ch.9 International Trade

What would happen after a rapid decline in trade costs? - People would be more closely integrated with the rest of the globe. - Countries would respond by setting more import quotas. - Multinational firms would trade freely and collude to set product prices. - Countries make more trade agreements to increase import tariffs.

People would be more closely integrated with the rest of the globe.

The world price for watermelons is $3 each. In the United States, the price for watermelons is $6 each. What will happen to the U.S. market for watermelons when imports are allowed? - The price of watermelons in the United States will fall to $3. - The quantity supplied by domestic sellers will exceed the domestic quantity demanded. - Foreign buyers will make up the difference of domestic supply and domestic demand. - The world price will increase to the equilibrium price of domestic market.

The price of watermelons in the United States will fall to $3.

Why is there almost no international trade in medical services, and no international trade in houses? - Their opportunity costs from overseas are relatively lower than our domestic prices. - People only consider price and out-of-pocket expenses for these products and services. - They have low trade costs, and it is virtually impossible to transport a house. - Their trade costs are prohibitively expensive, and it is nearly impossible to transport a house.

Their trade costs are prohibitively expensive, and it is nearly impossible to transport a house.

When you choose to import, you: - trade (buy and sell) goods or services with foreign sellers. - buy goods or services from foreign sellers. - sell goods or services to foreign sellers. - buy goods or services from domestic sellers.

buy goods or services from foreign sellers.

All of these conditions can explain why people are more integrated with the rest of the world than at any time in human history EXCEPT: - countries have torn down trade barriers. - trade costs have rapidly declined. - communication technology has dramatically improved. - countries have agreed to increase tariffs on imports.

countries have agreed to increase tariffs on imports.

When Sweden refuses to buy lobsters exported from Maine, this causes the domestic price of lobster in the United States to _____. The domestic buyers _____ whereas the domestic sellers _____.

decrease; win; lose

Tariffs _____ imports.

increase the trade costs on

Imports lead to lower price. The lower price _____ the consumer surplus of buyers, and _____ the producer surplus of sellers. The net effect for total economic surplus increases as buyers amplify their gains and sellers minimize their losses.

increases; decreases

The five arguments for limiting international trade that are the discussed in the chapter all argue whether or not international trade: - increases collaboration among governments. - is a part of globalization. - provides sufficient income from exports. - is good for Americans.

is good for Americans.

Opening up to international trade only has a temporary effect on unemployment but may become permanent for some people because: - international trade will have an adverse and long lasting effect on unemployment. - it's hard for workers to retrain and find new jobs. - imports increase the unemployment rate. - imports reduce average wages across the United States.

it's hard for workers to retrain and find new jobs.

A counterargument for _____ is that sometimes trade limitations actually undermine this. For example, limiting exports of encryption software actually helped foreign competitors develop encryption technology, by reducing the competition from superior U.S. products. - enforcing minimum standards - saving jobs - protecting national security - preventing unfair competition

protecting national security

The argument about _____ has a broader interpretation that suggests that we also need to protect domestic sources of food, so that we can eat if today's trading partners become tomorrow's enemies. - enforcing minimum standards - preventing unfair competition - protecting national security - saving jobs

protecting national security

The import quota is different from the tariff in that: - the import quota sets the price limit on imported goods. - the government does not gain tax revenue from the import quota. - the import quota limits the quantity demanded for imported goods. - the import quota is a trade agreement to reduce trade barriers.

the government does not gain tax revenue from the import quota.

Economists may need to pay more attention to the short-run disruption from international trade because: - the threat posed by international trade that domestic businesses may shrink is very real. - they think about "the economy" as businesses, such as auto plants having to relocate overseas. - the closure of businesses is not about lost jobs; it can also mean the loss of local traditions. - these temporary effects can last long enough to be nearly permanent for the people involved.

these temporary effects can last long enough to be nearly permanent for the people involved.

One of the blind spots of the economic thought about trade is that: - trade is about competition, not cooperation. - the magic of voluntary exchange is to make cheaper goods. - trade is not just about economics. - trade is just about business.

trade is not just about economics.

Economists don't agree the statement "trade is a competition, and every time China wins, America loses," and they will try to explain it differently. Which does NOT describe economists' view on this trade issue? - Trade involves millions of people cooperating with strangers to get better deal. - Trade is about cooperation, so that everyone gets more of what they want. - China competes with the United States by offering cheaper goods through imports. - Cheap imports offer all Americans a way to make their paycheck go further.

China competes with the United States by offering cheaper goods through imports.

The closure of an auto plant is not just about lost jobs; it can also mean the death of a city, the end of a particular way of life, and the loss of local traditions. This scenario explains the blind spot of trade that trade: - is about cooperation so that everyone gets more of what they want. - causes a lot of disruption in the long run. - leads to more competition, not cooperation. - is not just about economics.

is not just about economics.

The World Trade Organization (WTO) provides a way for all its member nations to: - jointly agree to reduce trading on locally produced goods. - jointly agree to reduce or eliminate trade barriers. - agree to increase farm subsidies in member nations. - reduce tariffs on manufactured goods from high-income countries.

jointly agree to reduce or eliminate trade barriers.

China imported some airplanes from the United States. In turn, the United States also imported shirts produced in China. Even though American and Chinese laborers don't directly compete with each other, their labor does compete because: - labor is embodied in the goods that are traded between countries. - China's exported goods embody the labor of American workers. - The United States' exported goods embody the labor of Chinese workers. - American and Chinese laborers compete in the same national labor market.

labor is embodied in the goods that are traded between countries.

The closure of an auto plant is not just about lost jobs; it can also mean the end of a particular way of life. This happens because when the world becomes more integrated, _____. - those auto plants are relocated overseas - local and national cultures are becoming more similar - countries reduce their trade costs - countries get the benefits of cheap imports

local and national cultures are becoming more similar

America's voters have agreed, through the laws passed by their elected officials, that businesses must meet certain _____. - minimum standards - infant industry - antiâ€dumping laws - national security

minimum standards

An economist mentions that "if we can import apples more cheaply, we can bake a bigger apple pie; this is the beauty of international trade." This economist believes that: - the magic of voluntary exchange is to make cheaper goods. - trade is disruptive in the long run. - trade reallocates tasks so that they're done more efficiently. - trade is about business.

trade reallocates tasks so that they're done more efficiently.

Imagine that you work for Boeing, building airplanes. Each plane from your production line embodies some of your labor, so every time one of these planes is exported to China, this means that _____. - you are selling some of your labor to China - American and Chinese laborers compete in the same national labor market - American and Chinese laborers directly compete with each other - China's exported goods embody the labor of American workers

you are selling some of your labor to China