eCON 101;chp 5

The main difference between a tariff and an import quota is that: a tariff will cause lower prices than an import quota. a tariff will cause higher prices than an import quota. an import quota reduces imports more sharply than a tariff. a tariff generates tax revenue, while an import quota generates rents to the license holders.

a tariff generates tax revenue, while an import quota generates rents to the license holders.

If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____. rise; fall rise; rise fall; fall fall; rise

rise; fall

The United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 5 tractors is _____ bicycles. 100 5 20 125

125

If a market begins to engage in international trade, we can assume that: consumers of the imported good may be worse off. consumers of the exported good may be better off. producers in the exporting industry may be worse off. producers in the importing industry may be worse off.

producers in the importing industry may be worse off.

Honduras exports clothing to the United States, and the United States exports bulldozers to Honduras. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by stating that: --Honduras has an advantage in the technology used in clothing production, while the United States has an advantage in the technology used in bulldozer production. --Honduras has a factor intensity in capital and the United States has a factor intensity in labor. --Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers. --Honduras's climate is more conducive to producing clothing, while the United States' climate is more conducive to producing bulldozers.

-Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers.

Mexico produces lettuce but can also import it. If Mexico imports some lettuce: the domestic quantity supplied will increase. Mexico has a comparative advantage in lettuce production. the price in Mexico will rise to equal the world price. the world price is lower than the domestic price.

the world price is lower than the domestic price.

Reference: Ref 5-5 (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. _____ has (have) an absolute advantage in producing tractors. Neither the United States nor Mexico Mexico The United States Both the United States and Mexico

The US

Comparative advantage arises from: an emphasis on export production. absolute advantage. countries engaging in autarkic behavior. differences in climate, factor endowments, annd technology.

differences in climate, factor endowments, annd technology.

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Columbia will _____. remain the same; increase increase; decrease decrease; remain the same increase; increase

increase; decrease

According to the Heckscher-Ohlin model, Brazil will have a comparative advantage in oranges if the factors _____ in the production of oranges are _____. intensive; abundant intensive; inexpensive that are scarce; imported intensive; imported

intensive'abundant

The job creation argument for protection against free trade: is frequently put forward by economists. is mostly that we need full employment to defend the security of the nation. is that we need full employment to prevent currency depreciation. is that keeping out foreign imports allows the goods and services to be produced by domestic workers.

is that keeping out foreign imports allows the goods and services to be produced by domestic workers.

Reference: Ref 5-2 (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico. machinery; more machinery; less machinery; the same petroleum; less

machinery; less

. In a Ricardian model of international trade, the production possibility frontiers are _____, indicating that the opportunity cost of increasing the production of one item relative to another _____. concave; increases straight lines; is constant convex; is constant straight lines; decreases

straight lines; is constant

Figure: The Production Possibility Frontiers for Jackson and Tahoe Reference: Ref 5-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. Jackson has an absolute advantage in producing: cattle only. neither wheat nor cattle. wheat only. both wheat and cattle.

wheat only