Chapter 9 Microeconomics

Which of the following is are three arguments for restricting trade?

It's wrong to trade with countries that use child labor. We can increase U.S. well-being with strategic trade protectionism. We need to keep certain industries at home for reasons of national security.

Protectionism is the economic policy of restraining trade though quotas, tariffs, or other regulations that heavily burden _____ producers.

foreign

Tariffs on products like sugar cost _____ and benefit domestic producers.

foreign producers

Tariffs, like all protectionist measures, place a burden on

foreign producers.

The revenues collected by the government from imposing a tariff are measured by:

multiplying the tariff rate by the quantity of the imports.

key industries argument, issue

not always sure what industries are key

what are better solutions for child labor

offer free schooling/lunches in poor countries;

protectionism will work well when

only in a limited number of circumstances

strategic trade protection is not such a good idea if

other countries can retaliate, every country tries to do this world trade as a whole will shrink and no country will be better off

Child labor was more common in the United States in the nineteenth century than it is today because:

people were much poorer then than they are today.

restrictions on trade prevent

domestic consumers from exploiting gains from trade

a tariff has two effects that influence welfare

domestic consumption decreases and domestic production increases

strategic trade protection allows

domestic firms to act as cartel when selling to international buyers

tarriffs are good for

domestic producers because they can expand production

we pay for our imports with

exports

A trade quota restricts the quantity of goods that can be:

imported

If Brazil imposes a tariff on imported American oranges, who would benefit the most?

Brazilian orange growers and the Brazilian government.The tariff would increase the price of imported oranges. This benefits the domestic producer and increases the tariff.

The Organization of Petroleum Exporting Countries (OPEC) limits the amount of oil it exports: The demand for oil is likely to be

The demand for oil is likely to be inelastic.

tariffs are bad for

consumers who have to pay more

what is a problem with the trade and national security argument

subject to abuse- almost every industry can make this argument for protection

with a tariff, what price prevails

tariff+ world price prevails

it is possible for a country to use __ and ___ to get a larger share of the gains from trade

tariffs or quotas

Protectionism tends to create a society that:__. What is an example

that pits one interest group against another. For example, it pits sugar producers against sugar consumers.

wages increase on average due to

comparative advantage

a tax on imports

tariff

The Organization of Petroleum Exporting Countries (OPEC) limits the amount of oil it exports:why

to raise prices and revenues from the sale of oil.

restrictions on trade waste resources by

transferring production from low-cost foreign producers to high-cost domestic producers

Protectionism heavily burdens

foreign producers.

a tariff has two effects that influence welfare. These effects reduce welfare, why?

1. When domestic consumption decreases, lost gains from trade reduce welfare 2. when domestic production increases, wasted resources from higher cost production

5 arguments against international trade

1. trade reduces number of jobs in the U.S 2. child labor 3. certain jobs home for national security 4. keep key industries at home because beneficial spillovers onto other sectors of the economy 5. can increase U.S. well-being with strategic trade protectionism

If the United States and China entered into a free trade agreement, abolishing all tariffs and quotas, who would benefit and who would lose in the United States?

Consumers of Chinese imports would win; American workers competing against Chinese goods would lose.Consumers would be able to import goods at a cheaper rate but the workers in America would lose and get paid less.

Tariffs on products like sugar benefit _____ and harm domestic consumers.

Domestic producers

If the United States were to export more of its supply of natural gas, what would happen to the price of natural gas in the United States? Why?

The price of natural gas would rise in the United States. Supply in the domestic market would decrease, causing a rise in the price of natural gas.

Which of the following is NOT an argument for restricting trade?Why

Trade promotes domestic job growth. While trade appears to have no net effect on the overall number of jobs, the argument that trade costs domestic jobs is mentioned in the text.

Suppose Japan and South Korea can both produce the same amount of cars per worker, but Japan can produce more satellite dishes per worker. Does South Korea have a comparative advantage in either good? Why?

Yes, South Korea would have a comparative advantage in producing cars.The opportunity cost of producing cars in Korea is less so they have a comparative advantage in that, but not satellite dishes.

If a Canadian lumber company can produce more plywood per worker than an American lumber company, should the United States export plywood?

Yes, if the United States' opportunity cost of producing plywood is lower than that of Canada. the opportunity cost of producing the good is lower than the other country, so they should export the good

A restriction on trade does not result in:

a decrease in price.

A restriction on trade results in what three things :

a decrease in the amount of the good consumed. wasted resources. lost gains from trade.

with a very high tariff entire domestic consumption is produced by

domestic suppliers

strategic trade protection can be effective if there are __

few substitutes. if substitutes or push price is too high, this creates substitutes in long run and reduces our market

Suppose there are three countries A, B, and C, which produce three goods—goods x, y, and z. Suppose further that country A is the sole producer of good x but that it also exports good y and that country B specializes in good y, which is its sole export. If country A starts a trade war with country C by imposing a tariff on country C's main export, good z, country C's best retaliatory move would be to impose a tariff on country A's sales of: why?

good y. In this case, country C would punish country A while maintaining access to good y through an alternative supplier, country B.

when world price falls in a free trade market, demand is __. difference is made up by

higher than supply . imports

Domestic consumption =QD free trade; some from __ and ___

imports and domestic suppliers

what happens when a tariff is lowered

imports increase, fewer jobs in the import competing industry

free trade robust policy is a policy that works well when

in most circumstances

tariffs do what

increase prices to consumers so domestic consumption falls and this creates a deadweight loss

what reduces child labor

increases in real GDP / economic growth

trade doesnt destory jobs overall. it

moves jobs from import-competing industries to exporting industries. jobs decrease in importing industries and increase in export industries

when world price falls what happens to domestic production in a market with free trade

it falls

strategic trade protection is the argument that

it is possible for a country to use tariffs and quotas to get a larger share of the gains from trade

a tariff does what to the world price

it raises the world price by amount of tariff or tax

when world price falls what happens to domestic consumption when there is free trade

it rises

when world price falls, domestic consumers are able to buy @ the world price, domestic producers are going to ___ . when there is free trade

less likely to sell because can only sell by world price

it is possible for a country to use tariffs or quotas to get a larger share of the gains from trade . this is done by

limiting or taxing exports

what are two cost of a tariff

lost gains from trade or deadweight loss and wasted resources

tariffs are bad overall because

lost gains from trade/deadweight loss and wasted resources

tariff switches production from __ to ___ which generates ___

low cost world producers to high cost domestic producers ; wasted resources

the economic policy of restraining trade through tariffs, quotas or other regulations that burden foreign producers but not domestic producers

protectionism

restriction on the quantity of goods that can be imported

quota

Trade restrictions tend to do what to the price

raise price

Tariffs do what to a supply curve. Why?

shift the world supply curve up by the amount of the tariff. The tariff effectively increases the price of imported goods.

a tariff does what to the world supply curve

shifts up along with price

what do the welfare consequences of a tariff depend on

the domestic production falling and domestic consumption increasing

key industries argument

there are some industries that are important for the nation to have a foothold in

what three things are true with free trade?

world price prevails, domestic production=Qs free trade, domestic consumption=QD free trade

with free trade domestic producers can only charge as much as

world producers