international trade

The opportunity cost of producing 1 pound of coffee for Colombia is ______ pounds of bananas.

2

autarky

a situation in which a country is closed to any international trade before vis ships many island countries existed in a state of autarky b/c they had no access to many products that were commonplace in other parts of the worlds.

Japan does not have a huge reserve of neodymium and has to import the metal from China. The benefit of international trade that applies in this case is:

access to scarce resources.

Specialization is based on _______ advantage

comparative

with a quota

domestic consumers lose because they must pay more and consume less.

When a country opens up to trade, domestic industries that make products that can be:

imported will contract and industries that have products to export will expand.

People in different countries trade among one another to get a ______ price than they would have to pay for the same product produced domestically.

lower

When a country opens its markets to international trade, if the world price is _____ than the domestic equilibrium price, quantity supplied from foreign producers will rise.

lower

The United States, a high-cost producer of oil, imports roughly half of the oil needed to produce the nation's gasoline. The benefit of international trade that applies in this case is:

lower-cost goods.

In the context of international trade, the competitive equilibrium is the free-trade equilibrium with:

no barriers to trade.

Producers generally ______, while consumers generally ______.

support exports; oppose exports

The effect of one trade barrier, a(n) _______ is an increase in the price consumers pay since it forces importers to raise their prices.

tariff

comparative advantage

the ability to produce a good or service at a lower relative opportunity cost than that of another producer

welfare effects

the effects that a change in market conditions, usually price, has on the welfare, or economic well - being, of market participants. welfare effects are generally found by comparing changes in consumer and producer surplus

specialization

the practice of producing a single good or service rather than producing multiple goods or services

Comparative advantage is the foundation for establishing the benefits of:

trade

Exchanging currencies is international

trade

Growth is the key to better consumption possibilities and one important key to better consumption possibilities is

trade

Economists use the phrase __ to refer to the positive gains enjoyed by both buyers and sellers when they trade.

"trade creates wealth"

consumer surplus

- the difference between the max price consumers are willing and able to pay for a good or service and the price they actually pay. - also can be thought of as the wealth that trade creates for consumers in a market. - consumer surplus is measured in dollars. - graphically, consumer surplus is the area below the demand curve and above the equilibrium price, from zero to the quantity traded

producer surplus

- the difference between the price producers receive for a good or service and the min. price they are willing and able to accept. - can be thought of as the wealth that trade creates for producers in a market - measured in dollars - graphically, producer surplus is the area below the equil. price and above the supply curve, from zero to the quantity traded

The opportunity cost of producing 1 pound of bananas for Colombia is ______ pounds of coffee.

0.5

Kate has a 20-square-foot plot of land in her backyard that she uses to grow tomatoes and lettuce. Every square foot of land can produce either 5 tomatoes or 3 heads of lettuce each summer. Her neighbor, Jim, has a 30-square-foot plot of land that has a lot more shade than Kate's, which is better for lettuce but worse for tomatoes. Every square foot of Jim's land can produce either 3 tomatoes or 6 heads of lettuce.

0.5T < X < 1.67T

Suppose that both countries open up to trade, and the United States and India decide to trade 1 tractor for 3 pounds of rice (1T = 3R) and that India needs 3 tractors. India's gains from trade are ______. The United States' gains from trade are ______.

1 tractor and 1 pound of rice; 1 tractor and 1 pound of rice

The opportunity cost of producing 1 pound of coffee for Brazil is ______ pounds of bananas.

4

Suppose the United States and India do not trade with each other, production is characterized by constant opportunity costs, and each country uses half of its resources for tractor production and half for rice production. The United States will produce ______. India will produce ______.

4 tractors and 8 pounds of rice; 2 tractors and 10 pounds of rice

Suppose that, currently, both the United States and India spend half of their resources producing tractors and half of their resources producing rice. There will be ______ and ______ produced in total.

6 tractors; 18 pounds of rice

If the United States and India specialize completely in the good for which each has a comparative advantage, then there will be ______ and ______ produced in total.

8 tractors; 20 pounds of rice

tariff revenue

The revenue collected from the imposition of a tariff on goods, services, or resources. TR = tariff x quantity

The market price will be highest and the quantity traded lowest:

a domestic market in autarky.

production possibilities frontier

a graph that shows the possible combinations of two different goods or services that can be produced with fixed resources & technology. it shows the production combinations that are both attainable and efficient

small country model

a model of international trade in which the production of consumption of a good, service, or resource in the domestic country is small relative to global markets. because the domestic country is small relative to world markets it is price taker and its consumption and production do not affect the world price. thus, the country adopts the world price for any good, service, or resource as the domestic price

quota

a numerical limit on the amount of a good that can be imported. sometimes called an import quota

tariff

a tax or fee that must be paid on goods imported from other countries when the U.S imposes tariff on foreign steel, any foreign producers that want to sell their steel in the U.S have to pay an extra fee, making it more expensive for them to sell their products

barrier to trade

any policy that is designed to reduce the competitiveness of foreign producers that wish to sell their goods or services in the domestic market, thereby reducing the imports of foreign goods or services

is a state that exists whenever an entity can survive or continue its activities without external assistance or international trade.

autarky

A situation in which a country is closed to any international trade due to self-sufficiency is referred to as:

autarky.

When a country is opening up to trade, resources in the economy flow:

away from the goods for which producers do not have a comparative advantage.

Because people and businesses sometimes oppose international trade, governments create trade

barriers

Comparative advantage refers to:

being the lowest relative opportunity cost producer of a good.

Suppose the U.S. specializes in producing lumber and its neighbor Canada specializes in producing steel. When they trade with each other:

both countries will likely consume more lumber and steel.

Consider the two production possibilities frontiers (PPFs) shown in the graphs. If the two countries do not specialize, Country A would likely ______.

choose point MA

Given the option of being self-sufficient or trading with others as long as a(n) ________ advantage exists, there will be potential for trade to make both parties better off.

comparative

If you are relatively better at something, then you are said to have a(n) _________ advantage in that activity

comparative

In an economy of two goods, a country cannot have the ______ advantage in both goods

comparative

Specialization is based on __ advantage not necessarily on whether one country can produce more of a good than another country.

comparative

Trade between people in different countries is driven by _______ advantage

comparative

_______ advantage is the foundation of establishing the benefits of trade.

comparative

Given the option of being self-sufficient or trading with others as long as a(n) ______ ______ exists, there will be potential for trade to make both parties better off.

comparative advantage

When there are barriers to trade,:

consumers suffer producers gain and total wealth decreases.

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the ______ loss

deadweight

All the units of a good or service that can be produced for less than the world price Pw are supplied by

domestic firms

The benefit or wealth that accrues to a buyer or a seller as a result of trading one good service or resource for another. the wealth or additional well being, created by trade does not have to be monetary

gains from trade

imports

goods, services, or resources produced abroad and sold domestically in the U.S clothing is often produced at a higher cost than in other countries. as a result clothing is part of U.S imports

exports

goods, services, or resources produced domestically and sold abroad in the U.S many agricultural products are produced at a lower cost than in other countries. as a result, agricultural products are part of U.S exports

When there is a quota, the quota price is ________ than the world price and the total quantity traded is ________

higher lower

Barriers to trade reduce the amount of output that can be supplied by foreign companies and, as a result, cause prices in the market to be ______ than they would otherwise be. This results in consumers buying ______ output.

higher; less

A barrier to trade reduces the _____ of foreign goods and services.

imports

The goods and services made in other countries that we purchase are called

imports

Europeans purchase wine produced in California and Argentina to have more choice. The benefit of international trade that applies in this case is:

increased variety of goods.

When two people specialize, total production between the two people _______

increases

The model and concepts used to develop the economics of __ are similar to those used to illustrate the effects of:

international trade; trade between individuals.

Imposing trade restrictions seems attractive to some people, but the end result will be _______ (reduced/increased) international trade and as a result ________ (reduced/increased) global wealth is created.

less low

In the 1980s, to avoid having tariffs or import quotas applied to their products, Japanese auto manufacturers agreed to:

limit the number of cars they shipped to the U.S. to fewer cars than they wanted to sell.

the producer with the _____ relative opportunity cost has a comparative advantage and should specialize in the production of that good

lowest

Airline passengers who fly on aircraft benefit from the specialization and trade that occurs between plane manufacturers since airlines can offer more routes at lower prices.

true

As of 2016, more than 15% of all goods and services consumed in the United States were produced abroad.

true

When a tariff is eliminated, we would expect the price to decrease and the quantity traded to increase.

true

In the small-country model, each country has a(n) _____ -sloping supply of a product and ______ cost is not constant.

upward opportunity

When a tariff is imposed on imports, the price in the market:

rises by the full amount of the tariff.z

The practice of "dumping" describes:

selling products in a foreign market at a price below average cost.

The sum of consumer and producer surplus is

social surplus

Comparative advantage identifies the producer that has the low relative opportunity cost for a specific good in the market. The low-relative-cost producer ________ in producing that good

specializes

Comparative advantage identifies the producer that has the low relative opportunity cost for a specific good in the market. The low-relative-cost producer ________ in producing that good. The price or ________ of trade that the good will trade for depends on the _________ costs of the buyers and sellers and determine how much each party ___________ from the trade

specializes terms opportunity gains

Quotas can have unintended consequences, such as:

substituting less expensive goods for the good that has a quota.

When calculating producer surplus for an individual firm, ________ the firm's willingness to accept from the market price.

subtract

absolute advantage

the ability to produce more output, given similar resources, than another producer

welfare effects

the effects that a change in market conditions, usually price, has on the welfare, or economic well being, of market participants. welfare effects are generally found by comparing changes in consumer and producer surplus

As long as the terms of trade are between both countries' ______ costs, trade will benefit both countries.

opportunity

As long as there are differences in the________ costs, there are comparative advantages and there will be potential for trade to make both parties better off.

opportunity

Comparative advantage is defined as having a lower relative _________ cost than another producer.

opportunity

If the terms of trade are the same as your ________ cost, you will receive no gains from the trade.

opportunity

In the small-country model,:

opportunity cost is not constant

Trade allows the economy as a whole to consume previously impossible combinations of output so the:

overall benefits outweigh the costs.

Consider the two production possibilities frontiers (PPFs) shown in the graphs. If the two countries do specialize, Country A would likely ______, while Country B would likely ______.

produce at point CA; produce at point WB

In the 1980s, the U.S. government established a type of import ______ called a voluntary export restriction in the market.

quota

Sugar is significantly more expensive in the United States than it is in Mexico and Canada because of the sugar

quota

is designed to protect or encourage the growth of a specific industry. there is a ______ on sugar imports in the United States.

quota

The size of the quota times the difference between the quota price and the world price is known as the dollar value of:

quota rent

A quota:

reduces imports and domestic consumption while increasing prices and domestic output.

Markets form between people in different countries to facilitate

trade

One of the major themes in economics is that ________ creates wealth

trade

One way of consuming a combination of goods a country cannot produce on its own is with

trade

People in different countries _______ to increase the diversity of their choices.

trade

The model and concepts used to develop the economics of international _________ are similar to those used to illustrate the effects of trade between two individuals.

trade

because _______ creates wealth, the threat of limiting ________ can be an incentive to change behavior.

trade

when two people ________ in the goods they produce, total production between the two people increases.

trade

without _______ our standard of living would be lower and we would enjoy fewer goods and less variety.

trade

free trade

trade between nations that is free from barriers such as regulations, tariffs, or quotas

In many of the examples of specialization and trade, it sometimes seems that one country is getting a better deal than another but:

we don't know the overall increase in the wealth or well-being generated by the trade. if they trade it must be the case that they are both better off.

When a country opens its markets to international trade, the overall quantity traded increases:

whether the country imports or exports a good service or resource.

In international markets, since a firm can always sell its output at the ________ price, there is no incentive to sell it for less.

world

Economic surplus is the:

gains associated with both consumers and producers in the market.

the value of the ________ surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the deadweight loss.

economic

When Congress failed to renew the ethanol tariff in 2012, we expected ethanol prices to

fall rise

The consumer surplus for domestic pineapple consumers ______, while the producer surplus for domestic pineapple producers ______.

falls; rises

Specialization is based on whether one country can produce more of a good than another country and not on comparative advantage.

false

In 2014, the United States imposed tariffs on nine different steel-producing countries because:

firms from these countries were "dumping" their products on the U.S. market. firms from these countries were selling their steel in the United States at a price below their average cost.

price takers

firms that take or accept the market price and have no ability to influence that price

The market has the largest possible number of suppliers and the most competition in the case of:

free trade market

quota rent

the income earned by whoever has the right to import the good at the world price and sell it in the domestic market at the higher quota price. the dollar value of a quota rent is equal to the size of the quota times the difference between the quota price and the world price.

domestic price

the price of a good, service, or resource that prevails in the domestic market. in the small country model, the domestic price equals the world price if the country is open to trade

world price

the price of a good, service, or resource that prevails in the world market

terms of trade

the price of one good, service, or resource in terms of another colombia and brazil decide that colombia will sell 1 ton of coffee to brazil in exchange for 5 tons of bananas. the 5 tons of bananas for 1 ton of coffee are the terms of trade

economic surplus

the sum of consumer and producer surplus. it is a measure of the total welfare, or wealth, that trade creates for consumers and producers in a market - also known as social welfare or total surplus

deadweight loss

the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

opportunity cost

the value of the next best forgone alternative; the value of the opportunity that you gave up when you chose one activity, or opportunity, instead of another. opportunity cost exist because of scarcity

opportunity cost is

the value of the opportunity that you give up when you choose one activity instead of another.