ECON 1000 Lecture Notes - Export Subsidy, Deadweight Loss, Trade Route

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26 Mar 2014

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Imports - the goods and services we buy from other countries. Exports the goods and services we sell to people in other countries. Comparative advantage a situation in which a person can perform an activity or produce a good or service at a lower opportunity cost than anyone else. National comparative advantage a situation in which a nation can perform an activity or produce a good or service at a lower opportunity cost than any other nation. Without imports, canada supplies 4 million t-shirts for ; with imports the world price for t- shirts is so canada demands 6 million t-shifts while it only supplies 2 million and it imports 4 million a year. Price in canada falls to world market price. Quantity bought increases; quantity demanded at world price. Without exports, canada supplies 40 jets for million, with exports canada supplies 20 jets and produces 70 jets at where they exports 50 jets.

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what you think for this ? do you agree or disagree and why ?

I donât think itâs wise for nations to begin raising tariffs and increasing subsidies when we are faced with a global recession. If a smaller country raises tariffs on a good they are importing, it might not have that big effect on the global economy. However, if a country like China, Japan, United States etc. decide to raise tariffs on imports, it could lead to a global increase in the average tariffs. In the article âBarriers to entry: A rise in protectionism would worsen the already grim outlook for world trade,â it talks about the worldwide average for tariffs. In 1986 they average 26%. If the big economies of the world start increasing tariffs, the rest of the world will eventually follow, leading to a global increase on tariffs. A rise in the tariffs would slow down the global economy even more in the long run. In the article it mentions how trade has picked up immensely when tariffs are lower, and the world GDP was higher compared to when tariffs are increased because countries are more willing to trade. I think theyâre still benefits to be gained from trade even when a global recession may be taking place. If tariffs are increased, countries might try to specialize in goods where they donât have a comparative advantage in. Instead of trading for that good, they will try to produce it domestically. The opportunity cost of choosing to specialize in a good when they donât have comparative advantage is using those resources elsewhere. Perhaps for producing a good they do have comparative advantage in. Also a decline in trade because of rising tariffs means firms wouldnât be able to benefit from economies of scale.

215. Economists examine pollution from the perspective of the:
A) preferences of people.
B) intensity and duration of the harm to resources.
C) desires of government bureaucrats.
D) intent of business firms in the maximization of profits.

212. Free trade is beneficial because it:
A) reduces competition.
B) leads to less use of the world's resources.
C) results in a wider array of consumer products.
D) leads to the production of free goods.

206. If a country has a comparative advantage in the production of a good:
A) it can produce that good at a lower opportunity cost.
B) it will find trade most beneficial when it trades with another country that has a comparative advantage in the same good.
C) it will not find trade beneficial because other countries won't have a comparative advantage in other goods.
D) it must also have an absolute advantage in the good.

203. Which of the following statements is true?
A) Nations have generally moved toward freer international trade policies over the past few decades.
B) Nations all over the world have recently raised trade barriers.
C) Eastern Europe and the Former Soviet Union countries have reduced trade in the last decade.
D) NAFTA lowered trade barriers between the United States and Mexico but raised them between the United States and Canada.

olivebuffalo87

TITLE: BENEFITS OF TRADE Trade among nations has been growing faster than the total world GDP. The growth of U.S. exports and imports relative to the U.S. GDP parallels this global trend. Today, exports constitute more than 10 per cent of total national production. In some countries, trade accounts for a much higher share of total economic activity.

Tasks: Consider the table below for the neighbouring nations of Northland and West Coast. The table lists the maximum feasible hourly rates of the production of pastries if no sandwiches are produced and the maximum feasible hourly rates of the production of sandwiches if no pastries are produced. Assume that the opportunity costs of producing these goods are constant in both nations.

Product	Northland	West Coast
Pastries (per hour)	50,000	100,000
Sandwiches (per hour)	25,000	200,000

a. Based on the data provided, what is the opportunity cost of producing pastries and sandwiches in Northland?

b. What is the opportunity cost of producing pastries and sandwiches in West Coast?

c. Which nation has a comparative advantage in producing pastries and which nation has a comparative advantage in producing sandwiches?

d. Suppose the two nations choose to specialize in producing the goods for which both have a comparative advantage. Both agree to trade at a rate of exchange of one pastry for one sandwich. At this rate of exchange, what are the maximum numbers of pastries and sandwiches that both could agree to trade?

tanhyena895

ECON 1000 Lecture Notes - Export Subsidy, Deadweight Loss, Trade Route

ECON 1000 Full Course Notes

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