ECON 1000 Lecture Notes - Lecture 8: Economic Equilibrium, Takers, Comparative Advantage

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amberdonkey564

22 Sep 2020

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Econ week 8: close economy, open economy: international trade (comparative advantage, the world price and comparative advantage. > the economists compare the current isolandians price of textiles to the price of textiles in other countries. The isolandians are said to be price takers in the world economy. World price > domestic price -> isoland would export. World price < domestic price -> isoland would import. World price: the price of a good that prevails in the world market for that good: the winners and losers from trade: The gains and losses of an exporting country: Before trade, the domestic equilibrium price is below the world price. Once free trade is allowed, the domestic price rises to equal the world price. No seller of textiles would accept less than the world price, and no buyer would pay more than the world price.

Question 1

In 2003, the ________ ruled that U.S. tariffs on steel imported from the EU were unfair and allowed the EU to issue retaliatory tariffs on U.S. products.

World Trade Organization

United Nations

European Central Bank

International Human Rights Commission

Question 2

The idea of the U.S.-Canadian Free-Trade Agreement that ________ barriers to trade including tariffs and quotas between the United States and Canada by 1998 was to increase the amount that the United States exports to Canada and the amount that the United States imports from Canada.

increased all

removed some

removed all

increased some

Question 3

According to the theory of comparative advantage, a country should specialize and ________ goods with ________ opportunity cost.

import; the lowest

import; negative

export; the lowest

export; the highest

Question 4

A quota is a restriction on imports.

True

False

Question 5

If Holland decreases subsidies to its tulip growers, the price of tulips in the United States will rise.

True

False

Question 6

According to comparative advantage, trade between two countries allows ________ of the trading countries to use its resources most efficiently.

only the smaller

only the larger

neither

each

Question 7

________ U.S. president(s) who has/have held office since GATT was signed has argued for free-trade policies, yet each one has used his powers to protect various sectors of the economy.

Only one

No

Every

Only 3

Question 8

In 1991, the European Union began the process of forming the

		largest free-trade zone in the world.
		only continental military force in the world.
		first international trade agreement in the world.
		first unified currency in the world.

Question 9
1. The Smoot-Hawley tariff set off an international trade war in the
  
  1930s.
  
  1950s.
  
  1970s.
  
  1990s.
  
  Please help me with these questions Thank you.

magentadeer293

Explain how the United States, being a large economy with an abundance of natural resources, labor, and capital, can benefit by not being in autarky. It was shown in the video that the United States had the comparative advantage in burgers. Using the table below, show and explain how Mexico has the comparative advantage in phones. From your answer in the previous question, what is the opportunity cost of burgers for the United States, i.e. how many burgers must the United States give up to produce one phone? What would be an agreeable terms of trade for 1 phone? At the end of the video, a supply and demand graph of the phone market for both countries was shown. Explain why Mexico exported phones to the United States. Suppose, the market for burgers was shown rather than the market for phones in the supply and demand graphs. For the United States to export burgers and Mexico to import burgers, what would world price need to be. in each country, relative to the domestic price? Lastly, explain what a tariff is and the effect it can have on burger imports for Mexico.

Statement	True	False
Meekertownian consumers are worse off under free trade than they were before.
Meekertownian producers are worse off under free trade than they were before.