Question 1

In one hour,Mr.X can produce 50 cans of tuna or 100 bags of potato chips.In one hour,Mr.Y can produce 20 cans of tuna or 30 bags of potato chips.Mr.________ has the lower opportunity cost of producing cans of tuna and Mr.________ has the lower opportunity cost of producing bags of potato chips.

Accepted Answer

Mr. Y has the lower opportunity cost of producing cans of tuna because for every can of tuna he produces, he gives up 1.5 bags of potato chips (30/20), whereas Mr. X gives up 2 bags of potato chips for every can of tuna (100/50). Mr. X has the lower opportunity cost of producing bags of potato chips because for every bag of potato chips he produces, he gives up 0.5 cans of tuna (50/100), whereas Mr. Y gives up 0.67 cans of tuna for every bag of potato chips (20/30).

Question 2

Lana is a freelance computer consultant who earns $500 per day for her services.Larry is a handyman who could earn $15 per hour at the local hardware store.Lana needs her house painted.She can paint the house in 5 days.Larry could paint Lana's house in 3 days' time ?(8 hours per day).What is Lana's opportunity cost of painting her own house? What is Larry's opportunity cost for painting Lana's house? Should Lana paint the house herself?

Accepted Answer

The answer of Lana is a freelance computer consultant who...

Question 3

Studies have shown that government retraining programs

Accepted Answer

Studies have not found government retraining programs to be particularly effective, with some showing that they cost more than the benefits they create. In some cases, they may have modest benefits above costs, but overall they are not considered a cost-effective method for retraining workers.

Question 4

Mr.X works in the warehouse of a large textile firm located in the United States.The firm outsources the production of its textiles to another nation.Which of the following is an example of the possible substitution effect of this event on Mr.X?

Accepted Answer

The outsourcing of production would lead to a decrease in demand for warehouse workers in the United States and an increase in demand for warehouse workers in the other nation, as the production is being moved to that location. This is an example of the substitution effect, where the production is being substituted from one location to another, leading to a change in the demand for workers in each location. Option A is incorrect, as the increase in demand for textiles would lead to an increase in demand for warehouse workers in the short term, but in the long term, the outsourcing of production would lead to a decrease in demand for workers.

Question 5

Which of the following is the least Pareto optimal tool for offsetting the job displacement caused by international trade?

Accepted Answer

While imposing tariffs may help protect domestic jobs in specific industries, it is not a Pareto optimal solution as it can lead to retaliatory tariffs from trading partners and ultimately hurt the overall economy. B, C, and D are all more Pareto optimal solutions as they directly address the needs of displaced workers and aim to help them transition to new jobs or acquire new skills. Of these three options, providing cost-effective retraining to workers is likely the most effective solution for addressing job displacement caused by international trade.

Question 6

When companies outsource jobs to foreign countries,the price of the outsourced inputs is effectively reduced.The cross-wage effect on the demand for other workers will be positive

Accepted Answer

When companies outsource jobs to foreign countries and the price of the outsourced inputs is effectively reduced, the scale effect can lead to an increase in demand for other workers. This happens because the company might expand its operations due to lower input costs, thus requiring more workers overall, even if some jobs are outsourced. This contrasts with the substitution effect, where jobs might be replaced by cheaper foreign labor. If the scale effect dominates, it means the overall expansion of the company's operations outweighs the direct replacement of jobs, leading to a positive cross-wage effect on the demand for other workers.

Question 7

A nation is more productive when

Accepted Answer

Option C is the correct answer as it indicates that it takes fewer jobs and resources to produce a given amount of goods. This means that the economy is more efficient and has lower costs, resulting in higher productivity. In contrast, options A and D imply job creation or preservation at the expense of efficiency, which can harm productivity. Option B is not relevant to productivity as workers changing jobs can still contribute to overall output.

Question 8

Nation X produces and consumes only one good.This good is produced only with labor and all workers are exactly alike.One worker produces one unit of this good every day.One worker in Nation Y can produce two units of the good a day (and this is the only good they consume).What will happen if there is open trade between the countries?

Accepted Answer

The answer of Nation X produces and consumes only one...

Question 9

Mr.X works in the warehouse of a large textile firm located in the United States.The firm outsources the production of its textiles to another nation.Which of the following is an example of the possible scale effect of this event on Mr.X?

Accepted Answer

The scale effect refers to the impact on employment due to changes in the scale of production. If outsourcing leads to lower production costs and thus lower prices, the firm may sell more textiles, increasing the demand for warehouse workers in the U.S.

Question 10

What is the substitution effect on American labor when lower wage labor becomes available in the rest of the world?

Accepted Answer

The answer of What is the substitution effect on American...

Question 11

What is production sharing?

Accepted Answer

The answer of What is production sharing?...

Question 12

Suppose Santa Claus actually existed and caused all toy-making workers in America to lose their job.The Pareto optimal social policy would be to

Accepted Answer

The Pareto optimal social policy would not intervene if the displaced workers can quickly find jobs paying the same or more. This intervention would cause inefficiencies as it would require resources to be diverted to enforcing the policy and would be discriminatory against Santa Claus. Allowing the free market to operate and for workers to find alternative job opportunities is the most efficient and fair solution.

Question 13

Which of the following statements is NOT an implication of the law of comparative advantage?

Accepted Answer

The law of comparative advantage states that countries should specialize in producing the goods in which their opportunity cost of production is the lowest. It does not imply that one country will have a competitive advantage in producing all goods, even with cheap labor. Additionally, the law applies to nations or individuals, not to a single person trading goods. Therefore, statements B, C, and D are all implications of the law of comparative advantage.

Question 14

Consider two countries,A and B,that can use their productive resources to produce two goods-computers and food.If country A devotes all of its resources to computer production,it produces 100 million computers.If it devotes its resources to food production,it produces 300 million units of food.Likewise,if country B devotes its resources to computer production,it produces 100 million computers.If B devotes its resources to food production,it produces 100 million units of food.In separate graphs,draw the production possibility curve for each country.What do the production possibilities curves show? Which country has comparative advantage in computer production? Which country has comparative advantage in food production? Explain.Suggest a mutually beneficial trading arrangement between these two countries.

Accepted Answer

The answer of Consider two countries,A and B,that can use...

Question 15

A study of Japan's opening to trade in 1859 showed that international trade increased the per capita income of the Japanese.Why does Japan,in this case,offer an excellent "natural experiment"?

Accepted Answer

Japan's transition from almost no trade to open trade with the world, not driven by economic reasons, provides a clear before-and-after scenario to study the impact of trade on economic growth, minimizing other confounding variables.

Question 16

Nation X's major agricultural product before trade is wheat.Nation X will be potentially better off from open trade if the world price of wheat is ________ its pre-trade price of wheat.

Accepted Answer

Nation X will be potentially better off from open trade if the world price of wheat is either above or below its pre-trade price. If the world price is higher, Nation X benefits from exporting wheat at higher prices. If the world price is lower, consumers in Nation X benefit from cheaper imports.

Question 17

The compensation principle suggested by normative economics,which says that those displaced by trade should be compensated for their losses,is based upon which of these normative principles?

Accepted Answer

The compensation principle suggests that those who are negatively affected by trade should be compensated, in order to ensure that trade does not result in any individual being made worse off. This principle is based upon the normative principle that change is only good when some people benefit and none are made worse off.

Question 18

Domestic textile workers are more likely to lose their jobs to foreigners when

Accepted Answer

When domestic workers are close substitutes for foreign workers, it is more likely that they will lose their jobs to foreigners. This is because employers can potentially hire equally productive foreign workers at a lower wage, making them a more attractive option. The other options do not necessarily lead to job loss for domestic workers.

Question 19

How does a country's move toward greater international trade affect labor demand through shifts in product market demand?

Accepted Answer

The answer of How does a country's move toward greater...

Question 20

Imports of goods and services from foreign countries to the United States constituted ________ percent of all American purchases in 2012.

Accepted Answer

In 2012, imports of goods and services from foreign countries made up 17 percent of all American purchases, reflecting the country's engagement in international trade and its reliance on foreign goods and services to meet domestic demand.

Quiz 16: The Labor-Market Effects of International Trade and Production Sharing

In one hour,Mr.X can produce 50 cans of tuna or 100 bags of potato chips.In one hour,Mr.Y can produce 20 cans of tuna or 30 bags of potato chips.Mr. has the lower opportunity cost of producing cans of tuna and Mr. has the lower opportunity cost of producing bags of potato chips.