Exam 7: Comparative Advantage and the Gains From International Trade

Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade.These examples are misleading because

The General Agreement on Tariffs and Trade (GATT)was formed to replace the World Trade Organization (WTO)because the WTO was empowered only to reduce barriers to trade in goods.The GATT is an agreement to reduce barriers to trade in goods,services,and intellectual property.

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 loss in domestic consumer surplus as a result of the tariff is equal to

Your roommate Hansen argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States.Hansen

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 consumer surplus?

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 domestic producer surplus without a quota?

Assume that Finland and Latvia produce only two goods.If Finland has an absolute advantage in the production of these two goods compared to Latvia,Finland can still benefit from trade with Latvia.

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 tariff causes domestic consumption of coffee

Today,the United States charges an average tariff rate of less than 1.5 percent.

If a country has an absolute advantage in producing a product,it may not have a comparative advantage in producing that product.

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.If there was no quota,how many pounds of peanuts would domestic producers supply?

A tariff is the same as 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 belt in Estonia?

Table 7-2 Madison and Austin own Cafe Ole'.Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour. -Refer to Table 7-2.Select the statement that accurately interprets the data in the table.

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.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded,how many swords will Morocco gain compared to the "without trade" numbers?

Autarky is a situation where one country does not trade with other countries.

In 1995,the General Agreement on Tariffs and Trade (GATT)was replaced by the World Trade Organization (WTO).

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

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.All of the following are terms of trade that could possibly benefit both countries except

What are three primary reasons for the growth of international trade over the past 50 years?