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ECON Final Exam Review (got 94% in the course)

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ECON 2030
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Economics Final ExamChapter 21 Practice Problems 14 7 8 14 15 18 19 22 24 26 27 29Final 50 multiple choice questions 10 from the first 10 from the second 10 from the third and 20 from new materialLook at old exams for questionsAInternational Trade take two1Questions to answeraIf workers in the United States are the most productive in the world why do we consume so many imported goodsThe US is the most productive place Absolute advantage means nothing Mutually beneficial trade results from comparative advantagethe one with the lowest opportunity cost This is because the ones we are buying are produced at a lower opportunity cost than in the US bIf trade can make everyone better off why is there so much opposition to it If trade can make everyone better off there is opposition because while on the macroeconomic level every country is made better off by trade but this doesnt mean that individuals in those countries will all be better off Some will be better off and some wont 2Revisit England and PortugalaGains from trade based on comparative advantage Look at moodle example againEngland has the absolute advantage in producing both wine and cloth but Portugal has comparative advantage in wine England has comparative advantage in producing cloth Each specializes in the one with this comparative advantage These means mutually beneficial trade trade that benefits both the buyers and the seller bWho wins from trade and why Portugal specializes in producing wine meaning they will becomes the producer seller and exporter of wine Sellers are better off if they sell at a higher price Anything higher than 2 will benefit Portugal What is beneficial to the buyer is the lower price England will benefit from trade in wine if it less than 3 cloths For it to be mutually beneficial trade the price of the good has to be somewhere in between the opportunity costs Winners are Portuguese wine producers and workers Portuguese cloth consumers England cloth producers and workers English wine consumers cWho loses from trade and why Losers are England wine producers and workers English cloth consumers Portuguese cloth producers and workers and Portuguese wine consumersThe English are facing increasing competition from the PortugueseThey are finding themselves structurally unemployed Mutually beneficially means than the wins out way the loses dWhat if anything to do about it When you hear opposition to trade it is always coming from the losers from trade BSupply and demand in an open economy1Importer a country will become an importer of a good if the price of the good is the world price is less than the world no trade domestic priceThere is more complaining here because domestic producers and workers are experiencing the problems Unions will complain Look at graphaSupply After trade supply line changes and becomes supply of domestic and worldbDemand Demand and quantity will increase during trade cConsumer surplus Consumer surplus gains more area after we trade All gains go to consumer surplusdProducer surplus Producer surplus shrinks after trade 2Exporter You export if the world price if greater than your domestic price Less people will complain in this situation because so many people makes the amount of loses very little for each personaSupplySupply will increase if you can export a good for more moneybDemand Demand will decrease Demand changes and becomes demand for both domestic and worldcConsumer surplus This will go downdProducer surplus All the gains now go to producers Producer surplus gets bigger CTrade restrictions These restrictions are supposed to be a response to the importer trade problems 1Embargo aDefinition This is a prohibition on trade This is back to the autarky situation where the entire industry is controlled by the domestic producers All the gains from trade disappear because they were going to consumers and the companies dont care The US imposes embargos for political purposes not for the industry This work sometimes and other times it doesnt This is political not economic 2Tariff
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