econ final ch 2.1 & 7

The first discussion of comparative advantage appears in a book written by

David Ricardo.

Which of the following is an example of a trade​ restriction?

Japan places a tax on all Korean automobiles.

In the​ 1980s, Japan agreed to limit the quantity of automobiles it would export to the United States. Why did the Japanese government agree to this trade​ restriction?

The Japanese government feared that the alternative would be a tariff or quota on imports of Japanese automobiles imposed by the U.S. government.

Which of the following statements about the importance of trade to the U.S. economy is false​?

The U.S. economy is highly dependent on international trade for growth in its gross domestic product.

Countries gain from specializing in producing goods in which they have​ ________ and trading for goods in which other countries have​ ________.

a comparative​ advantage; a comparative advantage

A quota is

a limit placed on the quantity of goods that can be imported into a country

Which of the following is the best example of a voluntary export​ restraint?

a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan

The​ ________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.

attainable

Which of the following is the best example of a​ tariff?

a​ $5,000 per-car fee imposed on all sports utility vehicles imported into the United States

Trade that is within a country or between countries is based on the principle of

comparative advantage.

Many economists​ ________ protectionism because it​ ________ consumers and​ ________ jobs in domestic industries that use protected products.

criticize; causes losses​ to; eliminates

Autarky is a situation in which a country

does not trade with other countries.

As percentage of​ imports, the largest product category of U.S. imports from China is

electronic products.

Domestically produced goods and services sold to other countries are referred to as

exports.

To compete in the automobile​ market, Tesla must make many strategic decisions such as whether to introduce a new car​ model, how to sell and service its​ cars, and where to advertise. At​ Tesla's Fremont, California​ plant, managers must decide on the monthly production quantities of their S and X models. In making this​ decision, the managers

face a trade-​off, because producing more of one model means producing less of the other.

T/F: Dumping refers to countries exporting unwanted and inferior products to other countries.

false

Domestic producers require time to gain experience and lower their unit​ costs; this will allow these producers to compete successfully in international markets. This statement describes the​ ________ argument for protectionism.

infant industry

Members of Congress promising to support each​ other's legislation is known as

logrolling

A quota

makes domestic consumers worse off

A tariff

makes domestic producers better off.

If the production possibilities frontier is​ linear, then

opportunity costs are constant as more of one good is produced.

In the 1930s the United States charged an average tariff rate

that exceeded 50 percent.

T/F: If a country has an absolute advantage in producing a​ product, it may not have a comparative advantage in producing that product.

true

T/F: One of the main sources of comparative advantage is natural resources.

true

T/F: One reason a country does not specialize completely in production is that production of most goods involves increasing opportunity costs.

true

T/F: The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called comparative advantage.

true

Whenever a buyer and a seller agree to​ trade, both must believe they will be made better off

whether the buyer and seller live in the same​ (or different) city or country.

If Norwegian workers are more productive than Albanian​ workers, then trade between Norway and Albania

will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade​ restrictions?

Consumers pay a high cost for jobs saved through trade restrictions.

saddles spurs(pairs) Mateo: 75 225 Celeste 100 225 Mateo and Celeste produce custom saddles and spurs. The table above lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. Select the statement that accurately interprets the data in the table.

Mateo has a greater opportunity cost than Celeste for making saddles.

Imports are goods and services bought domestically

but produced in other countries

An economic principle that explains why people pursue different occupations is

comparative advantage

International trade

helps consumers but hurts firms that are less efficient than their foreign competitors.

Protectionism is the use of​ ________ to protect domestic firms from foreign competition.

trade barriers

Output per hour of work swords belts Estonia: 5 2 Morocco: 3 3 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. What is the opportunity cost to produce 1 belt in​ Morocco?

1 sword

empanadas tacos madison: 30 50 austin: 24 32 Madison and Austin own Cafe​ Ole'. The table above lists the number of empanadas and tacos Madison and Austin can each make in one hour. Select the statement that accurately interprets the data in the table.

Austin has a comparative advantage in making empanadas

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.

Bill has an absolute advantage in picking berries and Rob has an absolute advantage in catching fish.

All but one of the following statements is used to justify protectionism. Which statement is not used to justify​ protectionism?

Free trade leads to higher prices for imported goods.

The first example of comparative advantage appeared in a book that was published in 1817. This example showed that mutually beneficial trade between two countries​ (England and​ Portugal) was possible. The example assumed that two goods​ (wine and​ cloth) could be produced by both countries. Which of the following describes the conclusion of this​ example?

Portugal had a comparative advantage in wine and England had a comparative advantage in cloth

T/F: Globalization is the process of countries imposing trade restrictions on other countries.

false

The World Trade Organization​ (WTO) promotes foreign trade and​ investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. All of the following are reasons for these anti-globalization protests except

protesters object to the loss of intellectual property​ (such as software programs and​ movies) that results from foreign trade and investment.

In​ 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by passing the Smoot-Hawley Tariff. In response to this​ tariff, other countries​ ________ and international trade​ ________.

raised their​ tariffs; collapsed

In the real world we​ don't observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except

some countries have more resources than other countries.

Free trade refers to trade between countries

that is without restrictions.

T/F: A quota is a numerical limit on the quantity of a good that can be imported.

true

T/F: Although the United States is the second largest exporting​ country, international trade is less important to the U.S. than it is to most other countries.

true

T/F: Assume that Finland and Latvia produce only two goods. If Finland has an absolute advantage in the production of these two goods compared to​ Latvia, Finland can still benefit from trade with Latvia.

true