Exam 7: Comparative Advantage and the Gains From International Trade

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

What are the four main sources of comparative advantage? Briefly explain each source and provide examples.

Japan has developed a comparative advantage in designing and producing automobiles.The source of its comparative advantage in these products is

Tastes for products such as beer differ.As a result

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?

Table 7.2 Output Per Hour of Work Handbags Jackets Cambodia 15 3 Thailand 24 6 Table 7.2 shows the output per hour of work for handbags and jackets in Cambodia and in Thailand. -Refer to Table 7.2. a.Which country has an absolute advantage in the production of handbags and jackets? b.Which country has a comparative advantage in the production of handbags? c.Which country has a comparative advantage in the production of jackets?

a.What is the World Trade Organization? b.When was it established? c.How many countries are members of the World Trade Organization?

If Canada has a comparative advantage relative to Mexico in the production of timber, then

Figure 7.4 Suppose the Canadian government imposes a $0.50 per pound tariff on sugar imports. Figure 7.4 shows the demand and supply curves for sugar and the impact of this tariff. -Use Figure 7.4 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 sugar producers with the tariff in place? d.Calculate the value of producer surplus received by Canadian sugar producers with the tariff in place. e.What is the quantity of sugar 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.

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

NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries?

When Roxanne, a Canadian citizen, purchases a designer dress from Holt Renfrew that was made in Milan (Italy), the purchase is

Figure 7.2 Suppose the Canadian government imposes a $0.40 per pound tariff on rice imports. Figure 7.2 shows the impact of this tariff. -Refer to Figure 7.2.The increase in domestic producer surplus as a result of the tariff is equal to the area

If Estonia has an absolute advantage in the production of two goods compared to Norway, Estonia can not benefit from trade with Norway.

In 1995 ________, which was established in 1948, was replaced by ________.

How have Canadian imports and exports, as a fraction of GDP, changed from 1981 to the present?

________ refers to reductions in a firm's costs that result from an increase in the size of an industry.

Figure 7.3 Assume that the Canadian government limits the import of peanuts. -Refer to Figure 7.3.What is the area that represents revenue to foreign producers who are granted permission to sell in the Canadian market when there is a quota?

The Canadian economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Measuring the impact of a quota or tariff on the Canadian economy is an example of ________.Stating that a quota or tariff should be eliminated is an example of ________.