Question 1

Import tariffs in the United States are likely to reduce U.S.exports,both because of the resulting decrease in foreign earnings of dollars from exports to the United States and because of the likelihood of increases in other countries' import restrictions against U.S.goods.

Accepted Answer

When the United States imposes import tariffs, other countries may retaliate by imposing their own import restrictions on U.S. goods, which can reduce exports from the United States. Additionally, when foreign countries earn fewer dollars from exporting to the United States, they may have less money available to buy U.S. goods, and this can also reduce U.S. exports.

Question 2

The inevitable cost of protecting domestic industries from foreign competition will be higher prices for domestic consumers.

Accepted Answer

When a government imposes tariffs or other measures to protect domestic industries from foreign competition, the prices of imported goods increase. This may lead domestic consumers to switch to domestic products, which can then be sold at higher prices due to the lack of foreign competition. Therefore, the cost of protecting domestic industries from foreign competition is likely to result in higher prices for consumers.

Question 3

If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat then the other country must have the comparative advantage producing sugar.

Accepted Answer

The principle of comparative advantage states that if one country can produce a good at a lower opportunity cost than another country, then that country has a comparative advantage in producing that good. Therefore, if one country has a comparative advantage in producing wheat, it must have a higher opportunity cost in producing sugar, and the other country must have a comparative advantage in producing sugar.

Question 4

A nation can gain from international trade when the relative domestic prices of the nation differs from that in other countries,and it imports goods for which it is a high opportunity cost producer.

Accepted Answer

This statement is true as a nation can benefit from international trade by importing goods for which it has a high opportunity cost of production and exporting goods for which it has a comparative advantage. This can lead to lower prices for consumers, increased economic efficiency and growth, and access to a wider variety of goods and services.

Question 5

The quantity supplied by domestic producers in an importing country must be less than the quantity demanded by its population.

Accepted Answer

The answer of The quantity supplied by domestic producers in...

Question 6

A country has an absolute advantage over another if it can produce a good with fewer resources.

Accepted Answer

The concept of absolute advantage means that a country is able to produce a good using fewer resources (such as labor, capital, or land) than another country.

Question 7

One difference between a tariff and a quota is that the tariff brings in revenue to
the government while the quota benefits the foreign producer who is lucky enough to receive an import license.

Accepted Answer

A tariff collects revenue for the government, while a quota limits the quantity of imports, giving an advantage to foreign producers who are able to obtain import licenses.

Question 8

Import quotas contribute to higher prices of products imported into the U.S.,but tariffs do not.

Accepted Answer

Tariffs impose an additional tax on imported products, which ultimately leads to higher prices for consumers.

Question 9

A U.S.tariff on French wine will likely benefit U.S.wine producers and the U.S.government (by increasing tax revenue),but harm U.S.wine drinkers and French wine producers.

Accepted Answer

A tariff on French wine would make it more expensive for U.S. consumers to purchase, which could harm French wine producers who rely on U.S. sales. Additionally, U.S. wine producers may benefit as consumers may opt to purchase domestic wines instead. However, for those who enjoy French wine, the tariff would be a disadvantage as it would be more expensive to purchase.

Question 10

Tariffs contribute to higher prices of textile products imported into the United States,but import quotas on textiles brought into the United States do not.

Accepted Answer

Import quotas limit the quantity of textiles that can be brought into the United States, which can lead to a decrease in supply and potentially higher prices.

Question 11

If it can be shown that a tariff on steel imports will increase employment in the steel industry,we can be sure that the effect of the tariff on U.S.employment will also be positive.

Accepted Answer

While a tariff on steel imports may increase employment in the steel industry, it could also lead to job losses in industries that rely on imported steel, such as construction and automobile manufacturing. Therefore, the overall effect on U.S. employment is uncertain and may not necessarily be positive.

Question 12

When a country allows trade and becomes an exporter of goods both domestic consumers and domestic producers benefit.

Accepted Answer

When a country allows trade and becomes an exporter of a good, domestic producers benefit because they gain a larger market to sell to, which often leads to higher revenues. However, domestic consumers may face higher prices for the good, as domestic supply is partially diverted to foreign markets, reducing the benefit to consumers.

Question 13

It is possible for some individuals within countries to lose from reducing international trade barriers.

Accepted Answer

When trade barriers are reduced or eliminated, it can lead to increased competition from foreign firms, causing some domestic firms to lose market share, revenue, and even being forced to shut down their business. This can result in job losses for workers employed in these industries. Additionally, consumers may be able to purchase cheaper imports, but domestic producers may not be able to compete with these lower prices, leading to a decline in their revenue and possibly shutting down their business. Therefore, reducing international trade barriers can have winners and losers within a country.

Question 14

Trade occurs when a country has an absolute advantage and not just a comparative advantage over another country.

Accepted Answer

Trade can occur even if a country has only a comparative advantage over another country, meaning it can produce a good or service at a lower opportunity cost than another country. Absolute advantage refers to a country's ability to produce a good or service more efficiently than another country, without considering opportunity cost.

Question 15

If England uses one week's time to produce ten yards of cloth or two barrels of wine and Portugal uses one week's time to produce twelve yards of cloth or six barrels of wine,England has the comparative advantage in both goods.

Accepted Answer

According to the information given, England has an absolute advantage in producing wine (2 barrels per week compared to Portugal's 6) but Portugal has a comparative advantage in producing cloth (12 yards per week compared to England's 10).

Question 16

A country that is half as productive at producing some goods as another country,but is one quarter as productive at producing others,will not be able to gain from trade.

Accepted Answer

Even though the country is less productive in producing some goods, it may still have a comparative advantage in producing other goods. As long as there is a difference in opportunity cost between the two countries, there can be gains from trade.

Question 17

The intended gains from U.S.tariffs and other trade restrictions can backfire if foreign governments retaliate by imposing additional trade restrictions on U.S.goods sold in their countries.

Accepted Answer

This is a well-documented phenomenon known as the "trade war" or "tit-for-tat" escalation of trade restrictions between countries. When one country imposes tariffs or other restrictions on imports from another country, that country may retaliate by imposing its own tariffs or restrictions on imports from the first country, leading to a cycle of escalating trade barriers that can harm both economies.

Question 18

A tariff on a good increases the domestic price of the good,increases domestic production of the good,reduces the amount of the good sold,and decreases imports of the good.

Accepted Answer

This is because a tariff is a tax on imports, making them more expensive for domestic consumers compared to domestic goods. As a result, there is an increase in domestic production and a decrease in imports, leading to a reduction in the amount of the good that is sold. The higher domestic price also gives domestic producers an incentive to produce more, leading to an increase in domestic production.

Question 19

Major U.S.exporters would be likely to oppose the sort of protectionist policies favored by domestic producers that compete with imports.

Accepted Answer

Major U.S. exporters rely on international trade and would oppose protectionist policies that could harm their ability to sell goods overseas.

Question 20

A country with relatively abundant supplies of labor is unlikely to have a comparative advantage in the production of labor intensive goods.

Accepted Answer

A country with abundant supplies of labor is likely to have a comparative advantage in the production of labor-intensive goods. This is because the abundant labor supply lowers the cost of labor, making it more efficient and cost-effective to produce goods that require a significant amount of labor.

Quiz 28: International Trade