Chapter 9: International Trade

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Trade raises the economic well-being of a nation in the sense that

the gains of the winners exceed the losses of the losers

Tariff

A tax on imported goods

President Bush imposed temporary tariffs on imported steel in 2002. The reasons for this trade restriction is most consistent with the

National-security argument

Suppose the United States exports cars to Switzerland and imports cheese from France. This situation suggests

The United States has a comparative advantage relative to Switzerland in producing cars, and France has a comparative advantage relative to the United States in producing cheese

With which of the Ten Principles of Economics is the study of international trade most closely connected?

Trade can make everyone better off

Economists view the fact that Florida grows oranges, Texas pumps oil, and California makes wine as

confirmation of the virtues of free trade

An important factor in the decline of the U.S. textile industry over the past 100 or so years is

foreign competitors that can produce quality textile goods at low cost.

The nation of Falconia forbids international trade. In Falconia, you can obtain a computer by trading 3 bicycles. In other countries, you can obtain a computer by trading 5 bicycles. These facts indicate that

if Falconia were to allow trade, it would export computers.

A tariff on a product

increases the domestic quantity supplied

When a country allows trade and becomes an importer of coal

the gains of the domestic consumers of coal exceed the losses of the domestic producers of coal.

A logical starting point from which the study of international trade begins is

principle of comparative advantage

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

producer surplus increases and total surplus decreases in the market for that good.

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

the country will be an importer of the good


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