Exam 9: Comparative Advantage and the Gains From International Trade

The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. In the U.S. steel market, a "Buy American" provision in the 2009 stimulus package would

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

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

Assume that China has a comparative advantage in producing corn and exports corn to Japan. We can conclude that

In the past two decades the United States lost its comparative advantage in automobiles to Japan. What factor was most responsible for the development of Japan's comparative advantage in automobiles?

Figure 9-5 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff. -Refer to Figure 9-5. Without the tariff in place, the United States produces

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

Explain whether it is possible for a country to have an absolute advantage in the production of a product without having a comparative advantage in the production of that product.

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

Suppose that in Vietnam, a worker can produce either 16 units of cloth or 2 bicycles, while in China, a worker can produce either 20 units of cloth or 5 bicycles. a. Which country has an absolute advantage in cloth production? In bicycle production? b. What is the opportunity cost of 1 unit of cloth in Vietnam? In China? c. What is the opportunity cost of 1 bicycle in Vietnam? In China? d. Which country has a comparative advantage in cloth production? In bicycle production? e. Suppose each country has 1,000 workers. Currently, each country devotes 40 percent of its labor force to cloth production and 60 percent to bicycle production. What is the output of cloth and bicycles for each country and what is the total output of cloth and bicycles 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 cloth and bicycles in the two countries? g. Provide a numerical example to show how Vietnam and China can both gain from trade. Assume that the terms of trade are established at 6 units of cloth for 1 bicycle.

Under autarky, domestic producer surplus is represented by the area

Table 9-7 Output Per Hour of Work Table 9-7 shows the output per hour of work for handbags and jackets in Cambodia and in Thailand. -Refer to Table 9-7. Fill in the following table with the opportunity costs of producing handbags and jackets for Cambodia and Thailand.

Article Summary Roberto Azevedo, director-general of the World Trade Organization (WTO), reported that global trade growth estimates will be lowered for 2013 and 2014 because of increasing global protectionism. The current protectionism is based primarily in regulations rather than the more common tariffs and subsidies. Since 2008, almost 700 new trade restrictions have materialized - over 150 of those in 2012 alone - with Russia being singled out as one of the primary offenders. Source: Kiran Moodley, "WTO warns of trade slowdown due to protectionism," CNBC, September 6, 2013. -Refer to the Article Summary. The protectionism being granted to Russian firms will cause the greatest harm to

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. If the tariff was replaced by a quota which limited rice imports to 16 million pounds, the amount of revenue received by rice importers would equal

Table 9-6 Mateo and Celeste produce custom saddles and spurs. Table 9-6 lists the number of saddles and pairs of spurs Mateo and Celeste can each produce in one month. -Refer to Table 9-6. Select the statement that accurately interprets the data in the table.

Table 9-11 Production and Consumption Production Without Trade With Trade Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production and consumption quantities without trade, and the production numbers with trade. -Refer to Table 9-11. With trade, what is the total gain in hat production?

In the 1980s Japan agreed to limit the quantity of automobiles it would export to the United States. Why did the Japanese government agree to this trade restriction?

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. What is the area that represents revenue to foreign producers who are granted permission to sell in the U.S. market when there is a quota?

Table 9-3 Bryce and Tina are artisans who produce homemade candles and soap. Table 9-3 lists the number of candles and bars of soap Bryce and Tina can each produce in one month. -Refer to Table 9-3. Select the statement that accurately interprets the data in the table.

Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because