Homework 13
Comparative advantage occurs when a person or a country can produce a good or service at a lower ____ than others.
. opportunity cost
Exhibit 18-1: Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. Refer to Exhibit 18-1. The opportunity costs of producing 1 ton of apples for Alpha and Omega, respectively, are:
2 tons of oranges; 4 tons of oranges.
Assume that the U.S. can produce either 10 million cell phones or 20 million picture frames and that Canada can produce either 2 million cell phones or 6 million picture frames. Based on this information, which of the following is true?
Both countries could benefit if the U.S. traded cell phones to Canada for picture frames.
From which of the following countries does the U.S. import the largest dollar value of goods?
Canada
Exhibit 18-1: Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. Refer to Exhibit 18-1. Which of the following statements is true? a. Alpha should export to Omega, but Omega should not export to Alpha. b. If Alpha specializes in growing apples and Omega specializes in growing oranges, they could both gain by specialization and trade. c. Since Alpha has an absolute advantage in both goods, no mutual gains from trade are possible. d. If Alpha specializes in growing oranges and Omega specializes in growing apples, they could both gain by specialization and trade.
If Alpha specializes in growing apples and Omega specializes in growing oranges, they could both gain by specialization and trade.
Exhibit 18-1: Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. Refer to Exhibit 18-1. The opportunity costs of producing 1 ton of oranges for Alpha and Omega, respectively, are:
a. 0.5 tons of apples; 0.25 tons of apples.
A tariff can be defined simply as a a. A tariff can be defined simply as a b. legal limit on imports. c. legal limit on exports. d. tax on exports.
a. A tariff can be defined simply as a (typo for tax on imports)
Refer to Exhibit 18-5. The change in producer surplus from free trade is equal to area: a. B b. E + B c. E + B + C + D d. A + B + E
a. B
Refer to Exhibit 18-4. The change in total surplus from free trade is area: a. D b. B + C c. A + B + C + D d. A + B + C + D + E + F
a. D
Which of the following is not a result we would expect to result from a tariff on leather shoes? a. Domestic producers would sell fewer shoes at the higher prices. b. The amount of shoes imported into the U.S. would decline. c. The price of leather shoes in the U.S. would increase. d. Fewer pairs of shoes would be sold in the U.S.
a. Domestic producers would sell fewer shoes at the higher prices.
Iceland can produce 32 units of food per person per year or 8 units of clothing per person per year, but Lavaland can produce 16 units of food per year or 8 units of clothing. Which of the following is true? a. Iceland has both a comparative and absolute advantage in producing food. b. Lavaland has both a comparative and absolute advantage in producing food. c. Lavaland has both a comparative and absolute advantage in producing clothing. d. Iceland has a comparative advantage, but not an absolute advantage in producing food
a. Iceland has both a comparative and absolute advantage in producing food.
In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. a. if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers. b. Guam will be better off if it exports coconuts and imports pineapples. c. both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples. d. mutually beneficial trade cannot occur.
a. if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.
A new U.S. import quota on imported steel would be likely to: a. raise the cost of production to steel-using American firms. b. decrease U.S. production of steel. c. generate tax revenue to the government. d. increase the production of steel-using American firms.
a. raise the cost of production to steel-using American firms.
The difference between the price the seller receives for a good or service and the minimum price he would be willing to accept for that unit is called: a. the gain in producer surplus. b. the total surplus. c. the gain in consumer surplus. d. the total gains from trading that unit.
a. the gain in producer surplus.
Columbia produces coffee with less labor and land than any other country; it therefore necessarily has
an absolute advantage in coffee production.
A tariff on a particular good does which of the following? a. It increases the net-of-tariff price received by foreign producers. b. It increases the price of the good to domestic consumers. c. It redistributes income away from domestic producers toward domestic consumers. d. none of the above
b. It increases the price of the good to domestic consumers.
If opening up international trade resulted in the U.S. importing ballpoint pens, what would tend to happen to the U.S. price of ballpoint pens? a. The domestic price will rise. b. The domestic price will fall. c. It is impossible to predict the impact. d. The domestic price will remain constant.
b. The domestic price will fall.
Which of the following is the best example of a tariff? a. a subsidy from the U.S. government to domestic manufacturers of small cars so they can compete more effectively with foreign producers of small cars. b. a $100-per-car fee imposed on all small cars imported. c. a tax placed on all small cars sold in the domestic market. d. a limit imposed on the number of small cars that can be imported from a foreign country.
b. a $100-per-car fee imposed on all small cars imported
A crucial difference between the impact of an import quota compared to a tariff is that: a. import quotas generate revenue to the domestic government, but tariffs do not. b. import quotas generate no revenue to the domestic government, but tariffs do. c. tariffs increase the prices paid by domestic consumers, but quotas do not. d. both (a) and (c)
b. import quotas generate no revenue to the domestic government, but tariffs do.
An import quota does which of the following? a. decreases the price of the imported goods to consumers b. increases the price of the domestic goods to consumers c. increases the domestic quantity demanded. d. both (a) and (c
b. increases the price of the domestic goods to consumers
Refer to Exhibit 18-4. The change in producer surplus from free trade is equal to area: a. E + F + B + C + D b. E + F c. B + C + D d. D
c. B + C + D
Which of the following is not a result of a U.S. tariff on foreign autos? a. decrease the quantity of foreign autos purchased by U.S. consumers b. increase the price of imported autos c. decrease the quantity of domestic autos purchased by U.S. consumers d. increase the price of domestic autos
c. decrease the quantity of domestic autos purchased by U.S. consumers
Raising an existing tariff on grapes from Chile will: a. increase U.S. imports of Chilean grapes. b. decrease U.S. consumption of domestically produced grapes. c. decrease total U.S. consumption of grapes. d. do all of the above.
c. decrease total U.S. consumption of grapes.
Reducing existing tariffs on tomatoes would: a. increase U.S. consumption of domestically produced tomatoes. b. reduce imports of tomatoes. c. none of the above d. decrease total U.S. consumption of tomatoes.
c. none of the above
Which of the following would increase prices for U.S. consumers? a. a tariff on imported automobiles b. an automobile import quota c. a foreign government subsidizing auto production d. (a) and (b) above only
d. (a) and (b) above only
A new U.S. tariff on imported steel would be likely to: a. raise the cost of production to steel-using American firms. b. generate tax revenue to the government. c. increase U.S. production of steel. d. all of the above
d. all of the above
A tariff on shoes would lead to: a. a higher price for shoes for domestic consumers. b. greater sales of shoes at higher prices for domestic producers. c. lower sales of foreign shoes. d. all of the above
d. all of the above
Introducing a tariff on vitamin E would: a. reduce imports of vitamin E. b. increase U.S. consumption of domestically produced vitamin E. c. decrease total U.S. consumption of vitamin E. d. all of the above
d. all of the above
Reducing a tariff on a particular good does which of the following? a. It decreases the price of the domestic good to domestic consumers. b. It increases the price of the good to domestic consumers. c. It redistributes income away from domestic producers toward domestic consumers. d. both (a) and (c)
d. both (a) and (c)
A new U.S. tariff on Mexican avocados would be likely to:a. raise the price of avocados to U.S. consumers. b. increase U.S. consumption of domestically produced avocados. c. increase total U.S. consumption of avocados. d. do both a. and b.
d. do both a. and b.
The main reason why one nation trades with another is to a. eliminate the danger of retaliation from other nations. b. improve political alliances. c. save its natural resources from rapid depletion. d. exploit the advantages of specialization.
d. exploit the advantages of specialization.
Raising an existing tariff on grapes from Chile will a. increase total U.S. consumption of grapes. b. increase U.S. imports of Chilean grapes. c. do all of the above. d. increase U.S. consumption of domestically produced grapes.
d. increase U.S. consumption of domestically produced grapes.
According to international trade theory, a country should:
specialize in the production of the good in which they have a comparative advantage.
The difference between the price the consumer is willing to pay for a good or service and what he would have to pay for that unit is called:
the gain in consumer surplus.
Why would a new limit on trade in goods with the United States by Canada be more important to the U.S. economy than the same type of policy in Italy?
Canada is one of the U.S.' largest trading partners
Which of the following is not a major trading partner of the U.S.? a. Canada b. China c. Mexico d. Russia
Russia
Which of the following would be expected if the tariff on foreign-produced automobiles was increased?
The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.
A tariff differs from a quota in that a tariff is
a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported
Protectionist legislation is often passed because:
both employers and workers in the affected industry lobby for protectionist policies.
The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that:
domestic producers can attain the economies of scale to allow them to compete in world markets.
Mutually beneficial trade will occur whenever the exchange rate between the goods involved is set at a level where
each country can import a good at a price below the opportunity cost of producing the good in the domestic market.
A new U.S. import quota on imported steel would be likely to:
increase U.S. production of steel.
A U.S. import tariff imposed on steel is likely to:
increase employment in the U.S. steel industry.
Imposing a quota on metal softball bats shipped into the United States would likely:
increase the price of the bats and the quantity of domestically made bats purchased in the United States.
Imposing a quota on metal softball bats shipped into the United States would likely
increase the price of the bats but decrease the total quantity of bats purchased in the United States.
After the United States introduces a tariff in the market for widgets, the price of widgets in the United States will:
increase.
The United States is the world's leading grain-producing nation. Exporting grain causes the
price of grain to domestic consumers to rise because of the added foreign demand.
If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy of reducing or eliminating imports of rice into their country would include:
the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.
A major difference between a tariff and a quota is that a tariff
typically generates tax revenue while a quota does not.
If a nation does not have an absolute advantage in producing anything, it
will have a comparative advantage in the activity in which its disadvantage is the least.