Chapter 9

for the US economy, imports and exports represent ___ fraction of the GDP compared to what they were 40 years ago.

A larger

Why do the good that countries import and export change over time?

Because the goods in which they have a(n) comparative advantage change over time.

What is the difference between comparative advantage and absolute advantage?

Comparative advantage is the ability of an individual, or a firm, or a country to produce a good or service at a lower cost opportunity than its competitors. Absolute advantage is 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.

True or False: The US is the leading exporting country in the world.

False

Goodyear manufactures tires in the United States, so you might expect the firm would benefit from a tariff on imports of Chinese tires. Yet Goodyear actually opposed the Obama administration's decision to impose the tariff. Goodyear was not in favor of the tariff because

Goodyear operates factories in China, and some of the tires were subject to the tariff.

Which of the following describes the importance of international trade around the world?

In 2012, China was the largest exporter in the world, accounting for 10% of the world's exports.

Which "economic forces" lead to most children's toys being developed in the United States and mass-produced in China and other developing countries?

The economic forces that Professor Wolak is referring to are the lower opportunity costs leading to China's comparative advantage in toy production.

Which is a true statement about the importance of trade in the US economy?

While imports and exports have been steadily rising as a fraction of GDP, not all sectors of the US economy have been affected equally by international trade.

which of the following factors 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, such as China or the United States?

all of the above: given its small size, the Netherlands must specialize in producing and exporting only a few products semicolon it cannot produce the wide range of products that China or the US can produce. The Netherlands is a small country with a level of GDP that is only a small fraction of that of China or the US. The Netherlands must rely on imports for a large range of products.

A country will always be an exporter of good where it has a ________________ advantage in production.

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. It explains why if individuals, firms, or a country specialize and trade, they will be better off.

true or false: international trade is more important to the US economy than to most other economies.

false. Exports and imports are a relatively small fraction of the United States GDP.

The value of US exports

has been smaller than the value of U.S. imports since about 1980.