Chapter 7 Mirco Test 2

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dumping occurs when

a foreign firm sells its exports at a lower price than its cost of production

the winners from free trade could organize and become a political force by lobbying for free trade

but political activity is costly and the gains per person are too small to make the cost of political activity worth bearing

offshore outsourcing occurs when a firm in the US

buys finished goods, components, or services from other firms in other countries

protection does not prevent workers in developing countries from being exploited.

child labor and near slave labor are serious problems that are rightly condemned. but by trading with poor countries, we increase the demand for goods that these countries produce and, more significantly, we increase the demand for their labor.

offshore outsourcing

consumers in US gain workers in the foreign country gain workers in US in that industry lose

protection does not save jobs.

free trade cost some jobs, but it also creates other jobs. it brings about a global rationalization of labor and allocates labor resources to their highest valued activities.

reshoring is moving production from china back to the US

happening for the following reasons: labor costs are declining in the US wages are increasing in China China is facing a labor shortage

rent seeking

lobbying and other political activity that aims to capture the gains from trade

a lower tariff on imported cars means Australian consumers gain and Australian producers and the government lose.

producers in the rest of the world gain.

2 reasons for imposing a tariff are tariff revenue and rent seeking

rent seeking is the major reason why international trade is restricted

the infant industry argument for protection is that is necessary to protect a new industry to enable it it grow into a mature industry that can compete in world markets.

the argument is based on the idea of dynamic comparative advantage, which can arise from learning-by-doing.

protection does not save the environment

the best hope for cleaner air in third world countries is rapid income growth and free trade contributes to that growth.

when a country relies on importing food, all of the following can happen except

the importing country loses its ability to be self sustaining

the winners from free trade do not win the political argument because

the number of winners from free trade are large but the gain per person is too small to make the cost of political activity worth bearing


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