Exam 17: Part A: International Trade

The table below shows the maximum amounts of food and clothing that two nations, A and B, can produce.Draw the production possibilities curve for A and B using the below graphs.Assume constant costs. (a) What is the cost ratio for the two products?(b) If each nation specializes according to comparative advantage, who should produce and trade each product? Why?(c) What will be the range for the terms of trade? If the terms are set at 1 food = 2 clothing, show how the trading possibilities lines will change in the graph.Explain.

What are the limitations to the diversification for stability argument for trade protection?

Suppose that by devoting all of its resources to the production of X, nation L can produce 40 X.By devoting all of its resources to Y it can produce 20 Y.Comparable figures for nation M are 15 X and 15 Y.According to the principle of comparative advantage, which nation will specialize in which product? What are the limits to the terms of trade?

Cite three important reasons why nations trade.

Of all the reason for protests against the WTO, which are most substantive?

In 2016, what were the top five exporting nations (measured in dollars)?

Explain the myth behind why buying Canadian and how this does or does not improve the Canadian economy.

How can supply and demand analysis be used to explain the equilibrium price and quantity of exports and imports for aluminum when there is trade between two nations (e.g., the United States and Canada)?

Explain and evaluate the validity of the self-sufficiency argument for trade protection.

Given the data in the graph below, which nation should specialize in steel production and which nation in wheat production? Why?

What are Canada's top four exports and imports?

The following table shows the domestic quantity demanded (Q_D) and quantity supplied (Q_S) of soybeans in Canada and Brazil at various prices (in Canadian dollars). (a) Complete the above table by indicating the size of exports or imports for each country at each price.(b) Suppose Canada and Brazil are closed economies.What is the domestic price of soybeans in Canada? What is the domestic price of soybeans in Brazil?(c) Suppose Canada and Brazil are the only countries in a two-nation world.What is the world price of soybeans? Is Canada an exporter or an importer at the world price? Is Brazil an exporter or an importer at the world price?

What are the similarities and differences in the economic effects of tariffs and quotas?

The next three questions refer to the information in the following table. (a) What would price and quantity be if the market were closed to international trade? What would the domestic and foreign quantity supplied be if it were open to international trade and the world price was $2?(b) If the world price was $2 and a tariff of $1 were placed on the product, what would be the total revenues going to domestic producers, foreign producers (after-tax), and the government? Explain.(c) Given a world price of $2, what would be the difference in the total revenue received by foreign producers with a $1 per unit tariff compared with a quota of 200 units?

Who gains and who loses from a protective tariff? Explain.

Which is more effective in blocking imports, a tariff or a quota?

Evaluate this argument for a trade barrier: "Canada needs protection from cheap foreign labour."

Answer the following questions regarding international trade:(a) What is the common myth regarding the benefits from international trade?(b) What is the associated implication arising from this myth?(c) What is the true benefit from international trade?

What are the economic benefits of free trade?

What is the problem with protecting industries in Canada from the dumping of foreign products on the domestic market?