Exam 7: Comparative Advantage and the Gains From International Trade

Imports are goods and services bought domestically

Figure 7-1 Figure 7-1 shows the U.S.demand and supply for leather footwear. -Refer to Figure 7-1.Suppose the government allows imports of leather footwear into the United States.The market price falls to $24.What area represents domestic producer surplus?

Which of the following statements is false?

Table 7-6 Output per hour Production and Production of work Consumption without Trade with Trade Estonia and Morocco can produce both swords and belts.Each country has a total of 40 available labor hours for the production of swords and belts.Table 7-6 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 7-6.Which country has an absolute advantage in producing swords?

Table 7-5 Table 7-5 shows the output per week for pens and pencils by Tran and Farah. -Refer to Table 7-5.Fill in the following table with the opportunity costs of producing bows and arrows for Tran and Farah.

Which of the following statements is false?

If the ________ cost of production for two goods is different between two countries then mutually beneficial trade is possible.

Protectionism is the use of ________ to protect domestic firms from foreign competition.

________ is the ability to produce more of a good or service than competitors when using the same amount of resources.

Examples of comparative advantage often begin with two countries that each produce the same two goods.Each country is then shown to have a comparative advantage in producing the good it can produce at a lower opportunity cost,and specializes in the production of the good for which it has a comparative advantage.How do these examples prove that both nations are made better off as a result of trade than they would be without trade?

The Smoot-Hawley Tariff

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.This statement describes the ________ argument for protectionism.

Whenever a buyer and a seller agree to trade,both must believe they will be made better off

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

Table 7-3 Mateo and Celeste produce custom saddles and spurs.Table 7-3 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. -Refer to Table 7-3.Select the statement that accurately interprets the data in the table.

The terms of trade refers to

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the value of revenue to foreign producers who are granted permission to sell in the U.S.market when there is a quota?

Table 7-6 Output per hour Production and Production of work Consumption without Trade with Trade Estonia and Morocco can produce both swords and belts.Each country has a total of 40 available labor hours for the production of swords and belts.Table 7-6 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 7-6.What is the opportunity cost to produce 1 sword in Estonia?

Which of the following is the best example of a voluntary export restraint?

Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee 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