Exam 9: Comparative Advantage and the Gains From International Trade

Table 9-4 Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced. -Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

Figure 9-8 Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure 9-8 shows the demand and supply curves for sugar and the impact of this tariff. -Use Figure 9-8 to answer questions a-i. a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased? b. Calculate the value of consumer surplus with the tariff in place. c. What is the quantity supplied by domestic sugar producers with the tariff in place? d. Calculate the value of producer surplus received by U.S. sugar producers with the tariff in place. e. What is the quantity of sugar imported with the tariff in place? f. What is the amount of tariff revenue collected by the government? g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff. h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government? i. Calculate the deadweight loss due to the tariff.

Protection in the form of tariffs create winners and losers. Winners include ________ and losers include ________.

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

Pakistan has developed a comparative advantage in the production of clothing. The source of its comparative advantage in these products is

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 be imported?

In the United States, imports and exports make up more than half of GDP.

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

In 1995, the General Agreement on Tariffs and Trade (GATT), which was established in 1948, was replaced by the World Trade Organization (WTO). Why did members of the GATT push for the establishment of the WTO?

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 is likely to cause

Protectionism is usually justified on the basis of one of four arguments. What are those four arguments?

________ raised average tariff rates by over 50 percent in the United States in 1930.

Table 9-10 Table 9-10 shows the output per week for pens and pencils by Tran and Farah. -Refer to Table 9-10. Fill in the following table with the opportunity costs of producing bows and arrows for Tran and Farah.

When BMW, a German company, purchases a welding machine that was made in Toronto, the purchase is

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

If the opportunity cost of production for two goods is different between two countries, then

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 of consumer surplus after the imposition of the quota?

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. -Free trade refers to trade between countries

When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is

Figure 9-1 Figure 9-1 shows the U.S. demand and supply for leather footwear. -Refer to Figure 9-1. Under autarky, the producer surplus is