale economies of scale comparative advantage comparative advantage
External economies of scale occur when average costs of a firm:
fall as the industry grows larger, but may or may not rise as the representative firm grows larger.
Internal economies of scale occur when the average costs of the firm:
fall as the representative firm grows larger.
One reason markets may fail to provide the optimal quantity of public goods is the problem of
free riders
high income countries have tariff policies that generally have
higher tariff and quota protection on products in agriculture, and clothing and textiles
High income countries have tariff policies that generally have
higher tariff and quota protection on products in agriculture, and clothing and textiles.
if an industry has technological externalities, an infant industry policy is justified
if the protection offered is temporary if the industry experiences falling costs
One common critique of the WTO is that it overturns national environmental protections and forces countries to lower their standards. For example, when the United States tried to protect endangered sea turtles, the WTO prevented it. This action illustrates that
individual countries can raise their standards, but must do so in accordance with WTO rules.
international trade in products made between different industries is called _______ trade
interindustry
international trade in products made within the same industry is known as __________ trade
intraindustry
The simultaneous export and import of textiles by India is an example of:
intraindustry trade.
Escape clause relief to assist domestic firms
is authorized by the U.S. and by GATT rules.
One reason that a large share of the trade between high - income industrial economies is intraindustry trade is because
it allows firms to take advantage of internal economies of scale.
Export labels provide an alternative to the use of trade barriers to promote environmental standards in partner trading countries, since
labels might allow customers to determine whether products were produced in an environmentally sustainable fashion.
Consider an oligopolistic market, such as the market for laptop computers. If a producer leaves the market,
laptop prices will rise and output per firm will increase.
Where there are economies of scale, an increase in the size of the market will
lead to more firms producing and selling in that market and lower the price per unit.
Empirical studies have found that countries with low labor standards generally attract less foreign investment due to
low labor standards are highly correlated with labor forces that are unskilled and illiterate. countries with low labor standards are often high cost locations, since these countries often have poor infrastructure in terms of roads, communications, power supply and schools.
Suppose the U.S. decided to use a quota to limit cell phone imports. Assume the U.S. is a small country. If the U.S. used an auction to allocate quota rights
the auction could generate revenue that was roughly equal to the revenue generated by a tariff which limited imports to the level allowed under the quota.
The logic of collective action explains the persistence of tariffs and quotas as an outcome that is driven by the asymmetry between
the benefits concentrated in the hands of the few firms, versus the costs distributed across many consumers.
which of the following describes the asymmetry moncur olson observed in the incentives to support and oppose trade policy?
the benefits of policy are concentrated, and the costs are spread out over a large number of participants
When economists talk about the gains from trade they mean that
the benefits of trade outweigh the losses.
Where there are economies of scale, the scale of production possible in a country is constrained by:
the combined size of the domestic and foreign market.
One reason why consumers are unlikely to be too upset about tariffs is because
the costs are so spread out that no one pays a big share of the total.
the biggest flaw in the logic of the labor argument is the failure to consider
the differences in national productivity levels
The biggest flaw in the logic of the labor argument is the failure to consider
the differences in national productivity levels.
Based on Figure 6.1, how much revenue will the government raise from a $0.25 per bushel tariff on soybean imports?
the government will raise $5 million
In a small country, the net national cost of tariff protection is equal to the reduction in consumer surplus minus
the increase in government revenue and the increase in producer surplus.
Domestic firms operating abroad may find it economically beneficial to adopt environment
the least−cost strategy usually involves the adoption of one set of environment−friendly technology rather than multiple standards.
A major difficulty with the infant industry argument for protection is that
the measurement of production externalities is hard and uncertain.
In the figure to the right the curve labeled AC shows for a typical" monopolistically competitive market, the relationship between average cost and the number of firms. This curve is positively sloped because
the more firms there are, the less each firm produces.
In the figure to the right the curve labeled AC shows, for a "typical" monopolistically competitive market, the relationship between average cost and the number of firms. This curve is positively sloped because
the more firms there are, the less each firm produces.
The notion that trade policy often imposes costs on large numbers of people, and benefits only a few is explained by
the problem of collective action
the notion that trade policy often imposes costs on large numbers of people, and benefits only a few i.es explained by
the problem of collective action
Tijuana, Mexico is across the border from San Diego, California. It has become a worldminus−leading producer and exporter of television sets and computer monitors, which it assembles in modern factories owned by multinational consumer electronics firms such as Sony. Initially, these electronics were produced in the industrialized countries of their parent companies, and after several years, the production moved to Tiajuana This is an example of
the product cycle
Requiring home country firms to use home country standards in a foreign country would not usually involve adopting
the same wage and benefit scale for employees.
Economists use the term opportunity cost to refer to
the value of the next best alternative occurring as a result of making a particular choice.
Under free trade, a digital SLR camera sells for $1000. If the U.S. imported the parts to produce a digital SLR, the free trade price of the parts would be $550. If U.S. producers produce digital SLRs under these conditions
their value-added equals $450.
when a country must resort to tariffs for protection, the result is considered a "second best" solution, which means the tariff is not the most efficient action. this result occurs because
there are always deadweight losses to market interventions
When a country must resort to tariffs for protection, the result is considered a "second best" solution, which means the tariff is not the most efficient action. This result occurs because
there are always deadweight losses to market interventions.
Developing countries are usually unwilling to negotiate over labor standards because
they fear that industrialized nations are trying to undermine their comparative advantage—production of agriculture and textiles/apparel—and close the markets of high−income countries in these areas.
Developing countries are usually unwilling to negotiate one labor standards because
they fear that industrialized nations are trying to undermine they comparative advantage- production of agriculture and textiles/apparel- and close the markets of high-income countries in these areas
Infant industry protection requires
time limited protection. a positive technological externality.
Historically, one of the most common reasons for countries to impose tariffs was
to raise revenue for the government.
A country that imports goods produced under conditions of external economies of scale may suffer if
trade stifles the development of new industries that could be more efficient than the existing ones.
international negotiations are especially appropriate when environmental problems are
transboundary in nature
International negotiations are especially appropriate when environmental problems are
transboundary in nature.
If social returns to the production of a good are greater than private returns, then we can conclude that relative to the social optimum, the good will be
under produced and over priced.
An example of social costs being greater than private costs is
water pollution.
It is possible for one country to use trade barriers to pressure another country into altering its labor standards
when the country using the trade barriers is a large country.
Which list places regional trade agreements in an order moving from the least provisions to the most?
Free-trade Area, Common market, Economic Union.
What is the main problem with imposing labor standards to prevent child labor and poor working conditions in the exporting sector of a less-developed country?
Less-developed countries are opposed to them.
Suppose Canada exports cars and imports furniture. This is an example of
inter-industry trade.
Labor standards are Arguments about labor standards are confined primarily to arguments between high-income countries on the one hand, and low- and middle-income countries on the other because these countries have underlying conditions that are very
multifaceted, covering both basic rights (freedom form forced labor) as well as civic rights (union representation). dissimilar
