Ch. 19: Comparative Advantage and the Gains from International Trade DSM

According to the graph, what is the equilibrium price of lumber in the U.S. under autarky?

$3 per board foot

According to the graph, what is the reduction in U.S. lumber consumption as a result of the tariff?

100,000 board feet

According to the graph, how many board feet of lumber will be imported if imports are allowed into the United States?

500,000

According to the graph, what quantity of domestic lumber will be supplied after a tariff of $0.50 per board foot is imposed?

900,000 board feet

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.

Comparative, comparative

What is the name given to the sale of a product for a price below its cost of production?

Dumping

The association formed to lower trade barriers and encourage trade between Canada, the United States and Mexico is known as:

NAFTA

Which of the following groups of people are opposed to the World Trade Organization (WTO)?

People who want to protect domestic firms

Which of the following arguments is used to justify protectionism?

Tariffs and quotas protect infant industries

Which of the following is a drawback to the infant industry justification for protectionism?

The industries under protection may never become efficient enough to compete with foreign firms.

Which of the following is a source of comparative advantage?

The relative abundance of capital and labor

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true?

You have a comparative advantage in picking apples.

The World Trade Organization (WTO) determines that dumping has occurred if:

a product is exported for a lower price than it sells for in a home market

The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources is known as:

absolute advantage

The global trend towards large multinational firms is partially driven by __________.

comparative advantage

Nations that use trade restrictions to pursue global environmental goals will:

encounter resistance from the WTO

Goods and services produced domestically but sold to other countries are called __________.

exports

When a firm buys or builds facilities in a foreign country it is known as:

foreign direct investment

The opponents of globalization contend that:

globalization destroys cultures

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

The use of trade barriers to shield domestic companies from foreign competition is called __________.

protectionism

Multinational corporations expanding into foreign markets often:

provide thousands of jobs for foreign nationals

A numerical limit on the quantity of a good that can be imported is known as a(n):

quota

The term external economies refers to:

the reduction of costs resulting from industry concentration in a given area

An agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is known as a(n):

voluntary export restraint