Trade

1. Some people argue for protectionism by pointing out that other countries with whom we trade engage in "unfair trade practices," and that we should retaliate with our own protectionist measures. One such policy is the policy of some countries to subsidize exporting industries. India, for example, subsidizes its steel industry. Who is hurt by this subsidy? a. U.S. steel producers b. U.S. steel consumers c. Indian steel producers d. A & C

a

1. True or False: Every country has at least one comparative advantage in something. a. True b. False

a

" Explain these bumper stickers in light of what you've learned: Who is hurt most by imported automobiles? a. American (domestic) consumers b. American (domestic) car manufacturers c. Foreign consumers d. Foreign car manufacturers

b

1. The Japanese people currently pay about four times the world price for rice because of trade barriers. Who is more likely to make a greater effort lobbying for or against a reduction in trade barriers? a. Japanese consumers. b. Japanese rice farmers.

b

2. The cost of the next most valuable opportunity is known as a a. Sunk cost b. Opportunity cost c. Comparative advantage d. Absolute advantage

b

2. The supply curve for rice in Japan slopes upward, just like any normal supply curve. If Japan eliminated its trade barriers to rice, what would happen to the number of workers employed in the rice-producing industry in Japan: Would it rise or fall? a. Rise b. Fall

b

3. In one hour, Ethan can bake 20 cookies or lay the drywall for two rooms. In one hour, Sienna can bake 100 cookies or lay the drywall for three rooms. a. Ethan has the absolute and comparative advantage at baking cookies. b. Sienna has the absolute and comparative advantage at baking cookies. c. Ethan has the absolute and comparative advantage at laying drywall. d. Sienna has the absolute and comparative advantage at laying drywall. e. A & D f. B & C g. None of the above.

b

5. Sugar farmers in Florida who use unusually large amounts of fertilizer to produce their crops do so because their land isn't all that great for sugar production. If we translate this into the language of the supply curve, where would these sugar farmers be on the supply curve? a. Lower-left b. Upper-right c. At equilibrium price d. Indeterminate with the given information.

b

" Why? a. Sugar is unhealthy and therefore it's unpopular to lower its cost. b. The sugar tariff benefits more Americans than it hurts. c. The price increase of sugar per person is small. d. None of the above.

c

1. What is a source of comparative advantage? a. climate b. institutions c. answer choices a & b d. None of the above.

c

4. Data can write 12 excellent poems per day or solve 100 difficult physics problems per day. Riker can write one excellent poem per day or solve 0.5 difficult physics problems per day. a. Data has the absolute and comparative advantage at writing poems. b. Riker has the absolute and comparative advantage at writing poems. c. Data has the absolute and comparative advantage at solving physics problems. d. Riker has the absolute and comparative advantage at solving physics problems. e. A & D f. B & C g. None of the above.

c

2. Many people will tell you that, whenever possible, you should always buy U.S.-made goods. If this argument were taken to its natural conclusion, where should you buy all of your goods from? a. Your state b. Your county c. Your neighborhood d. Yourself

d

6. There are three conditions that explain why a free market is efficient: 1. The supply of goods is sold by the sellers with the lowest cost. 2. There are no unexploited gains or wasteful trades. 3. The supply of goods is purchased by the buyers that place the highest value on the goods. Which condition or conditions cease to hold in the case of a tariff on imported goods? a. 1 only b. 2 only c. 3 only d. A and B only.

d

7. If the United States were to eliminate a tariff on, say, Mexican shirts thereby lowering its cost, which product might be purchased more by Americans? a. computer b. toothpaste c. pants d. All of the above.

d

1. How is international trade similar to domestic trade? a. International trade makes people better off when preferences differ. b. International trade increases productivity through specialization and the division of knowledge. c. Trade increases productivity through comparative advantage. d. A and B e. All of the above

e

2. In 30 minutes, Kana can either make miso soup or she can clean the kitchen. In 15 minutes, Mitchell can make miso soup; it takes Mitchell an hour to clean the kitchen. a. Kana has the absolute and comparative advantage at making miso soup. b. Mitchell has the absolute and comparative advantage at making miso soup. c. Kana has the absolute and comparative advantage at cleaning the kitchen. d. Mitchell has the absolute and comparative advantage at cleaning the kitchen. e. A & D f. B & C

f