Ch. 32 Homework – Flashcards
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True about the importance of international trade in the world economy?
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Trade accounts for an increasingly higher share of a country's economic activity
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If a country has an absolute advantage in the production of some good then
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That country has the ability to produce more output from given inputs of resources than other producers can
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If a country has a comparative advantage in the production of some good then
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That country can produce the good at a lower opportunity cost compared to other producers
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IS TRUE
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-Any restriction of imports ultimately reduces exports
-In the long run, imports are paid for by exports
-Protecting US jobs by restricting foreign competition ultimately leads to fewer jobs in the US export industry
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In the long run. imports are paid for by exports because
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For the most part, foreigners want US produced goods in exchange for the goods that are shipped to the US
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Ultimately, imports are paid for by
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Exports
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During the Great Depression of the 1930s, many industrial countries tried protecting domestic jobs by imposing tariffs. According to economic theory, the likely outcome would be
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Reduced exports and volume of trade for everyone
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According to the Swiss Institute for Management Development, the top country in terms of overall productive efficiency is
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The US
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The US economy is considered by the Institute for Management Development to be the most competitive economy because
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Of widespread entrepreneurship
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All have been citied as factors explaining America's top-rated competitiveness
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-Economic restructuring
-Large investments in scientific research
-Widespread entreprenuership
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Which of the following is consistent with international trade theory?
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The standard of living within a country is a function of the strengthof the economy and not its relative position
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An argument against free trade
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-Dumping
-Exporting technologies can pose a threat to national defense
-Infant Industry
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Not an argument against free trade
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Comparative advantage
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If a firm in China sells its product in the US at a price below its cost production, the firm is said to be
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Dumping its goods in the US market
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When a country protects an infant industry in the hope that it will become efficient enough to compete effectively in the world market
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-The stockholders of companies in the infant industry gain when they are protected from world competition
-Consumes in that country lose if they continue to pay a price higher than the world price for the good in question
-The import-restricting arrangements often remain after the time period allotted for the industry to mature
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When a firm's production is subsidized by its government and then the firm sells its products in a foreign country at a price below the cost of production, this is called
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Dumping
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Best explains the dumping argument against free trade
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Tariffs are required to prevent foreign producers from selling excess goods at price below cost
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One reason why "Protecting domestic jobs" is a poor argument against free trade is because
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The cost of protecting jobs is much higher than the value of the jobs
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One key difference between a tariff and a quota is that
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The tariff generates tax revenues for the government and the quota does not
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Which of the following restrictions on international trade sets maximum allowable amount of a commodity that can be imported?
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A quota
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One main difference between tariffs and quotas is that
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Consumers can import any amount of the imports that have tariffs placed on them, but they are restricted to a set maximum amount they can import for goods subject to quotas
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You are a policymakers of a major exporting nation. Your main export good has a price elasticity of demand of- 0.50. Which of the following qualifies as an economic reason why you would voluntarily agree to export restraints?
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Because the demand is inelastic, the voluntary restraints will generate higher revenue for the exporting nation
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Best describes a quota?
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A government-imposed restriction on the quantity of goods that can be imported
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Best describes the winners and losers from a quota
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Consumers lose, domestic producers gain, and licensed importers gain
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Critics of the NAFTA suggest that much of the increase in exports from Mexico to the US now involves goods that Mexico otherwise would have exported to other nations. Mexican firms choose to export the goods to the US, the critics argue, soles because the items receive preferential treatment under NAFTA tariff rules. This can be described as
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A diversion of trade
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Some critics of the NAFTA suggest that firms outside NAFTA nations sometimes shift unassembled inputs to Mexico, assemble the inputs into final goods there, and then export the final product to the US in order to take advantage of Mexican trade preferences. These critics are claiming that as a result of NAFTA,
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Trade deflection is occurring in US-Mexican trade
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The multilateral trade agreements established for all nations through the WTO could help
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To prevent both trade diversion and trade deflection that can occur under regional trade agreements, and promote more overall international trade, by adopting global trade agreements
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The main international institution created in 1947 to improve trade among nations was
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the General Agreements on Tariffs and Trade
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Not a regional trading bloc
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WTO
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Regional trading blocs
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the EU, NAFTA, ASEAN
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A significant advantage to being a member of a trade bloc is
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Reduced or eliminated tariffs among member countries
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The NAFTA and the European Union are examples of
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Trade blocs
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Trade deflection means
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Moving partially assembled goods into a trading bloc country in order to re-export to other trading bloc member
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The World Trade Organization (WTO)
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Handles trade disputes among member nations
