Chapter 22

Refer to Exhibit 34-10. Jason's opportunity cost of mowing the lawn is

0.50 clean houses.

Refer to Exhibit 34-1. The opportunity cost of one unit of Y in country A is

1 unit of X

Refer to Exhibit 34-1. The opportunity cost of one unit of X in country A is

1 unit of Y.

Refer to Exhibit 34-6. The opportunity cost of 1 unit of cheese in terms of units of wine is __________ for country A.

1/2

Refer to Exhibit 34-5. The opportunity cost of one unit of good B is __________ for country 1 and __________ for country 2.

2A; 1/2A

Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many more units of good B will country X consume by specializing and trading?

5

Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many more units of good B will country Y consume by specializing and trading?

5

Refer to Exhibit 34-7. The world price of good X is $15. Under a policy of free trade, U.S. consumers will import ___________ units of X from abroad

50

Refer to Exhibit 34-8. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Consumers' surplus is equal to the area __________ while producers' surplus is equal to the area __________.

A + B; C + G

A quota raises the price of the product on which the quota has been placed, decreases consumers' surplus, increases producers' surplus, and generates tariff revenue for the government.

False

As a result of a quota, both consumers' surplus and producers' surplus fall.

False

Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, consumers' surplus equals the area of

PWDE

Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, producers' surplus equals the area of

PWDE

Refer to Exhibit 34-2. The U.S. demand and supply for a good are shown. Under a policy of free trade, the world price is PW. At this price, what quantity of this good do U.S. consumers buy from U.S. producers and what quantity do they import from foreign producers?

Q1 from U.S. producers and (Q3 - Q1) from foreign producers

Which of the following conditions makes it most likely for a quota to be imposed?

The benefits of the quota are spread over few and the costs are spread over many.

Raquel, who earns $900 a week, bought a television set and gained $70 consumers' surplus. What price did she pay for the good?

There is not enough information to answer the question

Global technologies, such as electronics, have made up a significant portion of the recent wave of manufacturing offshoring.

True

The answer is: "It allows the inhabitants of a country to consume at a level beyond its production possibilities frontier." What is the question?

What does specialization and international trade do?

Refer to Exhibit 34-9. Which of the following statements is true?

a, b, and c

The answer is: "A reduction in consumers' surplus." What is the question?

a, b, and c

The answer is: "A tax on imports." What is the question?

c and d

The act of selling goods abroad at a price below their cost and below the price charged in the domestic market is called

dumping

The sale of goods abroad at a price below their cost and below the price charged in the domestic market is called

dumping

Refer to Exhibit 34-4. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________.

good A; good B

Smith argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States. Smith is

making the mistake of believing that high wages mean high cost

The infant industry argument for trade protectionism holds that

new industries sometimes need a protective environment in which to grow so that they can compete with older, more established foreign competitors.

A French firm sells its good at a lower price in England than in France. It follows that the French firm is necessarily

none of the above

The answer is: "There is a net loss to society." What is the question?

none of the above

The national defense argument for trade protectionism holds that

none of the above

Which of the following statements is false?

none of the above

Countries tend to specialize in the production of goods in which they have a comparative advantage because

people want to make a profit.

The difference between the amount a seller receives for a good and the lowest amount for which he would sell the good is called

producers' surplus

A quota on imported avocadoes ______________ the price of avocadoes, _____________ consumers' surplus for avocado buyers, _______________ producers' surplus of avocado growers and __________________ tariff revenue. Because the loss to _____________ is more than the gain to ___________________, there is a net loss to society.

raises; increases; decreases; does not generate;consumers; producers and importers

Producers' surplus is the difference between the price

sellers receive for a good and the minimum price for which they could have sold the good

Producers' surplus is the difference between the price __________ receive for a good and the __________ price for which they would have __________ the good.

sellers; minimum; sold

"Dumping" refers to

the sale of goods abroad at a price below their cost and below the price charged in the domestic market.

If there is no comparative advantage in the production of either of the two goods produced by countries 1 and 2, then

there are no gains from specialization and trade between the two countries

If, at the world price, domestic producers are producing and selling 100 units of a good, then at the world price plus tariff it follows that

they will be producing and selling more than 100 units of the good.