Econ Homework 9
Do you agree with Obama's statement? Briefly explain
Producers in industries in which the U.S. does not have a comparative advantage would likely agree with Obama.
Who is harmed when individual nations move from autarky to free trade?
The owners of the firms that went out of business
Among the main sources of comparative advantage are the following
climate and natural resources, relative abundance of labor and capital, technology, external economies
Dumping
is selling a product for a price below its cost of production
While running for president, Barack Obama made the following statement: "Well, look, people don't want a cheaper T-shirt if they're losing a job in the process." What did Obama mean by the phrase "losing a job in the process"? Obama was suggesting that a job would be lost if the T-shirt were cheaper because
it would be produced in another country
_____ are goods and services produced domestically but sold to other countries. _______ are goods and services bought domestically but produced in other countries. _______ are taxes imposed by a government on imports of a good into a country.
Exports Imports Tariffs
Protectionism is the use of trade barriers to shield domestic firms from foreign competition. Protectionism is usually justified on the basis of several arguments which include
saving jobs, protecting infant industries, and protecting national security
The primary difference between a quota and a voluntary export restraint (VER) is that
the quota is unilaterally imposed by one nation on the other while the VER is the result of negotiations between nations
Why do some people oppose the World Trade Organization (WTO)?
All of the above - Some opponents are specifically against the globalization process that began in the 1980s and became widespread in the 1990s - Some opponents desire to erect trade barriers to protect domestic firms from foreign competition - Some critics of the WTO support globalization in principle but believe that the WTO favors the interests of the high-income countries at the expense of the low-income countries
The World Trade Organization (WTO)
All of the above - generally aids in negotiating trade agreements that include not only goods but also services and intellectual property - is an international organization that oversees international trade agreements - replaced the General Agreement on Tariffs and Trade (GATT) in January 1995
By trading, countries are able to consume more than they could without trade. This outcome is possible because
All of the above - inefficiencies in resource allocation are reduced - world production of both goods increases after trade - shifting production to the more efficient country—the one with the comparative advantage—increases total production.
Some politicians argue that eliminating U.S. tariffs and quotas would help the U.S. economy only if other countries eliminated their tariffs and quotas in exchange.
This statement is false; the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.
We do not see complete specialization in the real world because
not all goods and services are traded internationally, production of most goods involves increasing opportunity costs, and tastes for products differ
_____ is a situation in which a country does not trade with other countries. The _____ is the ratio at which a country can trade its exports for imports from other countries.
Autarky, terms of trade
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
T-shirts at lower opportunity cost than other countries