Question 1

An import quota on a product normally does all of the following except

Accepted Answer

An import quota restricts the quantity of a good that can be imported into a country, which typically raises the price of that good in the importing country due to reduced supply. However, it does not necessarily increase the price everywhere, as prices in other countries or in the exporting country can be affected differently based on their own supply and demand conditions.

Question 2

Economists say that voluntary exchange makes both parties better off. What is the explanation that they offer to back up this conclusion?

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The answer of Economists say that voluntary exchange makes both...

Question 3

What is strategic trade policy? What are the pros and cons of such a policy by a nation in its dealings with other nations?

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The answer of What is strategic trade policy? What are...

Question 4

Why is comparative advantage rather than absolute advantage the basis for trade?

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The answer of Why is comparative advantage rather than absolute...

Question 5

Suppose that a tariff is imposed on imports of minivans. Show graphically what the effect is in terms of price and quantity of imports. Be sure that your graph is completely and correctly labeled. What determines how much of the tariff is paid by the buyers of the minivans?

Accepted Answer

The answer of Suppose that a tariff is imposed on...

Question 6

What is mercantilism? What are the draw backs of this doctrine?

Accepted Answer

The answer of What is mercantilism? What are the draw...

Question 7

Suppose the South had won the Civil War, and trade no longer took place between Northern and Southern states. Explain whether the sum of the North and South GDPs would have been higher or lower than with the current United States.

Accepted Answer

The answer of Suppose the South had won the Civil...

Question 8

Suppose that the citizens of South Dakota decided to limit imports of citrus fruit from Florida and California on the grounds that climatic differences give those two states an unfair advantage in the production of those products. How would the analysis used to explain international trade apply?

Accepted Answer

The answer of Suppose that the citizens of South Dakota...

Question 9

Carefully define the following terms and explain their importance to the study of economics. 
a. Specialization 
b. Absolute advantage 
c. Comparative advantage 
d. Quota 
e. Trade adjustment assistance

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The answer of Carefully define the following terms and explain...

Question 10

"The United States has more oil in Alaska than there is oil in Kuwait. Therefore, the United States should stop importing oil." Evaluate this statement using economic analysis.

Accepted Answer

The answer of "The United States has more oil in...

Question 11

Suppose that a quota is imposed on imports of minivans. Show graphically what the effect is in terms of price and quantity of imports. Be sure that your graph is completely and correctly labeled. What determines how much of the quota is paid by the buyers of the minivans?

Accepted Answer

The answer of Suppose that a quota is imposed on...

Question 12

"Free trade benefits one country at another country's expense." Evaluate this statement using economic analysis.

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The answer of "Free trade benefits one country at another...

Question 13

What is an export subsidy? Discuss some of the recent examples where such subsidies were controversial.

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The answer of What is an export subsidy? Discuss some...

Question 14

Compare and contrast the effects of a quota and a tariff on imports. Be sure to include both short-run and long-run effects in your answer.

Accepted Answer

The answer of Compare and contrast the effects of a...

Question 15

Quebec is capable of producing 10 pallets of wood shingles or 8 barrels of maple syrup with a unit of labor. Vermont is capable of producing 12 pallets of wood shingles or 12 barrels of maple syrup with a unit of labor. Assume that this is typical of the labor force as a whole. Which location has the absolute advantage and which has the comparative advantage, in the production of each good? Can these locations reap gains from trade?

Accepted Answer

The answer of Quebec is capable of producing 10 pallets...

Question 16

The essential logic behind international trade is not different from that underlying trade among different states. Why, then, do we study international trade as a special subject?

Accepted Answer

The answer of The essential logic behind international trade is...

Question 17

The United States can produce 1,000 shoes if it specializes in shoe production. Alternatively, it can produce 500 shirts. Taiwan can produce 500 shoes or 200 shirts. Explain which country will specialize in shoe production and which in shirt production. What are the possible terms of trade?

Accepted Answer

The answer of The United States can produce 1,000 shoes...

Question 18

Baumol and Blinder offer some reasons why countries trade with each other. List three of the reasons, and give an example of each to illustrate the reason.

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The answer of Baumol and Blinder offer some reasons why...

Question 19

Quebec is capable of producing 10,000 pallets of wood shingles or 8,000 barrels of maple syrup. Vermont is capable of producing 12,000 pallets of wood shingles or 12,000 barrels of maple syrup. 
a. Graph these production possibilities curves. Indicate from the slope, which has the absolute advantage, which the comparative advantage, and whether there are gains from trade. 
b. Assume that Vermont and Quebec each specializes in the good in which they have a comparative advantage. Suppose that Vermont and Quebec decide to trade 5,000 pallets of shingles for 5,000 barrels of syrup. Indicate this on the graph. How does this affect the well-being of the two societies? Explain.

Accepted Answer

The answer of Quebec is capable of producing 10,000 pallets...

Question 20

In the long run, foreign labor remains cheap when and if

Accepted Answer

The answer of In the long run, foreign labor remains...

Quiz 21: International Trade and Comparative Advantage