Microeconomics - Ch. 9 Homework

Assume the table below shows the quantities of computers and cell phones that a worker can produce in an hour in Japan and South Korea. Computers Cell Phones Japan 4 28 South Korea 2 19 The opportunity cost of producing a computer in Japan is 7 cell phones and the opportunity cost of producing a computer in South Korea is 9.5 cell phones. ​(Enter your responses rounded to two decimal​ places.) Japan has a comparative advantage producing computers and South Korea has a comparative advantage producing cell phones.

7, 9.5, Japan, S. Korea

Which of the following describes the extent of international trade in the U.S.​ economy?

About 66 percent of U.S. manufacturing industries depend on exports for at least 10 percent of jobs.

The World Trade Organization​ (WTO) A. replaced the General Agreement on Tariffs and Trade​ (GATT) in January 1995. B. is an international organization that oversees international trade agreements. C. generally aids in negotiating trade agreements that include not only goods but also services and intellectual property. D. all of the above.

Answer: all of the above

Why do some people oppose the World Trade Organization​ (WTO)? A. Some critics of the WTO support globalization in principle but believe that the WTO favors the interests of the​ high-income countries at the expense of the​ low-income countries. B. Some opponents are specifically against the globalization process that began in the 1980s and became widespread in the 1990s. C. Some opponents desire to erect trade barriers to protect domestic firms from foreign competition. D. All of the above.

Answer: all of the above

​_____ is a situation in which a country does not trade with other countries. The​ _____ is the ratio at which a country can trade its exports for imports from other countries. A. Terms of​ trade, autarky B. ​Plutarky, price ratio C. ​Autarky, terms of trade D. ​Oikonomia, prices By​ trading, countries are able to consume more than they could without trade. This outcome is possible because A. inefficiencies in resource allocation are reduced. B. shifting production to the more efficient country—the one with the comparative advantage—increases total production. C. world production of both goods increases after trade. D. all of the above.

Autarky, terms of trade all of the above

Assume the table below shows the quantities of bananas and pineapples that a plot of land can produce in a growing season in Columbia and the Philippines. Bananas Pineapples Columbia 40,000 8,000 The Philippines 20,000 32,000 Suppose each country has​ 2,000 plots of land and consumes the following​ (per season) without trade from allocating​ 1,000 plots of land to banana production and​ 1,000 plots of land to pineapple​ production: If both countries specialize completely by producing only that for which they have a comparative advantage and then​ trade, what would be the terms of trade that would benefit both​ countries?

Both countries would benefit from trade if Columbia were to trade 20,000 bananas for 16,000 pineapples with the Philippines.

As illustrated in the​ diagram, when a nation moves from autarky to free​ trade, economic surplus increases by the areas represented by C and D

C and D

The diagram on the right represents a tariff imposed on an individual market. The total deadweight loss​ (loss in economic​ surplus) from this tariff is illustrated by areas

C and D

_______________ are goods and services produced domestically but sold to other countries. ______________ are goods and services bought domestically but produced in other countries. ____________ are taxes imposed by a government on imports of a good into a country.

Exports, Imports, Tariffs

he world is often described as having a global economy. How important is international trade to the United​ States?

In the​ U.S., exports are smaller fractions of GDP than in most other countries.

Comparative advantage

Is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors.

Suppose the United States and South Korea produce only cell phones and digital music players. Assume that each country uses only labor to produce each​ good, and that the cell phones and digital music players made in the United States and South Korea are exactly alike. The table below shows how much each country can produce of each good with one hour of labor. Output per Hour of Labor Cell Phones Digital Music Players United States 3 7 South Korea 24 12 According to the​ table, South Korea has an absolute advantage in producing cell phones​, and South Korea has an absolute advantage in producing digital music players. At the same​ time, South Korea has a comparative advantage in producing cell phones​, and the United States has a comparative advantage in producing digital music players.

South Korea, South Korea South Korea, the United States

Who is harmed when individual nations move from autarky to free​ trade?

The owners of the firms that went out of business.

Some politicians argue that eliminating U.S. tariffs and quotas would help the U.S. economy only if other countries eliminated their tariffs and quotas in exchange.

This statement is​ false; the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Among the main sources of comparative advantage are the​ following:

climate and natural​ resources, relative abundance of labor and​ capital, technology, external economies.

One reason some oppose free trade and the reduction of trade barriers is protectionism. What does​ old-fashioned protectionism seek to​ protect? Protectionism traditionally seeks to use trade barriers to protect

domestic jobs

International trade has always played a role in the U.S. economy. Is this role increasing or decreasing​ (in terms of exports and​ imports)? International trade is

increasing because communication is less expensive.

Dumping

is selling a product for a price below its cost of production.

Comparative advantage

may change as time passes and circumstances change.

We do not see complete specialization in the real world because

not all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products differ.

Protectionism is the use of trade barriers to shield domestic firms from foreign competition. Protectionism is usually justified on the basis of several arguments which​ include:

saving​ jobs, protecting infant​ industries, and protecting national security.

In​ 1999, at a meeting of the World Trade Organization in​ Seattle, Washington, a large number of people protested attempts to reduce trade barriers. What is a reason why some would want to prevent trade barriers from being​ reduced? Some want to prevent trade barriers from being reduced because they

seek to protect domestic wages.

The primary difference between a quota and a voluntary export restraint​ (VER) is that

the quota is unilaterally imposed by one nation on the other while the VER is the result of negotiations between nations.

In addition to tariffs and​ quotas, governments sometimes erect other barriers to trade. For​ example, all governments require that imports meet certain health and safety requirements. Many governments also restrict imports of certain products on national security grounds. Explain whether you agree or disagree with the following​ statement: ​Sometimes, however, governments use these requirements to shield domestic firms from foreign competition.

​Yes, sometimes governments impose stricter health and safety requirements on imported goods than on goods produced by domestic firms.

Suppose France and Portugal produce only cloth and wine. Assume that each country uses only labor to produce each​ good, and that the cloth and wine made in France and Portugal are exactly alike. The table below shows how much each country can produce of each good with one hour of labor. Output per Hour of Labor Cloth Wine France 19 15 Portugal 2 7 According to the​ table, the opportunity cost to France of producing one more unit of cloth is .79 units of wine ​(enter a numeric response using a real number rounded to two decimal​ places)​, and the opportunity cost to Portugal of producing one more unit of cloth is 3.5 units of wine. ​Thus, we can conclude that __________________________________________________________

France, .79 Portugal, 3.5 France has a comparative advantage in producing cloth and Portugal has a comparative advantage in producing wine.

How is the U.S. economy affected by international​ trade? U.S. consumers buy _______________ quantities of goods and services produced in other countries. At the same​ time, U.S. businesses sell _______________ quantities of goods and services to consumers in other countries.

Increasing, Increasing

The diagram shows the actual statistics for the U.S. sugar market in​ 2020, reflecting a quota of 6.4 billion pounds placed on U.S. imports. Loss of Consumer Surplus: A + B + C + D Gain by US Sugar Producers: A Gain to Foreign Sugar Prod.: B Deadweight Loss: C + D Complete the table illustrating the welfare effects of this quota.

Loss of Consumer Surplus: A + B + C + D Gain by US Sugar Producers: A Gain to Foreign Sugar Prod.: B Deadweight Loss: C + D

Economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage​ (and less of that for which a country does not have a comparative​ advantage). ​ However, countries rarely specialize completely. ​ Why? Even with international​ trade, countries rarely specialize completely because

production of most goods involves increasing opportunity costs.

Suppose the United States and Japan produce only cell phones and digital music​ players, like​ Apple's iPod. Assume that each country uses only labor to produce each​ good, and that Japanese and U.S. cell phones and digital music players are exactly the same. Output per Hour of Work Cell Phones Digital Music Players Japan 2 4 United States 12 6 Determine the missing opportunity costs in the table below and fill in the missing values. ​(Enter your responses rounded to one decimal​ place.) Opportunity Costs Cell Phones Digital Music Players Japan 2.0 5.5 United States 5.5 2.0 From the tables above it is clear that​ _____ has an absolute advantage in the production of both goods and that​ _____ has a comparative advantage in cell​ phones, while​ _____ has a comparative advantage in digital music players.

the United States​, the United States​, Japan