ECO100Y5 Lecture Notes - Lecture 33: Absolute Advantage, Comparative Advantage, International Trade

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Eco100 chapter #33: the gains from international trade: 33. 1 the gains from trade: open economy: an economy that engages in international trade, closed economy: an economy that has no foreign trade. International trade leads to specialization in production and increased consumption possibilities: the difference in the slopes of the production possibilities boundaries reflects differences in comparative advantage. Intra-industry: trade of goods or services within the same broad industry. International trade therefore allows small countries to reap the benefits of scale economies: learning by doing: reduction in unit costs that often results as workers learn through repeatedly performing the same tasks. It causes a downward shift in the average cost curve: as people become in producing a good, costs tend to fall, countries can therefore develop new comparative advantages by education and tax incentive. Fig 33-4: specialization may lead to gains from trade through scale economies, learning by doing, or both.

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.

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ECO100Y5 Lecture Notes - Lecture 33: Absolute Advantage, Comparative Advantage, International Trade

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