ECO3701 Lecture Notes - Lecture 5: Import Substitution Industrialization, Uruguay Round, Comparative Advantage

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9 Apr 2018

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Specific tariff fixed amount per unit. Ad valorem tariff a fixed percentage of value. Combined tariff fixed and ad valorem. Impact of tariff is to increase price and lower quantity demanded without affecting world prices. World prices are impacted by the decrease in demand, lowering world prices, thereby improving the terms of trade. Tax-like: anti-dumping, countervailing duties (both admin. protection), import surcharges and variable levies. Quantitative restrictions: quotas, tariff rate quotas, licenses, sanctions and embargos, domestic content, etc. Government procurement: contract practices and posture towards imports. Policy usually administered via a system of import licenses. A quota has restricted supply of import licenses. Extra value of the right to import an amount of a good is known as quota. Its impact on price and domestic production is similar to the tariff. rents (area c) Who receives rents depends on how the quota licenses are allocated.

Related Questions

Which of the following is TRUE regarding international trade?

Select one:

a. Typically, it is belived that when countries trade with one another, ther eare gains in production efficiency.

b. All of these are correct

c. Freedom to trade internationally adds to the consumers' choices available for purhcase

d. Countries often hope that international trade will help raise the standard of living for their citizens

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Which of the following is TRUE regarding why countries trade with one another?

Select one:

a. Countries trade so that they can get products and services that they are not as efficient in making as other countries.

b. Countries often hope that international trade will help their economy grow

c. All of these are correct

d. Countries trade because not all nations have the same resources.

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Revenue tariffs are levied to

Select one:

a. lower exports.

b. protect domestic producers.

c. increase imports.

d. raise money.

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Tariffs and quotas can have all of the following effects EXCEPT

Select one:

a. protecting domestic industry.

b. reducing trade deficits.

c. increasing prices consumers pay for goods.

d. promoting third-world development.

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The United States trade deficit causes

Select one:

a. the value of the dollar to fall in foreign exchange markets.

b. immediate worldwide recessions.

c. increased employment opportunities for all Americans.

d. the value of the dollar to strengthen in foreign exchange markets.

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Which of the following is true regarding the relationship of international trade and competition?

Select one:

a. International competition, like competition in general, can have effects on the price levels of goods.

b. When countries trade with one another, there is often increased competition among firms offering the same good or service.

c. All of these are correct.

d. When tariffs increase, domestic producers usually have fewer international competitors.

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31. A country's tax system influences the attractiveness of investing in that country and affects the relative level of profitability for an MNC.

a. True

b. False

32. Points inside a production possibilities frontier represent

a. unattainable production combinations

b. efficiency

c. situations where supply exceeds demand

d. unemployment of resources

33. Firms in a high-wage nation like the U.S. can compete effectively with imports from low-wage nations if

a. the U.S. reduces tariffs on imports

b. low-wage nations impose tariffs on U.S. made goods

c. labor productivity is higher in the low-wage nation

d. labor productivity is higher in the U.S.

34. Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2000 on imports. Businesses spend $5,000 in new investment spending. And, foreigners spend $1000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of:

a. $2,000 surplus

b. $1,000 deficit

c. $2,000 deficit

d. $1000 surplus

e. $0 deficit

35. Autarky means-----------------------------------------------------------------

a. the absence of government

b. lack of agriculture

c. self-sufficient, in the absence of international trade

d. short of exchange rates

36. The more people there are----------------------, the less the public as a whole will spend on goods and services.

a. unemployed

b. underemployed

c. employed

d. as discouraged workers

37, Which of the following theories holds that countries will produce and export products that use large amounts of production factors that they have in abundance?

a. Mercantilism

b. The theory of absolute advantage

c. The factor endowment theory

d. None of the above.

38. Suppose that a consumer has a marginal propensity to consume of 0.79. If this consumer earns an extra $1220, her saving would be expected to increase by-----------------------------

39. Many countries in Asia, Africa, and South America-----------------------

a. Are developing countries

b. Are industrialized nations

c. Have a high demand for nonessential products

d. Do not trade

40. Which two of the following are regarded as the main aims of the World Trade Organization (WTO)?

a) To eliminate discrimination in world trade

b) To provide financial assistance to countries with debt

c) To reduce tariff barriers

d) To make infant industry protection illegal

e) To help give preferences to smaller economies

b) and e) a) and c) a) and d) c) and e) b) and d)

41. Last year Sophia's nominal income increased by 12% while the price level rose by 5.5%. Consequently, Sophia's real income:

a. rose by approximately 7%

b. fell by approximately 1%

c. rose by approximately 2%

d. ------------------------------------

42. Consumer surplus

a. is always positive.

b. for a particular unit of consumption is computed by taking the difference between quantity demand and quantity supplied.

c. for all units consumed is the area below demand and below market price over all the units consumed.

d. added to producer surplus provides a measure of the net gain to society from the production and consumption of the good.

43. A decline in Real GDP for six or more consecutive months is called-------------------------------

a. A trough

b. A recession

c. An expansion

d. A recovery

44. What do we call the situation where capital grows faster than the labor force?

a. economic growth

b. technological change

c. productivity growth

d. capital deepening

45. The terms of trade are-------------------------------------------

a. the cost of transportation between countries

b. the ratio of wages in two countries

c. the terms which are used in the trade negotiations

d. the rate at which two products can be exchanged

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Question 6: Which of the following economic goals focuses on equal opportunities for education? (5 points)

-Equity

-Freedom

-Growth

-Security

Question 7: Marcel takes out student loans and works part-time to put himself through college. In time, he earns an advanced medical degree and goes to work in an understaffed city -hospital. Marcel's economic decisions benefit the goal of efficiency by (5 points)

-making his own job

-related decisions

-paying back loans to reduce the debt

-contributing to the nation's productivity

-taking advantage of equal opportunities

Question 8: Two countries produce milk and dairy products efficiently. Neither has an absolute advantage. However, Country A exports milk to Country B, and Country A imports cotton from Country B. Which of the following is inferred? (5 points)

-The opportunity cost of producing milk is lower for Country A.

-The opportunity cost of producing cotton is higher for Country B.

-Country A has a natural resource advantage in cotton.

-Country B has a natural resource advantage in milk.

Question 9: Worker hours to produce one unit of natural gas; Worker hours to produce one unit of oil; Brazil 4 9; Argentina 2 10; Mexico 3 7; United States 1 6. According to the chart, which country has the comparative advantage in oil production? (5 points)

-Brazil

-Mexico

-Argentina

-United States

Question 10: The United States can manufacture books at a much more rapid pace than manufacturers in Indonesia. Which of the following is a reason? (5 points)

-Indonesia, as a developed country, has a highly paid and experienced workforce

-Indonesia, as a developing country, has a less advanced manufacturing infrastructure

-The United States, as a developing country, has a high comparative advantage in manufacturing.

-The United States, as a developed country, has a lower cost of living than Indonesia

Question 11: A group of nations establishes a free-trade zone. What is the most likely effect? (5 points)

-Cost of trade increases

-Exports decrease

-Imports decrease

-Trade increases

Question 12: The United States may have a tariff on cotton products from China in order to (5 points)

-prevent Chinese manufacturers from losing profit because of low prices

-protect the business of the American cotton growers and manufacturers

-stop trade due to political disagreement on economic policy

-promote sales in the United States of cotton products from China

Question 13: A Chinese international salesperson hoping to increase exports to the U.S. may worry about the inflation of the U.S. dollar because the inflation may (5 points)

-increase the United States' supply of Chinese products

-decrease tariffs on Chinese products sold to the United States

-increase taxes on the United States' products sold to China

-reduce the United States' demand for Chinese products

Question 14: How would a strong U.S. dollar impact the trade of grain produced in the United States? (5 points)

-U.S. grain exports decrease

-U.S. grain exports increase

-U.S. grain imports decrease

-U.S. grain imports stagnate

Question 15: Which of these can be a result of inflation? (5 points)

-Businesses grow cautious about spending

-The government has to cut spending

-The price of household items increases

-Workers benefit from a lower cost of living

Question 16: If the inflation rate increases faster than their income, people will most likely (5 points)

-use a higher proportion of their incomes on basic needs

-spend a lower proportion of their incomes on basic needs

-get more goods and services for less money

-obtain fewer goods and services for less money

Question 17: To increase your standard of living, your wages must (5 points)

-rise faster than the inflation rate

-rise more slowly than the inflation rate

-keep pace with the inflation rate

-have a negative inflation rate

Question 18: Look at the map showing the European Union (EU) and its free-trade agreement (FTA) countries. Which is true about most current EU free-trade agreements? (5 points)

-The European Union's free-trade agreements are with all of the most developed nations in the world.

-The European Union's free-trade agreements include agreements with both developed and developing nations.

-The European Union's free-trade agreements focus on nations with access to overland trade routes

-The European Union's free-trade agreements focus on the Southern Hemisphere, as distant countries have access to goods not grown in Europe.

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ECO3701 Lecture Notes - Lecture 5: Import Substitution Industrialization, Uruguay Round, Comparative Advantage

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