Chapter 9: International Trade

Which of the following statements about import quotas is true?

For every tariff, there is an import quota that could have generated a similar result.

Because producers are better able to organize than consumers are, we would expect there to be political pressure to create

import restrictions

North American Free Trade Agreement (NAFTA)

1993, lowered trade barriers among the US, Mexico and Canada

free trade

domestic price = world price

If free trade is allowed, a country will export a good if the world price is

above the before-trade domestic price of the good

General Agreement on Tariffs and Trade (GATT)

continuing series of negotiations among many of the worlds countries with the gaol of promoting free trade

world price

the price of a good that prevails in the world market for that good

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,

consumers will gain and producers will lose

When a country allows trade and exports a good

domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.

domestic price

opportunity cost of the good on the domestic market

Tariff

A tax on imported goods

When politicians argue that outsourcing or offshoring of technical support to India by Dell Computer Corporation is harmful to the U.S. economy, they are employing which of the following arguments for restricting trade?

the jobs argument

Which of the following statements about a tariff is true?

A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus.

Which of the following is not employed as an argument in support of trade restrictions?

Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus.

If the world price for a good exceeds the before-trade domestic price for a good, then that country must have

a comparative advantage in the production of the good