Exam 20: Prices and Distortions Across Markets

A speculator who takes a long position in a market buys low and sells high, whereas a speculator who taxes a short position in a market buys high and sells low.

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(True/False)

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Question 1

Correct Answer:

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False

Suppose there is a tradeable goods market (such as products like textiles that can be shipped across markets) and a non-tradable goods market (such as services like hair cuts).Can outsourcing impact wages in the non-tradable market?

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Question 2

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Yes. The non-tradable good cannot itself be outsourced -- hair cuts have to be sold in the market where demanders are and can't be undertaken in some other country across the globe. But textiles can be outsourced. We would then see wages in the textile industry fall in the high wage country and rise in the low wage country. But within the country, there are now pressures for workers to switch sectors -- so long as wage differences (adjusted for productivity) differ across the non-tradable and tradable sectors. Thus, textile workers whose wages have fallen because of outsourcing will switch to hair dressing in the high wage country -- thus extending the downward pressure on wages to the non-tradable sector. Similarly, hairdressers in the low wage countries (whose wages are unaffected by the outsourcing itself) now find themselves earning less than textile workers and would therefore switch -- extending the upward pressure on wages to the hair dresser markets in the low wage country.

If worker productivity is the same in each country, outsourcing and labor migration will both result in an equalization of wages across the two countries.

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Question 3

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Regardless of what types of workers are available in different countries, unrestricted labor outsourcing always results in an equalization of wages across countries.

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Question 4

Even when earning zero profit, exporters (nearly) equalize prices across markets.

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Question 5

Suppose the price of good x in country A is lower than the price of good x in country B when no trade is permitted.In the absence of transportation costs, if the supply curve for good x in the two countries is sufficiently elastic, free trade in good x implies that country B will stop producing x.

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Question 6

Explain the impact of speculators on markets is similar and how it may be different from the impact of exporters and importers.

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Question 7

Because trade across markets creates winners and losers,the overall surplus in the loser's market is diminished.

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Question 8

The smaller a country is, the less of an ability it has to export a portion of the burden of an import tariff to other countries.

(True/False)

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Question 9

If country A is importing good x from country B where x is produced along a perfectly inelastic supply curve, then country B will suffer the entire deadweight loss from any tariff imposed on imports to country A.

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Question 10

Quality of life indexes produced in popular magazines often place a heavy emphasis on the cost of housing in different cities -- with a lower housing cost entering the index as a positive feature of the city.Why might such quality of life indeces be misleading?

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Question 11

While some countries might be better off (in terms of social surplus) from the imposition of a tariff, the world overall is always worse off (in terms of social surplus) when import tariffs are imposed.

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Question 12

Consider the case of labor outsourcing and labor migration in tradeable goods markets with no barriers to trade.

(Multiple Choice)

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Question 13

If country A is importing good x from country B where x is produced in a perfectly competitive industry (composed of identical firms), then, in the long run, country A will suffer the entire deadweight loss from any tariff it might impose on imports of x from country B.

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Question 14

Which of the following is true about outsourcing and labor migration:

(Multiple Choice)

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Question 15

In a world of certainty about future demand and supply, speculators cause price fluctuations across time to decrease.

(True/False)

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Question 16

Explain how an import quota might be more inefficient than an import tariff that has the same impact on prices.

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Question 17

When speculators buy gasoline during the low demand spring in order to sell it during the high demand summer, they cause an increase in dead weight loss in the spring that is more than made up for by an increase in social surplus in the summer.

(True/False)

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Question 18

When tariffs on exports are eliminated, there is at least in principle a way for everyone to benefit.

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Question 19

When tariffs on imports are eliminated, everyone benefits.

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Question 20

Showing 1 - 20 of 22

Exam 20: Prices and Distortions Across Markets

A speculator who takes a long position in a market buys low and sells high, whereas a speculator who taxes a short position in a market buys high and sells low.

Suppose there is a tradeable goods market (such as products like textiles that can be shipped across markets) and a non-tradable goods market (such as services like hair cuts).Can outsourcing impact wages in the non-tradable market?

If worker productivity is the same in each country, outsourcing and labor migration will both result in an equalization of wages across the two countries.

Regardless of what types of workers are available in different countries, unrestricted labor outsourcing always results in an equalization of wages across countries.

Even when earning zero profit, exporters (nearly) equalize prices across markets.

Suppose the price of good x in country A is lower than the price of good x in country B when no trade is permitted.In the absence of transportation costs, if the supply curve for good x in the two countries is sufficiently elastic, free trade in good x implies that country B will stop producing x.

Explain the impact of speculators on markets is similar and how it may be different from the impact of exporters and importers.

Because trade across markets creates winners and losers,the overall surplus in the loser's market is diminished.

The smaller a country is, the less of an ability it has to export a portion of the burden of an import tariff to other countries.

If country A is importing good x from country B where x is produced along a perfectly inelastic supply curve, then country B will suffer the entire deadweight loss from any tariff imposed on imports to country A.

Quality of life indexes produced in popular magazines often place a heavy emphasis on the cost of housing in different cities -- with a lower housing cost entering the index as a positive feature of the city.Why might such quality of life indeces be misleading?

While some countries might be better off (in terms of social surplus) from the imposition of a tariff, the world overall is always worse off (in terms of social surplus) when import tariffs are imposed.

Consider the case of labor outsourcing and labor migration in tradeable goods markets with no barriers to trade.

If country A is importing good x from country B where x is produced in a perfectly competitive industry (composed of identical firms), then, in the long run, country A will suffer the entire deadweight loss from any tariff it might impose on imports of x from country B.

Which of the following is true about outsourcing and labor migration:

In a world of certainty about future demand and supply, speculators cause price fluctuations across time to decrease.

Explain how an import quota might be more inefficient than an import tariff that has the same impact on prices.

When speculators buy gasoline during the low demand spring in order to sell it during the high demand summer, they cause an increase in dead weight loss in the spring that is more than made up for by an increase in social surplus in the summer.

When tariffs on exports are eliminated, there is at least in principle a way for everyone to benefit.

When tariffs on imports are eliminated, everyone benefits.

Introduction

A Consumers Economic Circumstances

Economic Circumstances in Labor and Financial Markets

Tastes and Indifference Curves

Different Types of Tastes

Doing the Best We Can

Income and Substitution Effects in Consumer Goods Markets

Wealth and Substitution Effects in Labor and Capital Markets

Demand for Goods and Supply of Labor and Capital

Consumer Surplus and Deadweight Loss

One Input and One Output: a Short-Run Producer Model

Production With Multiple Inputs

Production Decisions in the Short and Long Run

Competitive Market Equilibrium

The Invisible Hand and the First Welfare Theorem

General Equilibrium

Choice and Markets in the Presence of Risk

Elasticities, Price-Distorting Policies, and Non-Price Rationing

Distortionary Taxes and Subsidies

Externalities in Competitive Markets

Asymmetric Information in Competitive Markets

Monopoly

Strategic Thinking and Game Theory

Oligopoly

Product Differentiation and Innovation in Markets

Public Goods

Governments and Politics

What Is Good Challenges From Psychology and Philosophy

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