Exam 9: Comparative Advantage and the Gains From International Trade

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?

Output per hour Production and Production of work Consumption without Trade with Trade Swords Belts Swords Belts Swords Belts Estonia 5 3 100 40 200 0 Morocco 2 2 60 60 0 120 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 9-12 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 9-12.Prior to trade,what was the opportunity cost to produce 1 belt in Estonia?

Members of Congress promising to support each other's legislation is known as

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia.We can conclude that

Whenever a buyer and a seller agree to trade

Candles Soup Bryce 150 450 Tina 200 450 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.

Output per hour Production and Production of work Consumption without Trade with Trade Swords Belts Swords Belts Swords Belts Estonia 5 3 100 40 200 0 Morocco 2 2 60 60 0 120 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 9-12 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 9-12.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded,how many belts will Estonia gain compared to the "without trade" numbers?

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Output per hour Production and Production of work Consumption without Trade with Trade Clocks Hats Clocks Hats Clocks Hats Denmark 6 3 900 150 1,200 0 Belize 1 2 150 100 0 400 Denmark and Belize can produce both clocks and hats.Each country has a total of 200 available labor hours for the production of clocks and hats.Table 9-11 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 9-11.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many hats will Belize consume?

A voluntary export restraint is an agreement negotiated by two countries that places ________ that can be imported by one country from another country.

Anti-globalization and protectionism are both arguments against free trade.How do these two arguments differ?

Japan has developed a comparative advantage in designing and producing automobiles.The source of its comparative advantage in these products is

Although the United States is the second largest exporting country,international trade is less important to the United States than it is to most other countries.

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

Costa Rica is a leading exporter of bananas.What explains the comparative advantage of this country in banana production?

Dalton,Georgia,a town with a population less than 35,000,has developed into a leading producer of carpets,despite its small size.Some government officials argue that the success achieved by firms in Dalton in developing a comparative advantage in carpet making because of external economies can be used to justify trade barriers as a means to protect an "infant industry." After an infant industry gains experience it can compete in international markets and the trade barriers can be removed.What objections do economists make to this argument in favor of trade barriers?

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

Output per hour Production and Production of work Consumption without Trade with Trade Clocks Hats Clocks Hats Clocks Hats Denmark 6 3 900 150 1,200 0 Belize 1 2 150 100 0 400 Denmark and Belize can produce both clocks and hats.Each country has a total of 200 available labor hours for the production of clocks and hats.Table 9-11 shows the output per hour of work,the production and consumption quantities without trade,and the production numbers with trade. -Refer to Table 9-11.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Denmark gain compared to the "without trade" numbers?

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.With a quota in place,what is the quantity consumed in the domestic market?

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.The tariff causes domestic consumption of rice