BUS 313

Suppose that Germany decides to become self sufficient in bananas and even to export them. In order to accomplish these​ goals, large tax incentives are granted to companies that will invest in banana production.​ Soon, the German industry is competitive and able to sell bananas at the lowest price anywhere. A comparative advantage for Germany in bananas

. does not exist since the tax incentives do not reduce the high opportunity cost for German banana production.

The following table contains a variety of statements regarding international organizations. More​ specifically, some of the statements are arguments in favor of international organizations and some are arguments against these organizations. Indicate which are​ "in favor" and which are​ "against." Do this by inserting the appropriate label​ (F for in​ favor, A for​ against) in the response box associated with each statement. 1. Ideological motives mayIdeological motives may yield bad or biased advice.yield bad or biased advice. 2. Asymmetries in negotiationAsymmetries in negotiation power and an ability to power and an ability to absorb costs will impose absorb costs will impose implementation and implementation and adjustment costs. 3. issues of sovereignty arise since they may force the adoption of domestic policies against a nations will or interests 4. economic inequality and compound risks to vunerable groups may be generated

1. A 2. A 3. A 4. A neither

The following table lists a variety of goods available nearly everywhere. Some of these are public goods and some are private goods. Indicate which are​ "public" and which are​ "private." Do this by inserting the appropriate label​ (G for​ public, P for​ private) in the response box associated with each good. 1. Street lighting 2. Clothing 3. Vacations 4. Clean air 5. Pollution abatement 6. Music concerts

1. G 2. P 3. P 4. G 5. G 6. P

The table shown below lists a variety of functions performed by various international organizations. Indicate which organization has primary responsibility for each function. Do this by inserting the appropriate organization identification label in the response box associated with each function. The ID labels​ are: 1. Assists national governmentsAssists national governments with necessary but with necessary but difficult reorganizations. 2. Makes technical expertise and advice available to and advice available to developing nations. 3. Keeps markets forKeeps markets for goods as open as possible.goods as open as possible. 4. Ensures that nations followEnsures that nations follow a set of rules governing a set of rules governing fair trade. 5. Acts as a lender of lastActs as a lender of last resort in the case resort in the case of debt crisis or of debt crisis or foreign exchange crisis.foreign exchange crisis.

1. M 2. B 3. G 4. G 5. M

The following table contains two lists. The upper portion lists five real and three fictitious types of agreements pertaining to regional trade. Attached to each is a response box. The​ table's lower portion gives the main characteristics of the five real types of agreements. Match the real types of agreements with their main​ feature, and using the letter​ X, mark the three fictitious agreements. 1. optimal currency area 2. customs union 3. tariff-free zone 4. economic union 5. common market 6. partial trade agreement 7. bretton woods regime 8. free trade area ​

1. x 2. b 3. x 4. c 5. d 6. a 7. x 8. e

Assume the U.S. currently grows 2.3 million tons of fresh winter fruit and that the resources absorbed in the production of this fruit could have produced 225,000 laptop computers.​ Therefore, the opportunity cost of those 2.3 million tons of fruit is ......... computers.

225,000

A key criticism of international institutions is that

A. they are idealogically biased. B. they impose high​ compliance/adjustment costs. C. their decision making lacks transparency. D. they violate national sovereignty.

Which list places regional trade agreements in an order moving from the least provisions to the​ most?

Free-trade Area, Common Market, Economic Union

​Kindleberger's study of the Great Depression of the 1930s led him to believe that market economies are sometimes unstable and that nations can get locked into prolonged downturns. Other economists are not convinced. Suppose that you disagree with Kindleberger and that you believe that​ market-based economies are inherently stable. How would you view the need for international institutions to address the provision of each of the public goods listed​ below?

Inherently stable​ market-based economies may still be exposed to instances of government failure​ (inefficient policies).​ Thus, the need for international institutions to address the provision of international public goods is not obviated.

What are the consequences for the overall​ economy?

Labor and capital are used up in a relatively inefficient endeavor. B. Tax revenues are diverted from other​ uses, creating an additional opportunity cost. C. Economic welfare falls. D. All of the above.

What is the relationship between GATT and​ WTO?

WTO continues and expands the efforts of GATT

Gains from trade can only be achieved​ if:

a country has a comparative productivity advantage.

Suppose that South America could have instead produced those 2.32.3 million tons of fruit at an opportunity cost of​ 150,000 laptops. Because of the difference in opportunity costs between the two​ regions, it can be shown that trade gives the possibility of

a mutually beneficial rearrangement of world production.

The GATT was

an international treaty governing trade.

An important insight of international trade theory is that when countries exchange goods and services one with the​ other, it

benefits both​ countries, and is usually not equally beneficial to both countries.

In periods of economic​ crisis, international institutions help mitigate problems of free riding

by changing countries' expectations about the actions of other countries, through commitments and coordination.

The potential for gains from the rearrangement of production among countries is due to

differing opportunity costs.

A Customs Union allows​ for:

free movement of goods. a common external tariff on​ non-members.

Many people believe that the goal of international trade should be to create jobs.​ Consequently, when they see workers laid off due to a​ firm's inability to compete against cheaper and better​ imports, they assume that trade must be bad for the economy. This assumption is

incorrect since trade is about improving living standards through a more efficient allocation of resources.

A country has a comparative advantage in producing a good if

its opportunity cost of producing that good is lower than elsewhere.

Public goods differ from private goods in that the former are

nonexcludable nondiminishable often provided collectively

Mercantilism advocated that a country

promote exports over imports because it viewed trade as zero​ sum, believing that one​ nation's gain was another​ nation's loss.

For each hour​ worked, a U.S. worker can produce 4 loaves of​ bread, or 2 tons of steel. Canadian workers can produce 2 loaves of​ bread, or 1 ton of steel per hour. The information indicates that

the U.S. has absolute advantage in​ bread, and the U.S also has absolute advantage in steel.

A nation gains from trade even though some individuals benefit while others are hurt because

the economic gains of the winners exceed the economic losses of the losers.

Economists use the term opportunity cost to refer to

the value of the next best alternative occurring as a result of making a particular choice.

​"IMF Conditionality" refers to the idea that countries that seek to borrow funds from the IMF may only be able to do so if

there are reforms in the way the borrowing government interacts with the market.

Economic nationalists in developed countries worry that international trade is destroying the national economy. A common complaint is that trade agreements open the economy to increased trade with countries where workers are paid a fraction of what they earn at home. This argument is faulty since it fails to recognize that

wage differentials reflect productivity differences.