Exercise 4: International Trade

Taken collectively, people in nations that engage in international trade are NOT likely to:

be made worse off.

If Japan levies tariffs on U.S. goods entering Japan, this will tend to:

damage U.S. producers and benefit Japanese producers.

In the market for wooden furniture, if a country's price in the absence of trade is lower than the price with trade, the country must:

export wooden furniture.

If the ________ differ(s) between two countries, this suggests the possibility for mutually advantageous trade.

factor endowments

If a nation imports a good when the economy is opened to trade, the domestic price of the good will ________ and domestic consumption will ________.

fall; rise

Mexico is relatively labor-abundant when compared with the United States. Therefore, Mexico has a comparative advantage in ________ compared with the United States.

goods that are labor-intensive in production

A tax imposed by a government on imported goods or services is a:

tariff

An example of a tariff is a:

tax of 10% of the value of each Honda automobile imported from Japan.

Policies that limit imports, usually with the goal of protecting domestic producers in import-competing industries from foreign competition, are known as

trade protection

Chile has a comparative advantage in copper. Which of the following is a source of this comparative advantage?

large deposits of copper ore

An example of a quota is a:

limit on the total number of Honda automobiles imported from Japan.

Which of the following is a common argument for trade protection?

national security

The infant industry argument for trade protection essentially states that:

new industries should be protected temporarily from foreign competition until they become established.

Goods and services purchased from abroad are ________; goods and services sold abroad are ________.

imports; exports

If a country has the comparative advantage in producing cloth, we would predict that in the market for cloth, the autarky price would be ________ the world price and the country would ________ cloth.

less than; export

If the United States placed larger tariffs on all textiles, then:

producer surplus would increase.

When a domestic market begins to export goods to and import goods from a foreign market:

producers in the exporting industry may be better off.

Tariffs and import quotas always:

reduce total surplus as compared to free trade.

If a nation exports a good when the economy is opened to trade, the domestic price of the good will ________ and domestic consumption will ________.

rise; fall

Gains from trade will result if a country specializes in:

the goods in which it has a comparative advantage.