Chapter 7

Which of the following statements is true about the importance of trade in the U.S.​ economy? A. Exports and imports have steadily declined as a fraction of U.S. GDP. B. While exports and imports have been steadily rising as a fraction of​ GDP, not all sectors of the U.S. economy have been affected equally by international trade. Your answer is correct. C. Only a few U.S. manufacturing industries depend on trade. D. None of the above.

B

Who is harmed when individual nations move from autarky to free​trade? Part 2 A. The nation taken as a whole. B. The owners of the firms that went out of business. Your answer is correct. C. The domestic customers of the firms that went out of business. D. The foreign customers of the firms that now specialize.

B

Protectionism is the use of trade barriers to shield domestic firms from foreign competition. Protectionism is usually justified on the basis of several arguments which​ include: Part 2 A. protecting national​ security, promoting the wants of select​ industries, and saving jobs. B. protecting high​ wages, protecting national​ security, and maintaining high prices for imports. C. protecting high​ wages, protecting mature​ industries, and protecting national security. D. saving​ jobs, protecting infant​ industries, and protecting national security.

D

The World Trade Organization​ (WTO) Part 2 A. generally aids in negotiating trade agreements that include not only goods but also services and intellectual property. B. is an international organization that oversees international trade agreements. C. replaced the General Agreement on Tariffs and Trade​ (GATT) in January 1995. D. all of the above.

D

Why do some people oppose the World Trade Organization​ (WTO)? Part 2 A. Some opponents desire to erect trade barriers to protect domestic firms from foreign competition. B. Some opponents are specifically against the globalization process that began in the 1980s and became widespread in the 1990s. C. Some critics of the WTO support globalization in principle but believe that the WTO favors the interests of the​ high-income countries at the expense of the​ low-income countries. D. All of the above.

D

Your roommate Hansen argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States. Hansen Part 1 A. is right in asserting the need to protect high wages if the United States wishes to maintain its high standard of living. B. is advancing the anti−dumping argument for protectionism. C. is correct in arguing that the high wages of U.S. workers make it impossible to compete with workers in low−wage countries. D. is incorrect. Free trade raises living standards by increasing economic efficiency.

D

International trade has always played a role in the U.S. economy. Is this role increasing or decreasing​ (in terms of exports and​ imports)? Part 2 International trade is Part 3 A. increasing because countries no longer enter into free trade agreements. B. increasing because government policies restrict trade. C. increasing because tariffs are increasing. D. decreasing because communication is less expensive. E. increasing because shipping costs have decreased.

E

Cell Phones Digital Music Players Japan 2 4 United States 12 6 Part 3 Determine the missing opportunity costs in the table below and fill in the missing values. ​(Enter your responses rounded to one decimal​ place.) Part 4 Opportunity Costs Cell Phones Digital Music Players Japan 2.0 . 5.5 United States . 5.5 2.0

.5, .5

As illustrated in the​ diagram, when a nation moves from autarky to free​ trade, economic surplus increases by the areas represented by Part 2 A. ​B, C and D. B. B and E. C. C and D. Your answer is correct. D. ​A, B, C and D.

C

Dumping Part 2 A. is selling a product for a price above its cost of production. B. is selling a product for a price the same as its cost of production. C. is selling a product for a price below its cost of production. Your answer is correct. D. none of the above.

C

In addition to tariffs and​ quotas, governments sometimes erect other barriers to trade. For​example, all governments require that imports meet certain health and safety requirements. Many governments also restrict imports of certain products on national security grounds. Explain whether you agree or disagree with the following​ statement: ​Sometimes, however, governments use these requirements to shield domestic firms from foreign competition. Part 2 A. ​No, governments are always more concerned about national security than appeasing special interests. B. ​No, politicians never make choices that are more likely to lead to reelection when health and safety issues are involved. C. ​Yes, sometimes governments impose stricter health and safety requirements on imported goods than on goods produced by domestic firms. Your answer is correct. D. ​Yes, sometimes governments impose less strict health and safety requirements on imported goods than on goods produced by domestic firms.

C

One effect of tariffs and quotas Part 2 A. is to reduce prices to domestic consumers as it protects jobs in the target industry. B. is generally a net gain for the nation enacting the protective legislation. C. is to cost jobs outside the industries immediately affected. Your answer is correct. D. is to create jobs outside the industries immediately affected.

C

The quantity of coffee supplied at the world price ​(QSC​) in Columbia is A. that quantity where the world price ​(pW​) intersects the Columbian demand curve. B. that quantity where the Columbian demand curve interects the Columbian supply curve. C. equal to zero. D. that quantity where the world price ​(pW​) intersects the Columbian supply curve.

D

Which of the following describes the importance of international trade around the​ world? Part 2 A. France is the only​ high-income country that is less dependent on international trade than the U.S. B. In some smaller countries such as​ Belgium, imports and exports make up less than 26 percent of GDP. C. Japan is the only​ high-income country that is more dependent on international trade than the U.S. D. In 2019, China was the largest exporter in the world, accounting for approximately 11% of world exports. Your answer is correct. E. Rapid growth in Hong Kong over the past 20 years has resulted in it becoming the third largest exporter.

D

​"the main burden of​ trade-related job losses and wage declines has fallen on​ middle- and​ lower-income Americans. But...the very people who suffer most from free trade are​ often, paradoxically, among its biggest​ beneficiaries." Explain how it is possible that​ middle- and​ lower-income Americans are both the biggest losers and at the same time the biggest winners from free trade. ​Source: James​ Surowiecki, "The​ Free-Trade Paradox," New Yorker​, May​ 26, 2008. Part 2 It would be possible for​ middle- and​ lower-income Americans to be both the biggest losers and at the same time the biggest winners from free trade if they are the ones most likely to Part 3 A. work in industries that produce at higher total cost than do other countries and purchase those goods that can be produced at lower total cost in other countries. B. work in industries that do not have a comparative advantage and purchase those goods in which the United States has a comparative advantage. C. work in industries that do not have an absolute advantage and purchase those goods in which the United States has an absolute advantage. D. work in industries that produce at higher opportunity cost than in other countries and purchase those goods that can be produced at lower opportunity cost in other countries. Your answer is correct. E. work in industries that have a comparative advantage and purchase those goods in which other countries have a comparative advantage.

D

The government of a country faced substantial pressure from different sectors to reduce tariffs. Many​ groups, including the​ media, were lobbying for an overall reduction in import tariffs imposed by the government. According to​ them, the country would gain if free trade were encouraged. While certain sectors reported increased exports after a reduction in trade​ restrictions, many firms went out of business in other sectors as imports increased. People who lost their jobs complained that the reduction in tariffs had done the nation more harm than good. Which of the​ following, if​ true, would weaken the claim of the people who lost their​ jobs? A. The global economy is recovering from a recession. B. The increase in GDP after the reduction in trade barriers was very low. C. The World Trade Organization is encouraging free trade between nations. D. The contribution of imports to this​ country's GDP has always been much higher than its exports. E. The demand for the​ country's goods is higher outside the country than inside the country.

E

The following table shows the hourly output per worker measured as quarts of olive oil and pounds of pasta in Greece and​ Italy: Output per Hour of Work Olive Oil Pasta Greece 4 2 Italy. 4 8 Part 2 The opportunity cost of producing one more quart of olive oil in Greece is .5 pounds of pasta. ​(Enter your response rounded to two decimal​ places.) Part 3 The opportunity cost of producing one more quart of olive oil in Italy is 2 pounds of pasta. ​(Enter your response rounded to two decimal​places.) Part 4 The opportunity cost of producing one more pound of pasta in Greece is 2 quarts of olive oil. ​(Enter your response rounded to two decimal​ places.) Part 5 The opportunity cost of producing one more pound of pasta in Italy is .5 quarts of olive oil. ​(Enter your response rounded to two decimal​places.)

.5, 2, 2, .5

Berries Fish Rob 20 80 Bill 30 60 Rob Crusoe and Bill Friday spent their week−long vacation on a desert island where they had to find and prepare their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. Use the table above to select the statement that accurately interprets the data in the table. Part 2 A. Bill has a comparative advantage in picking berries. Your answer is correct. B. Rob has a comparative advantage in catching fish and picking berries. C. Rob has a comparative advantage in picking berries. D. Bill has a comparative advantage in catching fish.

A

One reason some oppose free trade and the reduction of trade barriers is protectionism. Part 2 What does​ old-fashioned protectionism seek to​ protect? Part 3 Protectionism traditionally seeks to use trade barriers to protect Part 4 A. domestic wages. Your answer is correct. B. mature industries. C. U.S. consumers. D. child labor. E. foreign cultures.

A

What do most economists find to be the most persuasive argument in favor of​ protectionism? Part 2 A. Trade barriers protect infant industries that initially have relatively high costs. Your answer is correct. B. Trade barriers protect our national security. C. Trade barriers prevent firms from having to pay lower wages to compete with firms in developing countries. D. Trade barriers prevent the distinctive cultures of developing countries from being destroyed. E. Both a and b.

A

Which of the following describes the extent of international trade in the U.S.​ economy? Part 2 A. About 20 percent of U.S. manufacturing jobs depend directly or indirectly on exports. Your answer is correct. B. Since​ 1970, U.S. exports have decreased from about 11 percent of GDP to about 4 percent in 2018. C. Since​ 1970, U.S. imports have increased from less than 5 percent of GDP to about 30 percent in 2018. D. Each​ year, the U.S. exports less than 10 percent of many agricultural crops such as corn. E. Since​ 1970, U.S. exports have increased and U.S. imports have decreased.

A

Among the main sources of comparative advantage are the​ following: Part 2 A. climate and natural​ resources, relative scarcity of labor and​capital, technology, external economies. B. climate and natural​ resources, relative abundance of labor and​ capital, technology, external economies. Your answer is correct. C. climate and natural​ resources, relative abundance of labor and​ capital, inefficient​ technology, external economies. D. climate and natural​ resources, relative abundance of labor and​ capital, technology, external diseconomies.

B

Comparative advantage Part 2 A. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a higher absolute cost than competitors. B. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors. Your answer is correct. C. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a higher opportunity cost than competitors. D. is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower absolute cost than competitors.

B

From the tables above it is clear that​ _____ has an absolute advantage in the production of both goods and that​ _____ has a comparative advantage in cell​ phones, while​ _____ has a comparative advantage in digital music players. Part 6 A. Japan​,the United States​,the United States B. the United States​,the United States​,Japan Your answer is correct. C. the United States​,Japan​,the United States D. Japan​,Japan​,

B

Output per hour of work Production and Consumption without Trade Production with Trade Swords Belts Swords Belts Swords Belts Estonia 5 2 100 40 200 0 Morocco 3 3 60 60 0 120 Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. The table above shows the output per hour of​work, the production and consumption quantities without​ trade, and the production numbers with trade. Which country has a comparative advantage in producing​ belts? Part 2 A. Estonia B. Morocco Your answer is correct. C. both countries D. neither country

B

Some politicians argue that eliminating U.S. tariffs and quotas would help the U.S. economy only if other countries eliminated their tariffs and quotas in exchange. Part 2 A. This statement is​ true; the U.S. economy would gain from the elimination of tariffs and quotas but only if other countries also reduce their tariffs and quotas so our industries are able to penetrate their markets. B. This statement is​ false; the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas. Your answer is correct. C. This is statement​ true; the U.S. economy would not gain from the elimination of tariffs and quotas especially if other countries do not reduce their tariffs and quotas. D. This statement is false because the U.S. economy is so large that it is not affected by the reduction of tariffs and quotas.

B

The diagram on the right represents a tariff imposed on an individual market. The total deadweight loss​ (loss in economic​ surplus) from this tariff is illustrated by areas Part 2 A. ​A, C, T and D. B. C and D. Your answer is correct. C. A and T. D. ​C, T and D.

B

The domestic market equilibrium price and quantity for coffee in Columbia if trade were completely eliminated is A. where the world price ​(pW​) intersects the Columbian supply curve. B. where the Columbian demand curve interects the Columbian supply curve. Your answer is correct. C. where the world price ​(pW​) intersects the Columbian demand curve. D. at the​ graph's origin.

B

What were the economic effects of the North American Free Trade Agreement​ (NAFTA)? Part 2 A. The wages for both U.S. and Mexican workers decreased. B. Consumption increased about $400 per year for a family of four. Your answer is correct. C. Consumption increased in the United States but decreased in Mexico. D. U.S. exports of beef to Canada decreased. E. None of the above.

B

In​ 1999, at a meeting of the World Trade Organization in​ Seattle, Washington, a large number of people protested attempts to reduce trade barriers. Part 2 What is a reason why some would want to prevent trade barriers from being​ reduced? Part 3 Some want to prevent trade barriers from being reduced because they Part 4 A. wish to promote dumping. B. believe trade discourages child labor. C. seek to protect domestic jobs. Your answer is correct. D. instead favor globalization. E. want to reduce tariffs.

C

The primary difference between a quota and a voluntary export restraint​ (VER) is that Part 2 A. the quota directly limits imports while the VER only indirectly influences the quantity traded between the nations. B. the VER is unilaterally imposed by one nation on the other while the quota is the result of negotiations between nations. C. the quota is unilaterally imposed by one nation on the other while the VER is the result of negotiations between nations. Your answer is correct. D. the VER affects import price while the quota works through quantity restrictions and does not influence the price of the good.

C

The world is often described as having a global economy. How important is international trade to the United​ States? Part 2 A. In the​ U.S., exports make up more than half of GDP. B. The U.S. exports fewer goods than any of the other 8 highest income countries. C. In the​ U.S., imports are smaller fractions of GDP than in most other countries. Your answer is correct. D. In the​ U.S., exports are increasing but not as a portion of GDP. E. The U.S. exports more than it​ imports, resulting in a trade deficit.

C

We do not see complete specialization in the real world because Part 2 A. all goods and services are traded​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products are remarkably uniform. B. not all goods and services are traded​ internationally, production of most goods involves decreasing opportunity​costs, and tastes for products differ. C. not all goods and services are traded​ internationally, production of most goods involves increasing opportunity​costs, and tastes for products differ. Your answer is correct. D. not all goods and services are traded​ internationally, production of most goods involves constant opportunity​costs, and tastes for products are remarkably uniform.

C

​_____ is a situation in which a country does not trade with other countries. The​ _____ is the ratio at which a country can trade its exports for imports from other countries. Part 2 A. ​Oikonomia, prices B. ​Plutarky, price ratio C. ​Autarky, terms of trade Your answer is correct. D. Terms of​ trade, autarky Part 3 By​ trading, countries are able to consume more than they could without trade. This outcome is possible because Part 4 A. world production of both goods increases after trade. B. shifting production to the more efficient country—the one with the comparative advantage—increases total production. C. inefficiencies in resource allocation are reduced. D. all of the above.

C, D

Comparative advantage Part 2 A. is determined by governments of nations across the globe. B. is unlikely to​ change, once it has been defined. C. is independent a countries skilled and unskilled labor quantities. D. may change as time passes and circumstances change.

D

Consider the market for coffee in Columbia. Suppose the demand for coffee in Columbia is DColumbia and the supply in Columbia is SColumbia. The world price of coffee with free trade is pW. Indicate the quantity of coffee demanded at the world price ​(QDC​) in Columbia and the quantity of coffee supplied at the world price ​(QSC​) in Columbia. Also indicate the domestic market equilibrium price and quantity for coffee in Columbia if trade were completely eliminated. The quantity of coffee demanded at the world price ​(QDC​) in Columbia is A. that quantity where the world price ​(pW​) intersects the Columbian supply curve. B. that quantity where the Columbian demand curve interects the Columbian supply curve. C. equal to zero. D. that quantity where the world price ​(pW​) intersects the Columbian demand curve.

D

Briefly explain whether the value of U.S. exports is typically larger or smaller than the value of U.S. imports. Part 2 The value of U.S. exports Part 3 A. has always been larger than the value of U.S. imports. B. has always been smaller than the value of U.S. imports. C. has been larger than the value of U.S. imports since about 1980. D. has been smaller than the value of U.S. imports since about 1955. E. has been smaller than the value of U.S. imports since about 1980. Your answer is correct. Part 4 For the U.S.​ economy, imports and exports represent a larger fraction of GDP compared to what they were in 1970

E, A LARGER

Since​ 1999, ________ U.S. manufacturing jobs may have been lost to Chinese​ imports, and trade with China has​________ throughout the United States. Part 1 A. more than 2​ million; not created any additional jobs B. very​ few; created more than 2 million jobs C. very​ few; not created any additional jobs D. more than 2​ million; created other jobs

d

Which of the following statements is false​? Part 2 A. Imports and exports account for over one−half of the GDP of the Netherlands. B. China is the leading exporting​ country, accounting for 11.0 percent of total world exports. C. Japan is less dependent on foreign trade than is the United States. D. Because the cost of labor used on farms is so​ high, the United States exports very little of its​ wheat, rice, and corn crops.

d

Exports are goods and services produced domestically but sold to other countries. Imports are goods and services bought domestically but produced in other countries. Tariffs are taxes imposed by a government on importsof a good into a country.

exports, tariffs