Question 1

When the free trade treaty CER was signed between New Zealand and Australia, opponents claimed that New Zealand would suffer significant job losses to more efficient Australian producers.Why would you not be surprised to learn that CER did not lift unemployment in either country?

Accepted Answer

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Question 2

Suppose that Australia has a comparative advantage over the New Zealand in providing financial services and New Zealand has a comparative advantage over Australia in producing milk products.By reducing trade barriers, CER allowed both Australia and New Zealand to export more of the products in which it enjoys a comparative advantage.Do all people in both countries benefit from this free trade agreement? Explain.

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Question 3

Suppose that you are advising Russian policymakers on trade issues, and the issue of protection for the Russian vodka industry comes up.You argue in favour of free trade but the policymakers are convinced that some protection is needed.They are leaning in favour of an import quota.What will you tell them about the relative effects of import quotas and equivalent tariffs on the wellbeing of Russian vodka producers, Russian vodka consumers and the Russian government budget?

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Question 4

How does an import quota differ from an equivalent tariff?

Accepted Answer

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Question 5

What are the arguments in favour of trade restrictions and what are the counter-arguments?

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Question 6

Australia is considering whether it should import palm oil from Indonesia.If the Australian government is only interested in increasing consumer surplus, what factors should it take into account when deciding whether to import the palm oil?

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Question 7

Serbia has a small but growing apple juice market.In the past, Serbia has not traded much apple juice with other countries but now it is considering signing an agreement freeing up its apple juice trade with Croatia.Some apple juice growers are worried about the effect that opening up trade will have on their new industry and are meeting with the president to ask him to do something to protect them.What argument might they make to the president? Do they have a good point?

Accepted Answer

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Question 8

Most economists argue that international trade increases social welfare.What are some of the other benefits of international trade?

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Question 9

Suppose that Australia and China do not trade with each other.If they then allow trade and Australia becomes an exporter of mineral products to China, which group or groups in each country are better off, and which are worse off?

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Question 10

Suppose that China can produce every product at an absolutely lower cost than can Australia.Does it pay for China to trade with Australia? Explain.

Accepted Answer

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Question 11

What is the effect on the economic wellbeing of a nation if a tariff on imports is imposed? Why?

Accepted Answer

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Quiz 9: Application: International Trade