ECON Quiz 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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 belt in Morocco?

1 sword

In the United States during the Great Depression, tariffs were ________ than they were following World War II, and ________ than they are today.

higher; higher

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

is incorrect. Free trade raises living standards by increasing economic efficiency

If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible.

opportunity

Which of the following statements is true?

The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

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

comparative advantage.

Economists believe the most persuasive argument for protectionism is to

protect infant industries.

The Smoot-Hawley Tariff

raised average tariff rates by over 50 percent in the United States in 1930.

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

Trade restrictions tend to preserve ________ in the protected industries and lead to ________ in other industries.

relatively few jobs; job losses

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.

As a percentage of GDP, imports are greater than exports for which of the following countries?

the United States

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

trade barriers

In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to limit their exports to a country. What are these types of agreements called?

voluntary export restraints

All of the following are sources of comparative advantage except

a strong foreign currency exchange rate.

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.

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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many belts will Morocco gain compared to the "without trade" numbers?

10

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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many belts will Estonia gain compared to the "without trade" numbers?

10

A quota

makes domestic consumers worse off.

Figure 7-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. What will the market price be?

$24

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.

Table 7-6 Output per hour Production and Productionof work Consumption without Trade with Trade SwordsBelts SwordsBelts SwordsBeltsEstonia53 10040 2000Morocco22 6060 0120 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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Refer to Table 7-6. Which country has an absolute advantage in producing belts?

Estonia

In the past two decades the United States lost its comparative advantage in automobiles to Japan. What factor was most responsible for the development of Japan's comparative advantage in automobiles?

Japanese firms excelled in process technology.

Table 7-2 EmpanadasTacosMadison3050Austin2432 Madison and Austin own Cafe Ole'. Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. Refer to Table 7-2. Select the statement that accurately interprets the data in the table.

Madison has a comparative advantage in making tacos.

Figure 7-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. What will be the quantity demanded?

Q2

Figure 7-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. The market price falls to $24. What area represents consumer surplus?

R + S + T + U

Governments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier?

a requirement that the employees of domestic firms that engage in foreign trade pay income taxes

The Trans-Pacific Partnership (TPP) is an agreement between the United States and ________ that was meant to reduce trade barriers.

eleven other countries

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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.Refer to Table 7-6. Prior to trade, what was the opportunity cost to produce 1 belt in Estonia?

1.67 swords

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 7-3 illustrates the impact of the quota. Refer to Figure 7-3. If there was no quota, how many pounds of peanuts would be imported?

30 million

Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 7-2 shows the impact of this tariff. Refer to Figure 7-2. As a result of the tariff, domestic producers increase their quantity supplied by

6 million pounds of coffee.

Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 7-2 shows the impact of this tariff. Refer to Figure 7-2. If the tariff was replaced by a quota which limited coffee imports to 20 million pounds, the amount of revenue received by coffee importers would equal

$50 million.

Despite the Obama administration's support of the Trans-Pacific Partnership (TPP), the AFL-CIO labor union has argued that the TPP will not

all of the above

Costa Rica is a leading exporter of bananas. What explains the comparative advantage of this country in banana production?

climate and soil conditions in Costa Rica which are well-suited for banana production

Twenty-nine countries in Europe have formed the European Union (EU). After the EU was formed it

eliminated all tariffs among its member countries

At the time policymakers debated the Trans-Pacific Partnership, the United States imposed ________ on the value of imported shoes and shoe parts.

tariffs of 25 to 67.5 percent

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.

Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 7-3 illustrates the impact of the quota. Refer to Figure 7-3. With a quota in place, what is the quantity consumed in the domestic market and what portion of this is supplied by imports?

Domestic consumption equals 34 million pounds of which 16 million pounds are imports.

A tax imposed by a government on imports of a good into a country is called a

tariff.

Output per hour Production and Productionof work Consumption without Trade with Trade SwordsBelts SwordsBelts SwordsBeltsEstonia53 10040 2000Morocco22 6060 0120 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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Refer to Table 7-6. If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many swords will Morocco gain compared to the "without trade" numbers?

15

________ is the ability to produce more of a good or service than competitors when using the same amount of resources.

Absolute advantage

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

David Ricardo.

Table 7-6 Output per hour Production and Productionof work Consumption without Trade with Trade SwordsBelts SwordsBelts SwordsBeltsEstonia53 10040 2000Morocco22 6060 0120 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. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. Refer to Table 7-6. Which country has a comparative advantage in producing belts?

Morocco

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as

NAFTA.

Figure 7-1 shows the U.S. demand and supply for leather footwear. Refer to Figure 7-1. Suppose the government allows imports of leather footwear into the United States. What will be the domestic quantity supplied?

Q0

Table 7-1 Berries FishRob 20 80Bill 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. Refer to Table 7-1. Use the table above to select the statement that accurately interprets the data in the table.

Rob has a greater opportunity cost than Bill for picking berries.

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

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

Article Summary According to JP Morgan Chase, increased shipments of Chinese steel over the past two years has generated a wave of protectionism from countries around the globe. Decreasing domestic demand and slower economic growth have resulted in a large increase in steel exports from China, driving down global prices. The almost doubling of Chinese steel exports since 2013 has steel mills in areas ranging from South Africa to Europe to India to the United States pushing their governments for protectionist measures against the Chinese-produced steel.Source: Jasmine Ng, " JPMorgan Says `Waves of Protectionism' Will Cap China Steel," Bloomberg.com, October 4, 2015. Refer to the Article Summary. Assume countries initially enacted protectionist measures against Chinese steel imports. If these protectionist measures were eventually eliminated, then all else equal, the price of steel in those countries would________ and the quantity of steel demanded in those countries would ________.

decrease; increase

Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 7-2 shows the impact of this tariff. Refer to Figure 7-2. The increase in domestic producer surplus as a result of the tariff is equal to

$11.25 million.