ECON: International Trade Notes
Which of the following describes domestic price?
- The price of a good, service, or resource that prevails in a domestic market. - It is the same as world price in the small market if the country is open to trade.
By expanding markets, international trade benefits a country in important ways including:
- goods that were relatively more expensive can be purchased for less from foreign producers, increasing consumers' purchasing power and making their income go further. - trade provides consumers access to different types of goods, services, and resources that were previously unavailable, increasing their well-being.
The sugar quota persists because
-the price increase from the quota does not cost each sugar consumer a lot each year. -sugar producers account for 40% of total agricultural lobbying expenditures.
India will produce 2 tractors and
10 pounds of rice.
The United States will produce 4 tractors and
8 pounds of rice.
quota
A numerical limit on the amount of a good that can be imported. Sometimes called an import quota.
autarky
A situation in which a country is closed to any international trade.
Terms of trade
Depends on the opportunity costs of the buyers and sellers.
Comparative advantage
Identifies the producer that has the low relative opportunity cost for a specific good in the market.
Consumer surplus is the difference between the:
Maximum price consumers are willing and able to pay for a good or a service and the price they actually pay.
Europeans purchase wine produced in California and Argentina to have greater choice.
The benefit of international trade applies in this case is increased variety of goods.
The United States, a high-cost producer of oil, imports roughly half of the oil needed to produce the nation's gasoline.
The benefit of international trade applies in this case is lower-cost goods.
Japan does not have a huge reserves of neodymium and has to import the metal from China.
The benefit of international trade that applies in this case is
Specialization
The choice of good that the low-relative cost producer will focus on.
Which of the following describes world price?
The price of a good, service, or resource that prevails in the world market.
Suppose that, currently, both the United States and India spend half of their resources producing tractors and half of their resources producing rice.
There will be 6 tractors and 18 pounds of rice produced in total. or 8 and 20.
any policy that is designed to reduce the competitiveness of foreign producers that wish to sell their goods or services in the domestic market.
a barrier to trade
When a domestic country is a small relative to world markets, is a price taker, and its consumption and production do not affect the world price it can be studied using:
a small-country model.
tariff
a tax or fee that must be paid on goods imported from other countries.
The difference between the maximum price consumers are willing and able to pay for a good or service
and the price that they actually pay is called consumer surplus.
As long as the terms of trade:
are between both countries' opportunity costs, trade will benefit both countries.
Graphically, total ___ surplus is the entire area between the supply and demand curves, from a quantity of zero to the quantity traded.
economic
In 2014, the United States imposed tariffs on nine different steel-producing countries because:
firms from these countries were selling their steel in the US at a price below their average cost.
The benefit, or wealth, that accrues to a buyer or a seller as a result of trading one good, service, or resource for another is the:
gains from trade.
When two people specialize, total production between the two people
increases.
Imposing trade restrictions seems attractive to some people, but the end result will be
less international trade and, as a result, less global wealth is created.
In the 1980's, to avoid having tariffs or import quotas applied to their products, Japanese auto manufacturers agreed to:
limit the number of cars they shipped to the U.S. to fewer cars than they wanted to sell.
When there are barriers to trade, consumers
lose while producers gain, and total wealth decreases.
to graph the effect of an import quota, shift
only the portion of the domestic supply curve aboce the world price, Pw, to the right.
The unit used to measure
producer surplus is dollars.
If you were willing to sell your used bike for $400, but someone paid you $500 for it, you received
producer surplus of $100.
the difference between the price producers receive for a good or service and the minimum price they are willing and able to accept is
producer surplus.
when a tariff is imposed on imports, the price in the market
rises by the full amount of the tariff.
The practice of "dumping" describes:
selling products in a foreign market at a price below average cost.
Economic surplus is also known as:
social welfare or total surplus.
The effect of one trade barrier, a ____ is an increase in the price consumers pay, since it forces importers to raise their prices.
tariff
Absolute advantage refers to:
the ability to produce more output, given similar resources, than another producer.
tariff revenue equals a tariff times
the quantity imported
Deadweight loss is the:
the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium.
The dollar value of a quote rent is equal to the size of the quota
times the difference between the quota price and the world price.
Consumer surplus can be thought of as the wealth that
trade creates for consumers in a market.
One of the major themes in economics is that
trade creates wealth.
generally found by comparing changes in consumer and producer surplus.
welfare effects