Macroeconomics: International Trade

Rank output resulting from the market conditions, from highest to lowest

1. A free trade market 2. A market with a quota 3. Domestic market with no international trade

_____ is a state that exists whenever an entity can survive or continue its activities without external assistance or international trade

Autarky

_____ advantage is the foundation of establishing the benefits of trade

Comparative

One of the major themes in economics Is that trade creates wealth. True/false

True

A barrier to trade reduces the _____ of foreign goods and services

imports

Specialization is based on relative _____ cost, not necessarily on whether on country can produce more of a good than another country

opportunity

In many of the examples of specialization and trade it is sometimes that one country is getting a better deal than another but:

-if they trade, it must be the case that they are both better off

Which of the following describes domestic price?

-it is the same as world price in the small market if the country is open to trade -the price of a good or service or resource that prevails in a domestic market

Some economists say the united states should not even try to produce its own clothing because:

-other countries can produce clothing much more inexpensively than the united states -the labor and capital that the united states use to produce expensive good could be used to produce other goods that the united states can produce more efficiently

The sugar quota persists because:

-sugar producers account for 40% of total agricultural lobbying expenditures -the price increase from the quota does not cost each sugar consumer a lot each year

for two parties to be willing to trade, trade terms must be:

-terms of trade must be less than the buyer's opportunity cost but greater than the sellers opp. Cost

Deadweight loss is the:

-the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

By expanding markets, international trade benefits a country in important ways including:

-trade provides consumers access to different types of goods, services, and resources that were previously unavailable, increasing their well-being. -goods that were relatively more expensive can be purchased for less from foreign producers, increasing consumers' purchasing power and making their income go further

_____ is defined as having a lower relative opportunity cost than another producer

Comparative advantage

In an economy of two goods:

a country cannot have the comparative advantage in both goods

Any policy that is designed to reduce the competitiveness of foreign producers that wish to sell their goods/services in the domestic market is a:

barrier to trade

Because people and businesses sometimes oppose international trade, governments create trade

barriers

Specialization is based on ______ advantage, not necessarily on whether one country can produce more of a good than another country.

comparative

Given the option of being self-sufficient or trading with others, as long as a _____ exists, there will be potential for trade to make both parties better off

comparative advantage

Given the option of being self-sufficient or trading with others, as long as a _____ exists, there will be potential for trade to make both parties better off.

comparative advantage

In economics, we state that trade:

creates wealth

International trade involves exchanging:

currencies

When Congress failed to renew the ethanol tariff in 2012, we expected ethanol prices to _____ and output to _____.

decrease; increase

When a country opens its market to international trade, if the world price is greater than the domestic equilibrium price:

domestic producers make more output to sell abroad so total output increases

In 2014, the united states imposed tariffs on nine different steel-producing countries because:

firms from these countries were selling their steel in the united states at a price below their average cost

Given the option of being self-sufficient or trading with others, there will be potential for trade to make both parties better off

if a comparative advantage exists

The goods and services made in other countries that we purchase are

import

A quota is a numerical limit on the amount of a good that can be _____

imported

A quota is a numerical limit on the amount of a good that can be:

imported

When two people specialize, total production between two people _____

increases

The model and concepts used to develop the economics of _____ are similar to those used to illustrate the effects of _____

international trade; trade between individuals

When there are barriers to trade, consumers _____ while producers _____, and total wealth _____

lose; gain; decreases

The producer with the _____ relative opportunity cost has a comparative advantage and should specialize in the production of that good.

lowest

To graph the effect of an import quota, shift:

only the portion of the domestic supply curve above the world price, Pw, to the right

The value of the next best forgone alternative is the _____ cost

opportunity

If the government wants to maximize the amount of tariff revenue it collects on any one good it has to:

pay attention to the size of the tariff it sets

The difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept is _____ surplus

producer

When a tariff is imposed on imports, the price in the market

rises by the full amount of the tariff.

The model and concepts used to develop the economies of international trade are:

similar to those used to illustrate the effects of trade between individuals

When using the _____ country model, the country adopts the world price for any good, service, or resource as the domestic price.

small

Quotas can have unintended consequences such as:

substituting less expensive goods for the good that has a quota.

The difference between the maximum price consumers are willing and able to pay for a good or a service and the price they actually pay is the consumer _____

surplus

deadweight loss is the value of the economic _____ that is forgone when a market is not allowed to adjust its competitive equilibrium

surplus

Which of the following describes world price?

the price of a good, service or resource that prevails in the world market

The dollar value of a quota rent is equal to the size of the quota

times the difference between the quota price and the world price

the dollar value of a quota rent the size of the quota:

times the difference between the quota price and the world price

When a country is opening up to trade, resources in the economy flow:

toward the goods for which producers have a comparative advantage

Every economists use the phase _____ to refer to the positive gains enjoyed by both buyers and sellers when they trade.

trade creates wealth

In the 1980s the U.S. government established a type of import quota called a:

voluntary export restriction

The effect that a change in market conditions, usually price, has on the welfare, or economic well-being of market participants are _____ effects

welfare