Deck 20: Prices and Distortions Across Markets

Question 1

Even when earning zero profit, exporters (nearly) equalize prices across markets.

Answer 1

True

Question 2

Suppose the price of good x in country A is lower than the price of good x in country B when no trade is permitted.In the absence of transportation costs, if the supply curve for good x in the two countries is sufficiently elastic, free trade in good x implies that country B will stop producing x.

Answer 2

True

Question 3

A speculator who takes a long position in a market buys low and sells high, whereas a speculator who taxes a short position in a market buys high and sells low.

Answer 3

False

Question 4

If country A is importing good x from country B where x is produced in a perfectly competitive industry (composed of identical firms), then, in the long run, country A will suffer the entire deadweight loss from any tariff it might impose on imports of x from country B.

Question 5

The smaller a country is, the less of an ability it has to export a portion of the burden of an import tariff to other countries.

Question 6

In a world of certainty about future demand and supply, speculators cause price fluctuations across time to decrease.

Question 7

For any import quota a country imposes, there exists a tariff the country could have imposed that will have the same impact on producers and consumers.

Question 8

Consider the case of labor outsourcing and labor migration in tradeable goods markets with no barriers to trade.

A)In each country, labor outsourcing will result in the same wage changes as labor migration.
B)In each country, labor outsourcing will result in the same employment level changes as labor migration.
C)In each country, labor outsourcing will result in the same change in the demand for local public schools as labor migration.
D)Both (a) and (b)
E)Both (b) and c
F)Both (a) and (c)
G)All of the above.
H)None of the above.

Question 9

The larger a country is relative to the rest of the world, the less likely it is to be able to produce a net benefit for its citizens by imposing an import tariff.

Question 10

When tariffs on imports are eliminated, everyone benefits.

Question 11

If worker productivity is the same in each country, outsourcing and labor migration will both result in an equalization of wages across the two countries.

Question 12

Because trade across markets creates winners and losers,the overall surplus in the loser's market is diminished.

Question 13

Explain how an import quota might be more inefficient than an import tariff that has the same impact on prices.

Question 14

If country A is importing good x from country B where x is produced along a perfectly inelastic supply curve, then country B will suffer the entire deadweight loss from any tariff imposed on imports to country A.

Question 15

When speculators buy gasoline during the low demand spring in order to sell it during the high demand summer, they cause an increase in dead weight loss in the spring that is more than made up for by an increase in social surplus in the summer.

Question 16

Explain the impact of speculators on markets is similar and how it may be different from the impact of exporters and importers.

Question 17

While some countries might be better off (in terms of social surplus) from the imposition of a tariff, the world overall is always worse off (in terms of social surplus) when import tariffs are imposed.

Question 18

Regardless of what types of workers are available in different countries, unrestricted labor outsourcing always results in an equalization of wages across countries.

Question 19

Which of the following is true about outsourcing and labor migration:

A)Unrestricted out-sourcing and unrestricted labor migration result in the same wage outcomes in tradable goods markets (as long as there are no barriers to trade).
B)Under outsourcing, pressures for wage equalization arise from shifts in labor demand curves.
C)Under labor migration, pressures for wage equalization arise from shifts in labor supply curves.
D)Both (a) and (c)
E)Both (b) and c
F)Both (a) and (b)
G)All of the above
H)None of the above

Question 20

When tariffs on exports are eliminated, there is at least in principle a way for everyone to benefit.

Question 21

Suppose there is a tradeable goods market (such as products like textiles that can be shipped across markets) and a non-tradable goods market (such as services like hair cuts).Can outsourcing impact wages in the non-tradable market?

Question 22

Quality of life indexes produced in popular magazines often place a heavy emphasis on the cost of housing in different cities -- with a lower housing cost entering the index as a positive feature of the city.Why might such quality of life indeces be misleading?