Exam 2 - Ch. 20

Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. Assuming constant costs, Big Country needs to give up

3/4 units of Y for 1 unit of X and should produce good X. Small Nation needs to give up 1 unit of X for 1 unit Y and should produce good Y

Consider the following statement: "The United States can make certain toys with greater productive efficiency than can China. Yet we import those toys from China." Which ideas of Adam Smith and David Ricardo are represented?

China does not need Smith's absolute advantage to specialize in toys, rather it needs Ricardo's comparative advantage

Which of the below represent land-, labor-, and capital-intensive commodities respectively?

Corn, clothing, and aircraft

Which of the following are valid arguments for tariff protection?

Ensuring adequate production levels in sectors deemed to be essential in the event of war

"The potentially valid arguments for tariff protection—military self-sufficiency, infant industry protection, and diversification for stability—are also the most easily abused." Which of the following illustrates the potential for abuse of tariff protection?

There is a tendency for trade barriers to remain in place even after a so-called infant industry becomes established

Distinctions between land-, labor-, and capital-intensive commodities are important because

an abundant supply of one type of resource gives the country a comparative cost advantage in products using that resource

Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. The limits of the terms of trade between these two countries will be

between 1 unit of good X for a unit of good Y and 4/3 a unit of X for a unit of good Y

The use of artificial trade barriers, such as tariffs and import quotas,

can increase domestic output and employment in the short term, but that is not likely to last for the long term

The export supply curve for a particular country is the

difference between quantity supplied and quantity demanded in the domestic market for a price above the domestic equilibrium price

The import demand curve for a particular country is the

difference between quantity supplied and quantity demanded in the domestic market for a price below the domestic equilibrium price

Tariffs and import quotas can reduce unemployment in an import U.S. industry but

foreign countries could impose non-tariff barriers on U.S. goods, reducing jobs in an export industry

The equilibrium world price for a tradable good is determined by the

intersection of the world supply and demand schedules

In net, tariffs or quotas are

negative, since the costs to consumers substantially exceed the gains to producers and government

All manufacturing is not done in Mexico and other low-wage countries because

of trade barriers

Protective tariffs can reduce both the imports and the exports of the nation that levies tariffs because

other countries may follow with their own import tariffs

Distinctive products

provide an export niche for a country

In percentage terms, our exports of goods and services are

small when compared to other industrialized countries

Consider the following statement: "The United States can make certain toys with greater productive efficiency than can China. Yet we import those toys from China." We import these toys from China because

the U.S. has an absolute advantage in producing toys, but China has a comparative advantage in producing toys

A quota that results in the same level of imports as a tariff is more detrimental to an economy because

the government loses tax revenue

In 2012, manufacturing workers in the United States earned average compensation of $35.67 per hour. That same year, manufacturing workers in Mexico earned average compensation of $6.36 per hour. U.S. manufacturers can compete if

the workers are more productive