chap 9

(Figure: Imports and Exports) From 1930 to 2018, U.S. imports as a share of GDP have _____, and U.S. exports as a share of GDP have _____.

increased; increased

Which of the following would be MOST likely to support an increase in barriers to international trade?

a firm in an import-competing industry

(Figure: Market for Engines) If there is no international trade in this market, the value of the consumer surplus is:

$360,000.

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of televisions is $400, buyers and sellers will make exchanges at a price of _____ because buyers will refuse to pay _____ than the world price.

$400; more

(Figure: Market for Washing Machines) According to the figure, the equilibrium world price of washing machines is:

$600

France must give up the production of 75 ties to produce 25 additional dress shirts. The opportunity cost of producing three ties is _____ dress shirt(s).

1

France must give up the production of 100 ties to produce 50 additional sweaters. The opportunity cost of producing four ties is _____ sweater(s).

2

In 2012, Marco Rubio argued that he would be in favor of getting rid of quotas on sugar imports (a trade barrier) only if the United States got something in return from Brazil. Rubio's argument is not economically sound (consistent with economic theory) for which of the following reasons?

A proportion of the gains to trade received by Brazil would be used to import U.S. goods and services.

(Figure: The Market for Notebooks) Use Figure: The Market for Notebooks. Assume that S and D are the domestic supply and demand curves and that the world price is PW. Identify the area of consumer surplus when a tariff raises the domestic price from the world price to PT.

A+B

In a 2016 speech, Donald Trump stated, "America has lost nearly 1/3 of its manufacturing jobs since 1997. Even as the country has increased its population — think of this — by 50 million people. At the center of this catastrophe are two trade deals pushed by Bill and Hillary Clinton." Which of the following statements is a true reason for the reduction in manufacturing jobs?

The number of manufacturing jobs in the United States has declined for reasons that are unrelated to trade policy.

(Figure: The Market for Apple Computers in the United States) Use Figure: The Market for Apple Computers in the United States. Assume that PA is the domestic equilibrium price without trade andPW is the world price. Consumer surplus with international trade is area:

W.

Economist Joseph Stiglitz argues against free trade, stating that "a movement toward free trade brought wages of unskilled workers around the world closer together, meaning, for example, that America's unskilled workers' pay would fall towards that of India and China." Which of the following explains why this claim might also be used to argue that free trade benefits the United States?

Wages across countries moving closer together implies that wages would rise in developing countries, which would allow them to purchase more goods produced in the United States.

The main difference between a tariff and an import quota is that:

a tariff generates tax revenue, whereas an import quota generates rents to license holders.

The world demand curve slopes downward because, as the world price of a product falls:

consumers want to buy a larger quantity.

The world demand curve slopes downward because, as the world price of a product increases:

consumers want to buy a smaller quantity.

A blockade at the border between the United States and Mexico prevents the entry of all lumber products to the United States from Mexico. This blockade will:

decrease the producer surplus for Mexican lumber producers.

(Figure: Average Tariff Rate by the United States) According to the figure, prior to 2018, the average tariff rate imposed by the United States has generally _____. This is associated with _____ in international trade.

decreased; an increase

(Figure: Market for Pants) Suppose that the world price of a pair of pants is $40. According to the figure, the total domestic surplus in the free-trade equilibrium _____ the total domestic surplus in the no-international trade equilibrium by _____.

exceeds; $100,000

Mexico is relatively labor-abundant compared with the United States, which is capital-abundant. Therefore, the United States has a comparative advantage in _____ compared with Mexico.

goods that are capital-intensive in production

China is relatively labor-abundant compared with European Union member nations. Therefore, China has a comparative advantage in _____ compared with European Union member nations.

goods that are labor-intensive in production

Which of the following is MOST likely to be traded internationally?

hair gel

(Figure: Unemployment Rates) This figure shows the relationship between countries' unemployment rates and the share of national income spent on imports. From this figure, we can determine that the United States _____ relative to other countries.

has a small import to GDP ratio

The United States has a comparative advantage in _____-skilled labor. This explains why the U.S. is a net _____ of manufactured goods.

high; importer

Vietnam has a comparative disadvantage in _____-skilled labor. This explains why Vietnam is a net _____ of high-skilled services.

high; importer

If the United States imposes an import quota on Portuguese port, the result in the short run is likely to be _____ profits for American wine producers and _____ profits for Portuguese port producers.

higher; lower (higher b/c they can't get bought out by portuguese wine in the short run)

Assume that Brazil imposes an import quota on Nike running shoes from the United States. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of Nike shoes in Brazil will most likely _____, and the equilibrium price of shoes in the United States will most likely _____.

increase; decrease (inc because there's only so many, dec because there's more to go around back in the US)

In a single year, Germany can raise 100 tons of wheat or produce 1,000 boxes of daisies. In the same growing season, France can raise 50 tons of wheat or produce 750 boxes of daisies. In autarky, the opportunity cost of wheat:

is lower in Germany than in France.

Saudi Arabia has a tremendous comparative advantage in oil production. Which factor is a source of this comparative advantage?

large reserves of crude oil

Countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively _____.

low; high

If a country has the comparative advantage in producing lumber, then with free trade:

producer surplus in the market for lumber will increase.

(Figure: The Market for Tea in India) Use Figure: The Market for Tea in India. Without trade, the price is PA. When the economy is opened to trade, the price rises to PW, and producer surplus _____ to _____.

rises; G+H+I+J+K

Which of the following is LEAST likely to be traded internationally?

sports arenas

A tax on imports of foreign goods is called a(n):

tariff.

Which is a common argument for trade protection?

the job creation argument

Suppose that the world price of TVs is $500 and the government imposes a $100 tariff. According to the figure, the tariff causes total surplus to decrease by:

$1,500,000.

(Figure: The Market for Apple AirPods) Use Figure: The Market for Apple AirPods. Assume that Sd represents the domestic supply curve and that Dd represents the domestic demand curve. In the market for Apple AirPods, producer surplus without trade equals:

$1,500. (triangle bounded by equilibrium price, supply line, and y-axis)

(Figure: Market for Pants) According to the figure, if there is international trade in this market, and the world price of a pair of pants is $30, the value of the consumer surplus is:

$1,800,000.

South Korea must give up the production of 75 notebook computers to produce 25 additional cell phones. The opportunity cost of producing three notebook computers is _____ cell phone(s).

1

(Figure: The Market for Notebooks) Use Figure: The Market for Notebooks. Assume that S and D are the domestic supply and demand curves and that the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

D+F

(Table: U.S. International Trade in Goods and Services, 2018, in millions of dollars. Details may not equal totals due to seasonal adjustment and rounding.) From January to September in 2018, the United States was a net ___ of ____ million in services.

exporter; $205,812

In a single year, Germany can raise 100 tons of wheat or produce 1,000 boxes of daisies. In the same growing season, France can raise 50 tons of wheat or produce 750 boxes of daisies. When the two countries begin trading wheat for daisies, consumer surplus from wheat consumption will:

fall in Germany.

(Figure: The Market for Tea in India) Use Figure: The Market for Tea in India. Without trade, the price is PA. When the economy is opened to trade, the price rises to PW, and consumer surplus _____ to _____.

falls; F

(Table: U.S. International Trade in Goods and Services, 2016, in millions of dollars. Details may not equal totals due to seasonal adjustment and rounding.) In 2016, the United States was a net _____ of _____ million in goods and services.

importer; $502,001

Which of the following is an argument for limiting international trade? An increase in international trade may:

not reduce specialization

If the United States removed all tariffs and quotas on lumber imports into the United States:

producer surplus would decrease

Which of the following is an example of a trade cost incurred when a German citizen imports a bottle of wine produced in France?

the cost of the trucking services used in transportation.

(Figure: Market for Washing Machines) According to the figure, at a world price of $400:

the quantity demanded exceeds the quantity supplied, and there is upward pressure on the world price.

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $800, buyers and sellers will make exchanges at a price of _____ because sellers will refuse to sell for _____ than the world price.

$800; less

The United States must give up the production of 500 skateboards to produce 20 additional chain saws. The opportunity cost of producing five chain saws is _____ skateboards.

125

The United States must give up the production of 1,000 bicycles to produce 200 additional lawn mowers. The opportunity cost of producing 100 bicycles is _____ lawn mower(s).

20

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of televisions is $400, domestic consumers will purchase _____ units from domestic producers and _____ units from foreign producers.

20,000; 60,000

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $1,000, the quantity demanded is _____, and domestic suppliers will sell _____ units to domestic consumers.

400; 400

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of an engine is $800, the quantity demanded is _____, and the quantity supplied is _____ at the world price.

500; 800

(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of televisions is $500, the quantity demanded is _____, and domestic suppliers will sell _____ units to domestic consumers.

70,000; 40,000

The United Kingdom must give up the production of 300 motorcycles to produce 20 additional convertible Jaguars with the same resources. The opportunity cost of producing five convertible Jaguars is _____ motorcycles.

75

(Figure: The Market for Apple AirPods) Use Figure: The Market for Apple AirPods. Assume that Sd represents the domestic supply curve and that Dd represents the domestic demand curve. If the world price equals $120, and there is free trade, domestic consumer surplus _____ and domestic producer surplus _____ compared with the situation without trade.

decreases; increases

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

infant industry

In a 2016 debate, Hillary Clinton stated that she no longer supported the Trans-Pacific Partnership (TPP) because "I want to make sure that I can look into the eyes of any middle-class American and say, 'This will help raise your wages.' And I concluded I could not." Clinton's analysis of the TPP, a trade agreement that would reduce trade barriers between the United States and a number of other countries, fails to acknowledge which of the following benefits that the TPP would have for middle-class Americans? The reduction of trade barriers:

may leave middle-class Americans better off even if their average wages fall because the prices of a number of goods are likely to fall as well.

When a market begins to engage in international trade:

producers in the exporting industry may be better off.

In a single year, Germany can raise 100 tons of wheat or produce 1,000 boxes of daisies. In the same growing season, France can raise 50 tons of wheat or produce 750 boxes of daisies. When the two countries begin trading wheat for daisies, the total surplus from wheat consumption and production can be expected to:

rise in Germany

Suppose the United States places a tariff on imported Brazilian ipe (a type of wood). As a result of the tariff, the domestic price of lumber will _____, consumer surplus will _____, and producer surplus will _____.

rise; fall; rise. (price rises, consumer surplus will fall b/c they have to pay that, and prod surp rises because they get that money)

(Figure: Unemployment Rates) This figure shows the relationship between countries' unemployment rates and the share of national income spent on imports. From this figure, we can determine that the United States _____ relative to other countries.

spends a small share of income on imports

In a 2004 New York Times article entitled "Second Thoughts on Free Trade," Senator Charles ("Chuck") Schumer argues the following: "While some economists and elected officials suggest that all we need is a robust retraining effort for laid-off workers, we do not believe retraining alone is an answer, because almost the entire range of 'knowledge jobs' [software engineers, in the context of the article] can be done overseas." In advocating for more protectionism, Schumer fails to acknowledge which of the following benefits of a decrease in trade barriers (a decrease in protectionism)?

A reduction in trade barriers leads to lower prices for U.S. consumers.

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of engines is $1,000, domestic consumers will purchase _____ units from domestic producers and _____ units from foreign producers.

NOT 400;600

In 2016, Hillary Clinton stated the following: "My message to every worker in Michigan and across America is this. I will stop any trade deal that kills jobs or holds down wages, including the Trans-Pacific Partnership [Trade Agreement]." Which of the following is a reason that Clinton's statement is not grounded in economic theory?

Any trade deal that changes the terms of trade between countries will change the composition of jobs within a country.

Which of the following is NOT true of the parable about harvesting the Iowa car crop?

Jobs producing goods or services for domestic consumption are preferable to the jobs producing export goods. what IS true: International trade is similar to technological improvements in that it expands our ability to consume more goods and services. The public perception of job losses related to international trade is different than the public perception of job losses related to technological improvement. It's possible to acquire a product at a lower cost by producing something else first and then engaging in trade

(Figure: Market for Pants) According to the figure, if there is international trade in this market, and the world price of a pair of pants is $30, the value of the domestic producer surplus is:

$200,000.

(Figure: Market for TVs) According to the figure, the equilibrium world quantity of TVs (in millions) sold is:

50

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of an engine is $800, the value of the consumer surplus is:

$250,000.

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of an engine is $800, the quantity demanded is _____, and domestic suppliers will sell _____ units to domestic consumers.

500; 500

France must give up the production of 100 ties to produce 50 additional dress shirts. The opportunity cost of producing four dress shirts is _____ ties.

8

(Figure: Market for TVs 2) The world price of televisions is $500. According to the figure, international trade will lead to _____ in the domestic producer surplus and _____ in the domestic consumer surplus.

a decrease; an increase

A Korean-made washing machine purchased by a Chinese citizen is an example of a Korean _____, and a Chinese-made washing machine purchased by a Korean citizen is an example of a Korean _____.

export; import

(Figure: Market for Engines) Suppose that the world price of an engine is $800. According to the figure, the domestic total surplus _____ by _____ in the free-trade equilibrium relative to the no international trade equilibrium.

increases; $30,000

Which statement describes a source of comparative advantage?

Hawaii has a more favorable climate for the cultivation of tropical fruit than England has.

(Figure: Market for TVs 2) Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. According to the figure, the tariff causes total surplus to decrease by:

NOT 3mil

The exchange rate between the U.S. dollar and the Chinese yuan shifts from 6 yuan per U.S. dollar to 7 yuan per U.S. dollar. The yuan has _____, making Chinese exports _____ expensive.

NOT appreciated; less