eco 17

Quota rents are profits for foreign firms or governments from

(domestic price - world price) x Qimports.

advantage is the ability to produce more of a good than others with a given amount of resources.

Blank 1: Absolute

comparitive Blank 1Blank 1 comparitive , Incorrect Unavailableadvantage relates the ability to produce;Blank 2Blank 2 absolute , Incorrect Unavailableadvantage determines who produces what.

Blank 1: Absolute Blank 2: Comparative

By responding to the prices of inputs and outputs and choosing to produce the good that earns it the highest profits, each firm ends up producing the good in which it has a advantage.

Blank 1: comparative

Only a firm with a Blank 1Blank 1 absolute , Incorrect Unavailable advantage at producing a product— that is, the lowest Blank 2Blank 2 opportunity , Correct Unavailable cost of production—will be able to make the product profitably.

Blank 1: comparative Blank 2: opportunity

When a quota is imposed, domestic quantity demanded , domestic quantity supplied , and the quantity of imports .

Blank 1: decreases or falls Blank 2: increases or rises Blank 3: falls or decreases

The of each factor of production incorporates the cost of using that factor to produce other goods.

Blank 1: price or cost Blank 2: opportunity

An import is a limit on the amount of a particular good that can be imported.

Blank 1: quota

The quantity of imports multiplied by the difference between the domestic price and the world price goes to whoever holds the rights to import under a .

Blank 1: quota

If we impose trade restrictions to protect the owners of scarce factors of production, the economy as a whole would Blank 1Blank 1 expand , Incorrect Unavailable (shrink/expand).

Blank 1: shrink

Every country produces more than one good because restrictions and political concerns put limits on how much Blank 1Blank 1 specialization , Correct Unavailable we can expect.

Blank 1: specialization

What are the two main types of standards on imported goods?

Import standards on specific countries Blanket standards imposed on all imports

True or false: The WTO does not have an army or the power to enforce its decisions.

True

_________ advantage is the ability to produce more of a good than others with a given amount of resources but _________advantage is the ability to produce a good or service at a lower opportunity cost than others.

absolute comparative

Import standards on certain countries and blanket standards are solutions that some countries use to address

differing labor or environmental standards.

Free trade causes

factor prices to converge across countries.

When everyone responds to the profit motives they face as individual producers, firms will produce

goods in which they have a comparative advantage, and the gains from trade will occur.

When everyone responds to the profit motives they face as individual producers, the

invisible hand guides them to make products in which they have an comparative advantage.

The variation among countries in terms of laws and safety policies, labor standards, environmental regulations, and taxes is

one source of friction in international trade.

Over time, technology tends to spread from country to country, equalizing _____ costs.

opportunity

The price of each factor of production incorporates the cost of using that factor to produce other goods.

opportunity

Even though U.S. workers are more productive shirt-makers, U.S. firms import shirts made in China because

there are gains from trade.

Any move to liberalize or restrict creates losers as well as winners.

trade

The WTO was founded explicitly to prevent

trade wars from escalating.

True or false: The effect of the quota is very similar to the effect of a tariff.

True

When standards are used, they are integrated into individual trade agreements with those countries.

Blank 1: import

A movement that certifies and labels products that meet certain standards, such as minimum wages and conditions for workers, and that do not cause harm to the environment is the

fair trade movement.

The reality is that the day-to-day business of trade is carried out almost entirely by

firms and individuals.

When everyone responds to the Blank 1Blank 1 i , Incorrect Unavailable motives they face as individual producers, firms will produce goods in which they have a comparative advantage, and the gains from trade will occur.

profit

Trade liberalization refers to policies and actions that

reduce trade restrictions and promote free trade.

If an autarky decides to trade and begins to import, a lower world price would push the domestic quantity demanded _____ (up/down) and the domestic quantity supplied _____ (up/down).

up; down

Under the Bush steel tariff, foreign firms selling steel in the U.S. had to pay $ per ton to the government for the privilege of importing.

75

standards on specific countries typically address production issues in the country of origin, such as labor or environmental conditions.

Blank 1: Import

Assume when the economy of Big (not a price taker) is an autarky, the domestic price exceeds the world price. When the economy of Big moves from autarky to free trade, assuming world demand increases by more than world supply, the economy of Big as a whole is off. Big producers will be off since there is a in the domestic price.

Blank 1: better Blank 2: worse Blank 3: decrease , fall, or drop

As a general rule, free trade increases for factors that are domestically abundant, and it decreases the of factors that are domestically scarce.

Blank 1: demand Blank 2: supply

Arguments over trade policy are debates about the of benefits within each country.

Blank 1: distribution or allocation

Typically, the most important goal of a tariff is to protect the interests of Blank 1Blank 1 tariff , Incorrect Unavailable producers.

Blank 1: domestic

If an autarky has a price below the world price and decides to begin exportation, the higher world price would push the domestic quantity demanded Blank 1Blank 1 up , Incorrect Unavailable and the domestic quantity supplied Blank 2Blank 2 down , Incorrect Unavailable. The gap between them is made up by product Blank 3Blank 3 import , Incorrect Unavailable.

Blank 1: down or lower Blank 2: up or higher Blank 3: exports or export

If the domestic price for a product is below the world price, and an autarky decides to convert to an open market, it will Blank 1Blank 1 import , Incorrect Unavailable goods.

Blank 1: export

If the domestic price for a product is below the world price, and an autarky decides to convert to an open market, it will (one word). The domestic market price for the product will rise and more producers will be willing to produce the product.

Blank 1: export Blank 2: domestic

The movement attempts to inform and influence consumers' choices.

Blank 1: fair Blank 2: trade

Suppose you want to hire workers to make hats in your factory, but those workers can also choose to supply their labor to a company that makes salsa. If the workers are more productive at making salsa than hats, the salsa factory will be willing to offer them a Blank 1Blank 1 minimum , Incorrect Unavailable wage.

Blank 1: higher , better, or greater

If the domestic price for a product is above the world price, and an autarky decides to convert to an open market, it will goods.

Blank 1: import

If the domestic price for shirts is above the world price, and an autarky decides to convert to an open market, it will Blank 1Blank 1 a , Incorrect Unavailable shirts. The domestic market price for shirts will Blank 2Blank 2 a , Incorrect Unavailable (increase/decrease), and Blank 3Blank 3 a , Incorrect Unavailable (more/fewer)domestic producers will be willing to produce the product.

Blank 1: import Blank 2: fall , decrease, drop, or lower Blank 3: fewer or less

The problem of standards can be approached in two main ways: policymakers making explicit laws about imports, and consumers making voluntary purchasing decisions.

Blank 1: inconsistent

If the workers are less productive at making salsa than hats, the salsa factory will be willing to offer them a lower wage, which will Blank 1Blank 1 decrease , Incorrect Unavailable (increase/decrease) the supply of labor for making hats, and Blank 2Blank 2 raise , Incorrect Unavailable (raise/lower) the wage for hat-makers.

Blank 1: increase Blank 2: lower, decrease, or reduce

Assume when the economy of Big (not a price taker) is an autarky, the domestic price exceeds the world price. When the economy of Big moves from autarky to free trade, assuming world demand increases by more than world supply, the world price will Blank 1Blank 1 decrease , Incorrect Unavailable and the domestic price will Blank 2Blank 2 increase , Incorrect Unavailable.

Blank 1: increase or rise Blank 2: decrease, fall, or drop

The result of free trade is that the owners of domestically scarce factors of production lose due to Blank 1Blank 1 lose , Incorrect Unavailable competition, and the owners of domestically abundant factors gain from Blank 2Blank 2 gain , Incorrect Unavailable demand.

Blank 1: increased, more, higher, or foreign Blank 2: increased , higher, or more

The result of free trade is that the owners of domestically scarce factors of production Blank 1Blank 1 more , Incorrect Unavailable due to increased competition, and the owners of domestically abundant factors Blank 2Blank 2 more , Incorrect Unavailable from increased demand.

Blank 1: lose or suffer Blank 2: gain , win, succeed, or benefit

The fact that companies in China sell clothing to the U.S. tells us that China's cost of making a shirt is lower than that of the United States and therefore they have a(n) advantage in clothing.

Blank 1: opportunity Blank 2: comparative

Assume when the economy of Big is an autarky, the domestic price exceeds the world price. When the economy of Big (not a price taker) moves from autarky to free trade, the world demand curve shifts to the Blank 1Blank 1 better , Incorrect Unavailable because Big consumers Blank 2Blank 2 worse , Incorrect Unavailable the market and the world supply curve moves a bit to the Blank 3Blank 3 d , Incorrect Unavailable, because Big shirt producers Blank 4Blank 4 f , Incorrect Unavailable the world market.

Blank 1: right Blank 2: enter, join, or flood Blank 3: right Blank 4: enter or join

Typically, the most important goal of a is to protect the interests of domestic producers.

Blank 1: tariff

Under a , the U.S. government collects tax revenue equal to the quantity of imports multiplied by the difference between the domestic price and the world price. Under a , this value goes to whoever holds the rights to import.

Blank 1: tariff Blank 2: quota

An important distinction between the impact of and is who benefits from the difference between the value of the product in the U.S. and their value on the world market.

Blank 1: tariffs or tariff Blank 2: quotas or quota

The problem of inconsistent standards can be approached in which of the following two main ways?

Consumers making voluntary purchasing decisions Policymakers making explicit laws about imports

The North American Agreement on Labor Cooperation expresses the agreement of the three countries to work in the long term toward a set of labor standards. The standards address various issues, including which of the following?

Enforcement of minimum wages Elimination of child labor Equal pay for men and women Prevention of workplace injuries

True or false: Many countries have voluntarily joined the WTO and agreed in principle to liberalize their trade policies and abide by the WTO's decisions.

True

Import standards on specific countries are

are less common than blanket standards.

A country with plenty of capital and little land may have a _____ advantage in capital-intensive activities such as producing high-tech electronics, providing financial services, or biomedical research.

comparative

At any given time, technology or production processes developed in a particular country may give that country a temporary _____ advantage.

comparative

A tariff causes

deadweight loss and is inefficient.

As a general rule, free trade increases

demand for factors that are domestically abundant, and it decreases the supply of factors that are domestically scarce.

Trade allows consumers to buy at a price where

domestic demand doesn't equal domestic supply

The restriction or prohibition of trade in order to put political pressure on a country is a(n) ____

embargo

Free trade acts to

equalize the supply of and demand for factors across countries.

The North American Agreement on Labor Cooperation expresses the agreement of the three countries to work in the long term toward a set of labor standards. This is an example of

import standards.

Under the Bush steel tariff,

imports were smaller than before the tariff.

Under the Bush steel tariff, domestic steel producers enjoyed a(n) (increase/decrease) in surplus.

increase

The quantity that consumers want to buy at any given price, and the quantity that domestic producers are willing to sell at any given price

is not affected by trade.

An import quota is a on the amount of a particular good that can be imported.

limit

Absolute advantage is the ability to produce

more of a good than others with a given amount of resources.

Every country produces more than one good because

national economies are not perfectly free markets.

An embargo is a

prohibition of trade in order to put political pressure on a country.

A preference for policies that place limits on trade is called .

protectionism

The value that under a tariff becomes tax revenue, and under a quota turns into profits for foreign firms or governments, is called

quota rents.

Although additional is created by trade, there are gainers and losers.

surplus

One source of friction in international is the variety of laws and policies governing economies.

trade

Policies and actions that reduce trade restrictions and promote free trade are often referred to as

trade liberalization.

The gains from trade refer to the increase in

welfare in both countries that results from specialization and trade.