Chp. 7: HWK

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.

0.5 0.5 the United States, the United States, Japan

​Tom's opportunity cost of mowing lawns in terms of trimming bushes is nothing trimmed bushes per mowed lawn. ​(Enter your response rounded to two decimal​ places.)

2

Assume now that each country specializes in producing that good in which it has a comparative advantage. ​ Further, assume for simplicity that one cell phone can be traded for one digital music player. If JapanJapan trades nbsp 850 850 cell phones for nbsp 850 850 digital music players with GermanyGermany​, ​then, with​ trade, JapanJapan will be able to consume the same number of digital music players and additional cell phones ​(enter a numeric response using an​ integer)​, and GermanyGermany will be able to consume the same number of cell phones and 25502550 additional digital music players.

300, 2550

The graph to the right shows the supply and demand for beef in the United​ States, under the assumption that the United States can import as much as it wants at the world price of beef without causing the world price of beef to increase.

500, 200, gain, gain, lose

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.

Which of the following will not have an effect on the natural rate of unemployment​?

Changes in monetary policy

What is the difference between absolute advantage and comparative​ advantage? A country will always be an exporter of a good where it has _______ advantage in production.

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. While absolute advantage is the ability of an​ individual, a​ firm, or a country to produce more of a good or service than competitors when using the same amount of resources. a comparative

Briefly explain whether you agree or disagree with the following​ statement: ​ "International trade is more important to the U.S. economy than to most other​ economies."

Disagree. Exports and imports are a relatively small fraction of the United state GDP

The United States is the leading exporting country in the world.

False

When an industry receives tariff or quota​ protection, there is no effect on other domestic industries.

False

"Unfortunately, Bolivia does not have a comparative advantage with respect to the United States in the production of any good or​ service." ​(​Hint: You do not need any specific information about the economies of Bolivia or the United States to be able to answer this​ question.)

If the U.S. trades at all with​ Bolivia, then the argument above is false. There would be no trade unless both countries were made better​ off, and this would imply Bolivia has the comparative advantage in the production of at least one good or service.

The 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

What is meant by a country specializing in the production of a​ good? Is it typical for countries to be completely​ specialized?

It shifts resources toward producing only those goods where it has a comparative​ advantage; No

Can we conclude that foreign trade between the two countries benefited Canada more than it benefited the United​ States?

No, countries will engage in trade when there is a gain from trade to both parties.

Suppose the United States and TaiwanTaiwan 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 TaiwanTaiwan are exactly alike. The table below shows how much each country can produce of each good with one hour of labor.

T, T, T, US

Which of the following statements is true about the importance of trade in the U.S.​ economy?

While exports and imports have been steadily rising as a fraction of​ GDP, not all sectors of the U.S. economy have been affected equally by international trade.

​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.

If the United States were to stop trading goods and services with other​ countries, which of the following U.S. industries would be likely to see their sales decline the​ most?

all of the above

If a nation has a comparative advantage in the production of a good it means they can produce the good​ ___________ relative to other nations.

at a lower opp. cost

The primary justification most economists give to support free trade is the theory of

comparative trade

Which of the following is not a main source of comparative​ advantage?

internal economies of scale

Obama was suggesting that a job would be lost if the​ T-shirt were cheaper because Using the economic concept of comparative​ advantage, explain under what circumstances it would make sense for the United States to produce all of the​ T-shirts purchased in the United States. The United States should produce all of the​ T-shirts purchased in the United States if the U.S. could produce Do you agree with​ Obama's statement? Briefly explain.

it would be produced in another country. T-shirts at lower opportunity cost than other countries. Producers in industries in which the U.S. hashas a comparative advantage would likely not agreenot agree with Obama.

Comparative advantage

may change as time passes and circumstances change.

Consider the production possibilities frontier ​(PPF​) that shows the​ trade-off between the production of cotton and the production of soybeans depicted in the figure.. Properly label this curve. .production possibilities frontier by drawing a new production possibilities frontier. Properly label this curve. .

shift inwards

Use the​ three-point curved line drawing tool to show the effect that improved fertilizersimproved fertilizers would have on the initial production possibilities frontier by drawing a new production possibilities frontier. Properly label this curve. .

shift outwards

Suppose we can divide all the goods produced by an economy into two​ types: consumption goods and capital goods. Capital​ goods, such as​ machinery, equipment, and​ computers, are goods used to produce other goods. Suppose a technological advance occurs that affects the production of consumption goods but not capital goods.

the production possibilities frontier will shift outward

As a result of the effect of the sugar​ quota, the U.S. price of sugar is higher than the world price of sugar.

true

It would be possible for​ middle- and​ lower-income Americans to be both the biggest losers and at the same time the biggest winners from free trade if they are the ones most likely to

work in industries that produce at higher opportunity cost than in other countries and purchase those goods that can be produced at lower opportunity cost in other countries