Trade (DO NOT DELETE)
Suppose France and Spain produce only cloth and wine. Assume that each country uses only labor to produce each good, and that the cloth and wine made in France and Spain are exactly alike. The table below shows how much each country can produce of each good with one hour of labor.
According to the table, the opportunity cost to Italy of producing one more unit of cloth is 0.76 units of wine and the opportunity cost to Portugal of producing one more unit of cloth is 2.25 units of wine. Italy has a comparative advantage in producing cloth and has a comparative advantage in producing wine.
Consider the market for sugar in the United States depicted in the figure to the right. Assume the world price of sugar is $0.16 per pound, and at that price the United States can buy as much sugar as it wants without causing the world price to rise
As a result of the tariff, consumers will be worse off in terms of consumer surplus, and producers will be better off in terms of producer surplus
Assume the table below shows the quantities of bananas and pineapples that a plot of land can produce in a growing season in Columbia and the Philippines. If both countries specialize completely by producing only that for which they have a comparative advantage and then trade, what would be the terms of trade that would benefit both countries?
Both countries would benefit from trade if Columbia were to trade 20,000 bananas for 12,000 pineapples with the Philippines.
The United States produces beef and also imports beef from other countries. The graph to the right shows the supply and demand for beef in the United States, under the assumption that the United States can import as much as it wants at the world price of beef without causing the world price of beef to increase.
How much beef does the United States import at the world price(WP)? 500mil Now suppose that the United States imposes a tariff on beef of $0.50 a pound. How much beef is now imported? 200mil Do domestic producers of beef gain or lose when the United States imposes a tariff on beef? Gain Does the government gain or lose when the United States imposes a tariff on beef? Gain Do domestic consumers of beef gain or lose when the United States imposes a tariff on beef? Lose
Suppose France and Portugal produce only cloth and wine. Assume that each country uses only labor to produce each good, and that the cloth and wine made in France and Portugal are exactly alike. The table below shows how much each country can produce of each good with one hour of labor:
If France trades 750 units of cloth for 750 units of wine with Portugal, then, with trade, France will be able to consume the same amount of wine and 450 additional units of cloth. If France trades 750 units of cloth for 750 units of wine with Portugal, then, with trade, Portugal will be able to consume the same amount of cloth and 562 additional units of wine.
Linda and Sandy own The Preppy Puppy, a dog grooming business. The table above lists the number of dogs Linda and Sandy can each bathe and groom in one week.
Linda has a comparative advantage in dog bathing.
Sarita and Gabriel own S&G Bakery. The table to the right lists the number of pies and cakes Sarita and Gabriel can each bake in one day.
Sarita's opportunity cost for baking cakes is less than Gabriel's. Sarita has a comparative advantage in baking cakes. Gabriel has a comparative advantage in baking pies.
Using the numbers in the table, determine which country has a comparative advantage in producing each product.
The opportunity cost for Canada to produce one Smartphone is 1.40 Fitness Bracelet. Canada should produce Smartphones and Switzerland should produce Fitness Bracelets.
The graph on the right shows Tanzania's production possibilities frontier for cashew nuts and mangoes. Assume that the output per hour of work is 8 bushels of cashew nuts or 2 bushels of mangoes, and that Tanzania has 1,000 hours of labor. Without trade, Tanzania evenly splits its labor hours between cashews and mangoes and produces and consumes at point A. Suppose Tanzania opens trade with Kenya, and Kenya's output per hour of work is 1 bushel of cashew nuts or 1 bushel of mangoes. Having the comparative advantage, Tanzania completely specializes in cashew nuts. 1.) Using the point drawing tool, locate the point of production for Tanzania. Label this point 'B'. Suppose Tanzania keeps 5,000 bushels of cashew nuts and exports the remaining 3,000 bushels. The terms of trade are 1 bushel of mangoes for 2 bushels of cashew nuts. 2.) Using the point drawing tool, locate the point that shows the amount of cashew nuts and mangoes that Tanzania consumes with trade. Label this point 'C'. Which of the following statements is true for Tazania with trade?
With trade, Tanzania is producing on its PPF but not consuming on its PPF.
The figure to the right shows the U.S. demand and supply for leather footwear. Under autarky, the producer surplus is... Under autarky, the deadweight loss is... Suppose the government allows imports of leather footwear into the United States. What will be the quantity of imports?... Suppose the government allows imports of leather footwear into the United States. The market price falls to $18. What is the value of consumer surplus?...
a) $105 b) $0 c) 10 units d) $320
Since 1953 the United States has imposed a quota to limit the imports of peanuts. The figure to the right illustrates the impact of the quota. What is the area of domestic producer surplus without a quota? What is the area of consumer surplus after the imposition of the quota? What is the area that represents revenue to foreign producers who are granted permission to sell in the U.S. market when there is a quota? What is the area that represents the deadweight loss as a result of the quota?
a) C b) A+G+H c) I+J+K+L d) E+M
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. The figure to the right shows the impact of this tariff. The tariff revenue collected by the government equals the area... Without the tariff in place, the United States consumes... With the tariff in place, the United States consumes... With the tariff in place, the United States imports... As a result of the tariff, domestic producers increase their quantity supplied by... The increase in domestic producer surplus as a result of the tariff is equal to the area... The loss in domestic consumer surplus as a result of the tariff is equal to the area... If the tariff was replaced by a quota which limited rice imports to 16 million pounds, the amount of additional revenue received by rice importers would equal...
a) E b) 42 million c)31 million pounds of rice. d) 16 million pounds of rice e) 6 million pounds of rice f) C. g) C+D+E+F h) $6.4 million
The graph shows the effect of a $0.50 per board foot tariff on lumber. What is the quantity of lumber supplied (in thousands of board feet) by domestic producers after the tariff? What is the reduction in U.S. lumber consumption (in thousands of board feet) as a result of the tariff?
a)900 b)100
Assume the market for pineapples in the United States is illustrated by the figure to the right, with the supply of pineapples and the demand for pineapples in the U.S. as indicated. Assume trade restrictions are currently in place such that the domestic price of pineapples in the U.S. is p1
rectangle: new government revenue triangle: deadweight loss