Microeconomics Chapter 16

The following protectionist policies are used to shield domestic industries from competition.

-tariffs, tax on imported goods. -import quotas -anti dumping rules

Poorer countries have lower labor costs and this is generally acceptable. If poor countries needed to have an equivalent "cash standard" payment to employees, which of the following benefits might be evaluated?

-wages and salary -health care benefit -retirement benefit/pension

If Spain specializes in production it can produce 300 tons of fish or 506 tons of grain. Norway on the other hand can produce 200 tons of fish or 200 tons of grain. Calculate the ratio of tons of fish relative to tons of grain associated with the least opportunity cost to produce grain.

0.59

England and France can both produce grains and fish. In England 5 hours are required to produce one ton of fish and 8 hours are required to produce one ton of grain. In France, 6 hours are required to produce one ton of fish and 6 hours are required to produce one ton of grain.

England has a comparative advantage in fish only.

Assuming the US has an abundant supply of capital equipment and China has an abundant supply of labor, and example of the Hichscher-Ohlen theorem is...

The US exports capital intensive machines in exchange for labor intensive clothing.

Absolute advantage is the..

ability to produce a good at a lower cost than your trading partners.

Comparative advantage is the..

ability to produce a good at a lower opportunity cost than someone else.

International financial transactions such as buying and selling debt or assets..

allow a country to import more than export.

When countries voluntarily enter into trading due to known differences in opportunity costs..

both countries are better off after the trade.

Economic studies on the theory of comparative advantage have...

confirmed that the theory works.

As countries trade increases, the result will be..

each country will tend to specialize in particular goods and services.

International trade tends to drive wage and returns of other factors of production toward the level of opportunity costs. Protectionism lets..

firms earn wages and profits above opportunity costs at the expense of consumer.

The term " race to the bottom" refers to the perception that..

free trade encourages countries to have lower safety standard to reduce costs and increase trade.

The exchange rate can vary freely; however some countries may wish to hold their currency constant in value. The aim of this policy for the country is..

increased exports

Protectionism is any policy that..

is enacted to shield domestic firms from imported competition.

Consumer demand..

is the reason for trade

When considering whether to trade or not to trade the theory of comparative advantage argue that..

lover opportunity cost is the key determinant.

If a country fears that they will not be able to offer any product for export, the theory of comparative advantage...

offers the proposition that a country will be able to export because it will have comparative advantage with something.

Foreign exchange markets are..

places where anyone can exchange one currency for another currency.

Core labor standards involve..

universal human right.

In trade, specialization does all but which of the following?

use resource less efficiently due to specialization.