Micro Final Ch. 19

All of the following are terms of trade that could possibly benefit both countries except

1 hat: 8 clocks

Prior to trade, what was the opportunity cost to produce 1 hat in Belize?

1.5 clocks

Prior to trade, what was the opportunity cost to produce 1 clock in Denmark?

1/6 of a hat

With trade, what is the total gain in clock production?

150

With trade, what is the total gain in hat production?

150

Prior to trade, what was the opportunity cost to produce 1 clock in Belize?

2/3 of a hat

Without the tariff in place, the United States consumes

42 million pounds of rice

Prior to trade, what was the opportunity cost to produce 1 hat in Denmark?

6 clocks

Without the tariff in place, the United States produces

9 million pounds of rice

The increase in domestic producer surplus as a result of the tariff is equal to the area

C

Which country has a comparative advantage in producing clocks?

Denmark

The tariff revenue collected by the government equals the area

E

Which of the following statements is true?

Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

All but one of the following statements is used to justify protectionism. Which statement is not used to justify protectionism?

Free trade leads to higher prices for imported goods.

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as

NAFTA

If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?

The dollar will depreciate.

If the dollar appreciated against the Mexican peso

U.S exports to Mexico become more expensive.

When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is

a German import and a Canadian import

Countries that engage in trade will tend to specialize in the production of goods and services in which they have ______ and will _______ these goods and services.

a comparative advantage; export

Which of the following is the best example of a quota?

a limit on the quantity of tires that can be imported from a foreign country

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called

a voluntary export retraint

A situation in which a country does not trade with other countries is called

autarky

Costa Rica is a leading exporter of bananas. What explains the comparative advantage of the is country in banana production?

climate and soil conditions in Costa Rica which are well-suited for banana production

An economic principle that explains why countries produce different goods and services is

comparative advantage

When the US government places a tariff on a product, such as the tariff on tires imported from China, the quantity of the product imported will generally ______ and the price paid by the consumers for the product will generally______.

decrease; increase

The selling of a product for a price below its cost of production is called

dumping.

Protection in the form of tariffs create winners and losers. Winners include ________ and losers include________.

firms sheltered form foreign competition; US consumers and taxpayers

A tariff is a tax imposed by a government on

imports

Goods and services bought domestically but produced in other countries are referred to as

imports

With the tariff in place, the United States

imports 16 million pounds of rice

An increase in the demand for American-made goods will

increase the demand for dollars on the foreign exchange market.

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets. This statement describes the __________ argument for protectionism.

infant industry

Exports are domestically produced goods and services

sold to other countries.

When the market value of the dollar rises relative to other currencies around the world, we say that

the dollar has appreciated.

If the exchange rate changes from $1.45=1 euro to $1.37= 1 euro, then

the euro has depreciated and the dollar has appreciated

The ratio at which a country can trade its exports for imports from other countries is called

the terms of trade

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because

they believe the restrictions will protect their jobs

Many people assume that if child workers in developing countries weren't working in factories, they would be in school. In fact, children in developing countries

usually have few good alternatives to work.