Exam 14: Comparative Advantage and the Gains From International Trade Macro

Suppose that Kuwait currently both produces and imports almonds. The government of Kuwait decides to restrict international trade in almonds by imposing a quota that allows imports of only 10 million kilos each year. Figure 14-5 shows the estimated demand and supply curves for almonds in Kuwait and the results of imposing the quota. Answer questions a-j using the figure. -a. If there is no quota what is the domestic price of almonds and what is the quantity of almonds demanded by consumers? b. If there is no quota how many kilos of almonds would domestic producers supply and what quantity would be imported? c. If there is no quota what is the dollar value of consumer surplus? d. If there is no quota what is the dollar value of producer surplus received by producers in Kuwait? e. If there is no quota what is the revenue received by foreign producers who supply almonds to Kuwait? f. With a quota in place what is the price that consumers of Kuwait must now pay and what is the quantity demanded? g. With a quota in place what is the dollar value of consumer surplus? Are consumers better off? h. With a quota in place what is the dollar value of producer surplus received by producers in Kuwait? Are domestic producers better off? i. Calculate the revenue to foreign producers who are granted permission to sell in Kuwait after the imposition of the quota. j. Calculate the deadweight loss as a result of the quota.

-Refer to Table 14 -1. Select the statement that accurately interprets the data in the table.

If Sweden exports cell phones to UAE and UAE exports oil to Sweden, which of the following would explain this pattern of trade?

The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. One reason for these anti -globalization protests is

As major oil exporters, the GCC countries depend heavily on exports, which made up more than 50% of their incomes in 2007.

Which group benefits most from the Egyptian tariff on the importation of cars?

Suppose in Vietnam a worker can produce either 16 units of cloth or 2 bicycles while in China a worker can produce either 20 units of cloth or 5 bicycles. a. Which country has an absolute advantage in cloth production? In bicycle production? b. What is the opportunity cost of 1 unit of cloth in Vietnam? In China? c. What is the opportunity cost of 1 bicycle in Vietnam? In China? d. Which country has a comparative advantage in cloth production? In bicycle production? e. Suppose each country has 1,000 workers. Currently, each country devotes 40 percent of its labor force to cloth production and 60 percent to bicycle production. What is the output of cloth and bicycles for each country and what is the total output of cloth and bicycles between the two countries? f. Suppose each country specializes in the production of the good in which it has a comparative advantage. What is the total output of cloth and bicycles in the two countries? g. Provide a numerical example to show how Vietnam and China can both gain from trade. Assume that the terms of trade are established at 6 units of cloth for 1 bicycle.

One result of a bilateral trade agreement reached between the GCC and Singapore in 2008 was the phasing out of a tariff on halal meat imposed by the GCC. Which of the following is the most likely result from the elimination of this tariff?

One reason for the success that firms have in getting the government to erect barriers to foreign competition is that jobs lost to foreign competition are easy to identify but jobs created by foreign trade are often hard to identify. Which of the following is a second reason?

"Trade is a win-win situation for all countries that participate." This statement is

Which of the following describes the infant industry argument for protectionism?

Which of the following is NOT a privilege given to Arab countries under GAFTA?

If country A has an absolute advantage in the production of two goods compared to country B, country A can still benefit from trade with country B.

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

Which of the following best explains why the Egyptian economy was less successful that then the Korean economy in the 1960s?

-Refer to Table 14 -1. Select the statement that accurately interprets the data in the table.

Suppose the Egyptian government imposes a $0.25 per kilo tariff on rice imports. Figure 14-4 shows the demand and supply curves for rice and the impact of this tariff. Use the figure to answer questions a-i. -a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased? b. Calculate the value of consumer surplus with the tariff in place. c. What is the quantity supplied by domestic rice growers with the tariff in place? d. Calculate the value of producer surplus received by Egyptian rice growers with the tariff in place. e. What is the quantity of rice imported with the tariff in place? f. What is the amount of tariff revenue collected by the government? g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff. h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government? i. Calculate the deadweight loss due to the tariff.

What is the main benefit to Arab countries of the Qualified Industrial Zones (QIZ) policy?

Assume that the quota on imported sugar costs Egyptian consumers more than $2 million annually and protects very few jobs. Why does the parliament maintain a sugar quota that protects only a few thousand workers while forcing millions of people to pay higher prices for sugar products?

The fact that merchandise exports in major Arab countries have grown significantly, reflects decreases in both the volume of exports and the prices of major exports.