Exam 7: Comparative Advantage and the Gains From International Trade

Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. -Refer to Figure 9-3.If there was no quota,how many pounds of peanuts would domestic consumers purchase and what quantity would be imported?

Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries with a "Buy Canadian" provision.This policy,similar to the original "Buy American" provision in the 2009 U.S.stimulus bill,is likely to cause

Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. -Refer to Figure 9-3.Without the quota,the domestic price of peanuts equals the world price which is $2.00 per pound.What is the quantity of peanuts supplied by domestic producers in the absence of a quota?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.Without the tariff in place,the United States consumes

Which of the following is the best example of a quota?

A tariff is

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2.With the tariff in place,the United States

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

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

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

Suppose in Finland a worker can produce either 32 cell phones or 4 kayaks while in Canada a worker can produce either 40 cell phones or 10 kayaks. a.Which country has an absolute advantage in cell phone production? In kayak production? b.What is the opportunity cost of 1 cell phone in Finland? In Canada? c.What is the opportunity cost of 1 kayak in Finland? In Canada? d.Which country has a comparative advantage in cell phone production? In kayak production? e.Suppose each country has 1,000 workers.Currently,each country devotes 40 percent of its labor force to cell phone production and 60 percent to kayak production.What is the output of cell phones and kayaks for each country and what is the total output of cell phones and kayaks 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 cell phones and kayaks in the two countries? g.Provide a numerical example to show how Finland and Canada can both gain from trade.Assume that the terms of trade are established at 6 cell phones for 1 kayak.

Figure 9-1 Figure 9-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.What happens to the market price and what is the quantity of imports?

Distinguish between a voluntary export restraint and a quota.

Table 9-1 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. -Refer to Table 9-1.Select the statement that accurately interprets the data in the table.

The ability of a firm or country to produce a good or service at a lower opportunity cost than other producers is called absolute advantage.

The ratio at which a country can trade its exports for imports from other countries is called

A tariff

Which of the following statements is true?

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage.One reasons for this is

In the 1970s and 1980s,the United States lost its comparative advantage in consumer electronics goods to Japan.What factor was most responsible for the development of Japan's comparative advantage in consumer electronics goods?