ECON 1B03 Chapter Notes - Chapter 9: Takers, Deadweight Loss, Invisible Hand

48 views2 pages

plumdeer920

21 Aug 2013

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Shanghaibalcony1234 and 37744 others unlocked

ECON 1B03 Full Course Notes

Verified Note

46 documents

Document Summary

World price: the price of a good that prevails in the world marked for that good (i. e. how much is it everywhere else?) If the domestic price exceeds the world price the country is a consumer, an importer (and vise versa) If the domestic price is low, the cost of producing is low, suggesting the country has a comparative advantage relative to the rest of the world. Price takers if the economy is small. The gains and losses of an exporting country. If the domestic equilibrium is below the world price, the price will shift up causing a greater production in goods, and a decreased domestic demand in goods, therefore making the country an exporter. Still in equilibrium because now there is another participant in the market. The consumer surplus decreases, producer surplus increases, and total surplus increases. Trade rises economic well being as the gains of the winners exceed the losses of the losers.

Related Questions

Suppose the market for oranges in a small country is closed to international trade. The domestic price is $3 per lb, at which 10,000 lbs are bought and sold in the country, while the world price is $4 per lb. If the country opens up to free trade with the world, the domestic quantity demanded at the world price will be 8,000 lbs, and the domestic quantity supplied at the world price will be 12,000 lbs.

A. Which of the following statements is true?

a. The country will become an importer of oranges because it has a comparative advantage in the production of oranges

b. The country will become an exporter of oranges because it has a comparative advantage in the production of oranges

c. The country will become an importer of oranges because the world has a comparative advantage in the production of oranges

d. The country will become an exporter of oranges because the world has a comparative advantage in the production of oranges

B. At what price (per lb.) will oranges be bought and sold in the country after opening up to trade?

a. $3

b. $4

c. $3.5

C. After opening up to trade, the level of exports/imports for the country will be:

a. 8,000 lbs.

b. 12,000 lbs.

c. 10,000 lbs.

d. 4,000 lbs.

D. How much (in $) is the net gain from trade for this country in opening up to free trade?

coralbadger702

1. An import tariff

a. lowers the domestic price of the exported good below the world price.

b. keeps the domestic price of the exported goods the same as the world price.

c. raises the domestic price of the imported good above the world price

d. lowers the domestic price of the imported good below the world price.

2. Which two accounts are included in the balance of payments:

a. current account and the reserve account.

b. current account and the trade account.

c. current account and the capital account.

d. trade account and the capital account.

3. A producer has a comparative advantage in the production of a good when the producer:

a. has a production cost that is less than sales revenue.

b. has the highest cost of production compared to any other producer.

c. is comparatively more efficient at producing the good than it is at producing anything else.

d. specializes through the use of an assembly line.

4. According to the Fischer effect, if the "real" rate of interest in a country is 4 percent and expected annual inflation is 9 percent, the "nominal" interest rate will be _____.

5 percent

B.	13 percent

9 percent

36 percent

bluetortoise611

1. True or False: Increases in imports will always lead to NET job losses in the U.S. domestic economy.

Would this be false?

2. True or False: If all countries could restrict imports and promote exports, world output would rise.

Would this be false as well?

3. Which of the following statement is FALSE?
A.Quotas restrict the quantity of a good that is imported into a country.
B.One result of quotas is that consumers of the good facing the quota will pay a higher price for the good.
C.Domestic producers of the good will benefit because they face less foreign competition.
D.Government collects the revenue from quotas.

Is it B?

4. True or False: If country A has an absolute advantage in producing many goods and services over another country B, then country A will NEVER have an incentive to trade with country B.

I want to say its False because regardless if country A has an absolute advantage it still needs to trade with country B. I think?

ECON 1B03 Chapter Notes - Chapter 9: Takers, Deadweight Loss, Invisible Hand

ECON 1B03 Full Course Notes

Document Summary

Get access

Related Documents

ECON 1B03 Chapter Notes - Chapter 9: Demand Curve, Comparative Advantage, Economic Surplus

ECON 1B03 Lecture Notes - Economic Surplus, West Bank Areas In The Oslo Ii Accord, Comparative Advantage

ECON 1B03 Lecture Notes - Lecture 9: International Trade, Comparative Advantage, Import Quota

Related Questions