international trade
The opportunity cost of producing 1 pound of coffee for Colombia is ______ pounds of bananas.
2
autarky
a situation in which a country is closed to any international trade before vis ships many island countries existed in a state of autarky b/c they had no access to many products that were commonplace in other parts of the worlds.
Japan does not have a huge reserve of neodymium and has to import the metal from China. The benefit of international trade that applies in this case is:
access to scarce resources.
Specialization is based on _______ advantage
comparative
with a quota
domestic consumers lose because they must pay more and consume less.
When a country opens up to trade, domestic industries that make products that can be:
imported will contract and industries that have products to export will expand.
People in different countries trade among one another to get a ______ price than they would have to pay for the same product produced domestically.
lower
When a country opens its markets to international trade, if the world price is _____ than the domestic equilibrium price, quantity supplied from foreign producers will rise.
lower
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 that applies in this case is:
lower-cost goods.
In the context of international trade, the competitive equilibrium is the free-trade equilibrium with:
no barriers to trade.
Producers generally ______, while consumers generally ______.
support exports; oppose exports
The effect of one trade barrier, a(n) _______ is an increase in the price consumers pay since it forces importers to raise their prices.
tariff
comparative advantage
the ability to produce a good or service at a lower relative opportunity cost than that of another producer
welfare effects
the effects that a change in market conditions, usually price, has on the welfare, or economic well - being, of market participants. welfare effects are generally found by comparing changes in consumer and producer surplus
specialization
the practice of producing a single good or service rather than producing multiple goods or services
Comparative advantage is the foundation for establishing the benefits of:
trade
Exchanging currencies is international
trade
Growth is the key to better consumption possibilities and one important key to better consumption possibilities is
trade
Economists use the phrase __ to refer to the positive gains enjoyed by both buyers and sellers when they trade.
"trade creates wealth"
consumer surplus
- the difference between the max price consumers are willing and able to pay for a good or service and the price they actually pay. - also can be thought of as the wealth that trade creates for consumers in a market. - consumer surplus is measured in dollars. - graphically, consumer surplus is the area below the demand curve and above the equilibrium price, from zero to the quantity traded
producer surplus
- the difference between the price producers receive for a good or service and the min. price they are willing and able to accept. - can be thought of as the wealth that trade creates for producers in a market - measured in dollars - graphically, producer surplus is the area below the equil. price and above the supply curve, from zero to the quantity traded
The opportunity cost of producing 1 pound of bananas for Colombia is ______ pounds of coffee.
0.5
Kate has a 20-square-foot plot of land in her backyard that she uses to grow tomatoes and lettuce. Every square foot of land can produce either 5 tomatoes or 3 heads of lettuce each summer. Her neighbor, Jim, has a 30-square-foot plot of land that has a lot more shade than Kate's, which is better for lettuce but worse for tomatoes. Every square foot of Jim's land can produce either 3 tomatoes or 6 heads of lettuce.
0.5T < X < 1.67T
Suppose that both countries open up to trade, and the United States and India decide to trade 1 tractor for 3 pounds of rice (1T = 3R) and that India needs 3 tractors. India's gains from trade are ______. The United States' gains from trade are ______.
1 tractor and 1 pound of rice; 1 tractor and 1 pound of rice
The opportunity cost of producing 1 pound of coffee for Brazil is ______ pounds of bananas.
4
Suppose the United States and India do not trade with each other, production is characterized by constant opportunity costs, and each country uses half of its resources for tractor production and half for rice production. The United States will produce ______. India will produce ______.
4 tractors and 8 pounds of rice; 2 tractors and 10 pounds of rice
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 ______ and ______ produced in total.
6 tractors; 18 pounds of rice
If the United States and India specialize completely in the good for which each has a comparative advantage, then there will be ______ and ______ produced in total.
8 tractors; 20 pounds of rice
tariff revenue
The revenue collected from the imposition of a tariff on goods, services, or resources. TR = tariff x quantity
The market price will be highest and the quantity traded lowest:
a domestic market in autarky.
production possibilities frontier
a graph that shows the possible combinations of two different goods or services that can be produced with fixed resources & technology. it shows the production combinations that are both attainable and efficient
small country model
a model of international trade in which the production of consumption of a good, service, or resource in the domestic country is small relative to global markets. because the domestic country is small relative to world markets it is price taker and its consumption and production do not affect the world price. thus, the country adopts the world price for any good, service, or resource as the domestic price
quota
a numerical limit on the amount of a good that can be imported. sometimes called an import quota
tariff
a tax or fee that must be paid on goods imported from other countries when the U.S imposes tariff on foreign steel, any foreign producers that want to sell their steel in the U.S have to pay an extra fee, making it more expensive for them to sell their products
barrier to trade
any policy that is designed to reduce the competitiveness of foreign producers that wish to sell their goods or services in the domestic market, thereby reducing the imports of foreign goods or services
is a state that exists whenever an entity can survive or continue its activities without external assistance or international trade.
autarky
A situation in which a country is closed to any international trade due to self-sufficiency is referred to as:
autarky.
When a country is opening up to trade, resources in the economy flow:
away from the goods for which producers do not have a comparative advantage.
Because people and businesses sometimes oppose international trade, governments create trade
barriers
Comparative advantage refers to:
being the lowest relative opportunity cost producer of a good.
Suppose the U.S. specializes in producing lumber and its neighbor Canada specializes in producing steel. When they trade with each other:
both countries will likely consume more lumber and steel.
Consider the two production possibilities frontiers (PPFs) shown in the graphs. If the two countries do not specialize, Country A would likely ______.
choose point MA
Given the option of being self-sufficient or trading with others as long as a(n) ________ advantage exists, there will be potential for trade to make both parties better off.
comparative
If you are relatively better at something, then you are said to have a(n) _________ advantage in that activity
comparative
In an economy of two goods, a country cannot have the ______ advantage in both goods
comparative
Specialization is based on __ advantage not necessarily on whether one country can produce more of a good than another country.
comparative
Trade between people in different countries is driven by _______ advantage
comparative
_______ advantage is the foundation of establishing the benefits of trade.
comparative
Given the option of being self-sufficient or trading with others as long as a(n) ______ ______ exists, there will be potential for trade to make both parties better off.
comparative advantage
When there are barriers to trade,:
consumers suffer producers gain and total wealth decreases.
The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the ______ loss
deadweight
All the units of a good or service that can be produced for less than the world price Pw are supplied by
domestic firms
The benefit or wealth that accrues to a buyer or a seller as a result of trading one good service or resource for another. the wealth or additional well being, created by trade does not have to be monetary
gains from trade
imports
goods, services, or resources produced abroad and sold domestically in the U.S clothing is often produced at a higher cost than in other countries. as a result clothing is part of U.S imports
exports
goods, services, or resources produced domestically and sold abroad in the U.S many agricultural products are produced at a lower cost than in other countries. as a result, agricultural products are part of U.S exports
When there is a quota, the quota price is ________ than the world price and the total quantity traded is ________
higher lower
Barriers to trade reduce the amount of output that can be supplied by foreign companies and, as a result, cause prices in the market to be ______ than they would otherwise be. This results in consumers buying ______ output.
higher; less
A barrier to trade reduces the _____ of foreign goods and services.
imports
The goods and services made in other countries that we purchase are called
imports
Europeans purchase wine produced in California and Argentina to have more choice. The benefit of international trade that applies in this case is:
increased variety of goods.
When two people specialize, total production between the two people _______
increases
The model and concepts used to develop the economics of __ are similar to those used to illustrate the effects of:
international trade; trade between individuals.
Imposing trade restrictions seems attractive to some people, but the end result will be _______ (reduced/increased) international trade and as a result ________ (reduced/increased) global wealth is created.
less low
In the 1980s, 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.
the producer with the _____ relative opportunity cost has a comparative advantage and should specialize in the production of that good
lowest
Airline passengers who fly on aircraft benefit from the specialization and trade that occurs between plane manufacturers since airlines can offer more routes at lower prices.
true
As of 2016, more than 15% of all goods and services consumed in the United States were produced abroad.
true
When a tariff is eliminated, we would expect the price to decrease and the quantity traded to increase.
true
In the small-country model, each country has a(n) _____ -sloping supply of a product and ______ cost is not constant.
upward opportunity
When a tariff is imposed on imports, the price in the market:
rises by the full amount of the tariff.z
The practice of "dumping" describes:
selling products in a foreign market at a price below average cost.
The sum of consumer and producer surplus is
social surplus
Comparative advantage identifies the producer that has the low relative opportunity cost for a specific good in the market. The low-relative-cost producer ________ in producing that good
specializes
Comparative advantage identifies the producer that has the low relative opportunity cost for a specific good in the market. The low-relative-cost producer ________ in producing that good. The price or ________ of trade that the good will trade for depends on the _________ costs of the buyers and sellers and determine how much each party ___________ from the trade
specializes terms opportunity gains
Quotas can have unintended consequences, such as:
substituting less expensive goods for the good that has a quota.
When calculating producer surplus for an individual firm, ________ the firm's willingness to accept from the market price.
subtract
absolute advantage
the ability to produce more output, given similar resources, than another producer
welfare effects
the effects that a change in market conditions, usually price, has on the welfare, or economic well being, of market participants. welfare effects are generally found by comparing changes in consumer and producer surplus
As long as the terms of trade are between both countries' ______ costs, trade will benefit both countries.
opportunity
As long as there are differences in the________ costs, there are comparative advantages and there will be potential for trade to make both parties better off.
opportunity
Comparative advantage is defined as having a lower relative _________ cost than another producer.
opportunity
If the terms of trade are the same as your ________ cost, you will receive no gains from the trade.
opportunity
In the small-country model,:
opportunity cost is not constant
Trade allows the economy as a whole to consume previously impossible combinations of output so the:
overall benefits outweigh the costs.
Consider the two production possibilities frontiers (PPFs) shown in the graphs. If the two countries do specialize, Country A would likely ______, while Country B would likely ______.
produce at point CA; produce at point WB
In the 1980s, the U.S. government established a type of import ______ called a voluntary export restriction in the market.
quota
Sugar is significantly more expensive in the United States than it is in Mexico and Canada because of the sugar
quota
is designed to protect or encourage the growth of a specific industry. there is a ______ on sugar imports in the United States.
quota
The size of the quota times the difference between the quota price and the world price is known as the dollar value of:
quota rent
A quota:
reduces imports and domestic consumption while increasing prices and domestic output.
Markets form between people in different countries to facilitate
trade
One of the major themes in economics is that ________ creates wealth
trade
One way of consuming a combination of goods a country cannot produce on its own is with
trade
People in different countries _______ to increase the diversity of their choices.
trade
The model and concepts used to develop the economics of international _________ are similar to those used to illustrate the effects of trade between two individuals.
trade
because _______ creates wealth, the threat of limiting ________ can be an incentive to change behavior.
trade
when two people ________ in the goods they produce, total production between the two people increases.
trade
without _______ our standard of living would be lower and we would enjoy fewer goods and less variety.
trade
free trade
trade between nations that is free from barriers such as regulations, tariffs, or quotas
In many of the examples of specialization and trade, it sometimes seems that one country is getting a better deal than another but:
we don't know the overall increase in the wealth or well-being generated by the trade. if they trade it must be the case that they are both better off.
When a country opens its markets to international trade, the overall quantity traded increases:
whether the country imports or exports a good service or resource.
In international markets, since a firm can always sell its output at the ________ price, there is no incentive to sell it for less.
world
Economic surplus is the:
gains associated with both consumers and producers in the market.
the value of the ________ surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the deadweight loss.
economic
When Congress failed to renew the ethanol tariff in 2012, we expected ethanol prices to
fall rise
The consumer surplus for domestic pineapple consumers ______, while the producer surplus for domestic pineapple producers ______.
falls; rises
Specialization is based on whether one country can produce more of a good than another country and not on comparative advantage.
false
In 2014, the United States imposed tariffs on nine different steel-producing countries because:
firms from these countries were "dumping" their products on the U.S. market. firms from these countries were selling their steel in the United States at a price below their average cost.
price takers
firms that take or accept the market price and have no ability to influence that price
The market has the largest possible number of suppliers and the most competition in the case of:
free trade market
quota rent
the income earned by whoever has the right to import the good at the world price and sell it in the domestic market at the higher quota price. the dollar value of a quota rent is equal to the size of the quota times the difference between the quota price and the world price.
domestic price
the price of a good, service, or resource that prevails in the domestic market. in the small country model, the domestic price equals the world price if the country is open to trade
world price
the price of a good, service, or resource that prevails in the world market
terms of trade
the price of one good, service, or resource in terms of another colombia and brazil decide that colombia will sell 1 ton of coffee to brazil in exchange for 5 tons of bananas. the 5 tons of bananas for 1 ton of coffee are the terms of trade
economic surplus
the sum of consumer and producer surplus. it is a measure of the total welfare, or wealth, that trade creates for consumers and producers in a market - also known as social welfare or total surplus
deadweight loss
the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium
opportunity cost
the value of the next best forgone alternative; the value of the opportunity that you gave up when you chose one activity, or opportunity, instead of another. opportunity cost exist because of scarcity
opportunity cost is
the value of the opportunity that you give up when you choose one activity instead of another.