Micro Econ chapter 9
For the US economy, imports and exports represent _____ fraction of GDP compared to what they were 40 years ago
A Larger
A country will always be an exporter of a good where it has
A comparative
what is quota
A numerical limit a government imposes on the quantity of a good that can be imported into a country
Is free trade more likely to benefit a large populous country or a small coutry with fewer people
A small country with fewer people
If the US stopped trading goods and services with other countries, what industry would have the most decline in sales
Agricultural some service industry most manufacturing
what is a voluntary export restraint
An agreement negotiated between two countries that paces a numerical limit on the quantity of a good that can be imported by one country from other country
In the real world, specialization is not complete. Why do countries not completely specialize
Because prodcution of most goods involves increasing opportunity costs Because taste for products differ because not all goods are traded internationally
Dumping is selling a product below its cost of production.
Below
how does International trade increase a countries consumption
By specializing in the production of the goods and services in which they have a COMPARATIVE ADVANTAGE , countries allocate resources more efficiently In other words, goods and services are produced at their lowerst opportunity cost and the world output increases
Why do goods that countries import and export change over time Because the goods in which they have a _____ advantage change over time
Comparative
The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors is known as
Comparative advantage
What is the difference between absolute advantage and comparative advantage
Comparative advantage is the ability of an individual , a firm, or a country to produce a good or service at a lower opportunity cost than competitors Absolute advantage is the ability of an individual , a firm, or a country to produce more of a good or service than competitors when using the same amount of resources
If sugar protectionism has the bad effects as stated in the editorial, what is a likely reason why congress and the president do not eliminate it
Consumers are unaware of the existence of the quota there is little political supporert for the elimination of the quota sugar growers have a very strong lobby in washington
Who benefits from dumping and who loses?
Consumers benefit while competing firms lose;The true production costs are not easy for foreign govt to calculate.
the idea that international trade should be based on the comparative advantage of each country is fine for rich countries like US or Japan
Correct
Japan has always been much more heavily involved in international trade than most are other nations. Today japans exports a larger fraction of its GDP than Germany, GB, US
Disagree Japan, exports 20 percent of its GDP, the US has a smaller percentage
International trade is more important to the US economy than most other economics
Disagree, Exports and imports are a relatively small fraction of the united states GDP
Do you agree with these senetors that reducing barriers to trade reduces the number of jobs available to workers in the US
Disagree. While some jobs are saved by trade restrictions, many more jobs are lost in industries that use trade restricted goods as inputs
Who loses from protectionist policies?
Domestic consumers. Industries that use trade protected goods as inputs.
who gains and who loses when a country imposes tariffs or quotas on imported goods
Domestic sugar producers and their workers-Gains Consumers- Lose Industries that use sugar and their workers- Lose The US economy- Lose
Instagram Being located in the Bay Area gives start up software firms an advantage because of The advantages of the bay area has are
External economics Likely to persist over time because ore software firms will locate there, enhancing the external economics
As long as countries only produce goods in which they have a comparative advantage and trade those goods for ones in which they do not have a comparative advantage, everyone gains and no one loses as a result in international trade T or f
FALSE
The united states is the leading exporting country in the world
FALSE
When an industry recieves tariff or quota protection, there is no effect o n other domestic industries T or F
FALSE
countries gain from specializing in producing goods in which they have an absolute advantage and trading for goods in which other countries have an absolute advantage T or F
FALSE
The US economy would expericene a gian in economic surplus from the elimination of tariffs and quotas only if other countries also reduced their tariffs and quotas T or F
False
Goodyear was not in favor of the tire tariff because
Good year also operates factories in china
Explain whether the value of eports is typically larger or smaller than the value of imports
Has been smaller than the value of US imports since about 1980
Once a country has lost its comparative advantage in producing a good, its income will be ___ and its economy will be _____ efficient if it switches from producing the good to importing it
Higher More
Unfortunatley Bolovia does not have a comparative advantage with resepct to the untied states in the production of any good or service
If the US trades at all with bolovia , then the arguments is false. There would be no trade unless both countries were made better off, and this would imply bolovia has the comparative advantage in the production of at lease one good or service
What describes the importance of international trade around the world
Imports and exports remain a smaller fraction of GDP in the US than in most other countries
In addition to tariff and quotas governments sometimes reect other barriers to trade. what is an example of a barrier to trade that a gov may impose
Imports must meet certain safety requirements imports of certain products may be restricted on national security grounds imports must meet certain health requirements
according to the washington post Sugar protectionism is a burden on consumers and a job killer The united states practices "sugar protectionism by
Imposing a quota on sugar imports
what makes the question above have such powerful insight
It explains why if individuals , firms, and countries specialize and trade they will be better off
in what way is sugar protectionism a burden on consumers as far as the effects of sugar protectionism on the US consumers is concerned
It raises the pirces of sugar and candy that consumers have to pay and leads to a loss of consumer surplus
what is meant by a country specializing in the production of a good? is it typical for countries to be completely specialized
It shifts resources toward producing only those goods where it has a comparative advantage; NO
While running for president, Barack obama made the folllowing statement "well look , people dont want a cheaper T shirt if theyre losing a job in the process what did obama mean by the phrase losing a job in the process
It would be produced in another country
Which of the following is an example of positive economic analysis?
Measuring the effect of the sugar quota on the US economy
If a country engages in free trade, is the total number of jobs in the county likely to decline?
No because trade allows a country to operate more efficiently, which creates more opportunity and more jobs.
in 2011 obama described a trade agreement reached with the government of Colombia as a "win-win" for both countries Is everyone in both countries likely to win from the agreement
No, workers employed at companies that are less efficient than foreign companies will lose jobs
Using economic concepts of comparative advantage, explain under what circumstances it would makes sense for the united states to produce all of the T shirts purchased in the untied states\ The united states should produce all of the T shirts purchased in the united states if the US could produce
T shirts at lower opportunity cost than other countries Producers in industries in wich the US has a comparatice advantage would likely not agree with obama
As a result of the effect of the sugar quota, the US price of sugar is higher than the world price of sugar T or F
TRUE
Hal varian an economists at the university of Cali, has made two observations about international trade Trade allows a country to "Produce more with less" There is little doubt who wins (from trade) in the long run: consumers
TRUE TRUE
If the government wants to protect import competing industries and its workers from foreign competition, it can impose a tax on imports called ____
Tariff
Since countries are producing goods and services at different opportunity csots,______ can be negociated that will allow all countries to consume more with trade than autarky
Terms of trade
what is absolute advantage
The ability of an individual firm or country to produce more of a good or service than competitors when using the same amount of resources
what events led to the General Agreement on Tarrifs and Trade? Why did the World Trade Org eventually replace GATT?
The great depression and the Smoot-Hawley tarriff; trade in Services and in products incorporating intellectual property grew in importance.
in an newspaper column, a professor of economics at Stanford , refered to, "the economic forces that lead to most children toys being developed in the united states and mass produced in china and other developing countries The economic forces being referred are
The lower opportunity costs leading to china's comparative advantage in toy production
What factor may explain why a country like the Netherlands is more likely to import and export larger fractions of its GDP than would a larger country, shich as china or the united states
The netherlands must rely on imports for a large range of products Given its small size , the netherlands must specialize in producing and exporting only a few products , it cannot produce the wide range of products as big countries The netherlands is a small country with a level of GDP that is only a small fraction of that of china or the US
Who benefits from protectionist policies?
The protected domestic companies and their workers. Workers in trade protected industries.
Most countries do not exhaust their comparative advantage in producing a good or service before they reach complete specialization as a result of decreasing opportunity costs
The statement is false
china decides to pay large subsides to any chinese companies that exports goods or services to the US. Resulting these companies are able to sell products in the US at far below their cost of production. In addition, China decides to bar all imports from the US. The dollar that the US pays to import chink goods left in the banks in china
The strategy will lower the standard of living in china the strategy will raise the standard of living in the US
Economic nationalism
The use of non tariff barriers to protect domestic industries The use of quotas to protect domestic industries The use of tarrifs to protect domestic industries
Although international trade leads to substantial net benefits, not everyone gains from international trade what groups is most likely to lose from international trade
The worker and companies in the industries that compete with imports
What statement is true about importance of trade in the US economy
While exports and imports have been steadily rising as a fraction of GDP, not all sectors of the US economy have been affected equally by international trade
Would a quota result in consumers paying a higher price than the price before the quota imposed Would a straight handout be cheaper than a quota
Yes YES
would it be cheaper for the fed gov to have raised taxes on US consumers and given the money to tire workers rather than to have imposed a tariff
Yes because hufbauer and lowry concluded that rariff cost the US consumers more than 900.000 per year for each job saved in the tire industry
you and your neighbor pick apples and charries. If you can pick apples at a lower opportunity cost than your neighbor , which of the following statement is true
You have a comparative advantage you can trade some of your apples for some of your neighbors cherries, and both of you will end up with more of both fruit
how does the world trade org allow countries to determine whether dumping has occurred?
a product is exported for a lower price that it sells for on the home market
name given to the sale of a product for a price below its cost of production
dumping
The opponents of globalization contend that
globalization destroys cultures
what is not a main source of comparative advantage
internal economics of scale
Sugar protectionism is viewed as a job killer because
it adversely affects the stock market by raising the pirce of sugar futures
The use of trade barriers to shield domestic companies from foreign competition is called
protectionism
Another restriction with a similar outcome would be to impose a limit on the amount of a specific good that can be imported. This restriction is called a____ What is not a non tariff barrier to trade
quota Ad valorem on imports
A quota on steel imports would cause employment to fall in other industries because what happens to the costs of producing goods that use steel
the quota raises the costs of producing goods that use steel
The term external economics refers to what is a source of comparative advantage
the reduction of costs resulting from incrases in the size of an industry in the given area The relative abundance of capital and labor
The federal gov did not adopt this alternative policy because
the united states steel workers unions had sufficient political power to persuade congress to pass this tariff
Globalization is the process of countries becoming more open to foreign _____________ Some people are opposed to globalization because they
trade and investment all of the above(destroys distinctive cultures, want to erect trade barriers to protect domestic firms from foreign competition, globalization favors the interests of high income countries at the expense of low income countries
Protectionism is the use of _______ to shield domestic firms from foreign competition.
trade barriers
how are middle and lower class biggest winners and biggest losers of free trade It would be possible for middle and lower income Americans to be both biggest losers and at the same time biggest winners from free trade if they are the ones most likely to
work in industries that produce at higher opportunity cost than in other countries and purchase those goods that can be produces at lower opportunity cost in other countries