ECON 1B03 Chapter Notes - Chapter 9: North American Free Trade Agreement, Shortage, Comparative Advantage

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ECON 1B03 Full Course Notes

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Econ120 micro, natasha park: country has comparative advantage if it produces good at lower opportunity cost than others. Countries gain from trade if each exports the goods in which it has comparative advantage. World price: pw = the world price of a good, the price that prevails in world markets, pd = domestic price without trade. If pd < pw if pw < pd. Country has comparative advantage in good country doesn"t have comparative. Under free trade, the country exports the good under free trade, country imports the advantage good. Small economy assumption: a small economy is a price taker in world markets its actions have no effect on pw. Not always true, but simplifies the analysis: when an economy engages in free trade, pw is the only relevant price. No seller accepts less than pw, no buyer would pay more than pw. A tax that is charged on imported goods. Imports were q1-q2: after the tariff: (pw+t)

Related Questions

Suppose we are analyzing Chile and Argentina economies using the Ricardian model. They can both produce bicycles and snowboards. In Chile, MPLb = 4 bicycles while MPLs = 6 snowboards. In Argentina, MPLb =2 bicycles while MPLs = 8 snowboards.

1. Which country has an absolute advantage in bicycle production?

A.Chile

B.Argentina

C.Neither Argentina nor Chile has an absolute advantage.

D.Both Argentina and Chile have an absolute advantage.

2. What is the relative price of snowboards in Argentina before Argentina and Chile trade with each other?

A.2/3

B.3/2

C.4

D.1/4

3. Which country has a comparative advantage in snowboard production?

A.Chile

B.Argentina

C.Neither Argentina nor Chile has a comparative advantage.

D.Both Argentina and Chile have a comparative advantage.

4. International trade will occur between Chile and Argentina as long as the world price of a snowboard is

A.lower than 1/4.

B.higher than 2/3.

C.between 1/4 and 2/3.

D.between 3/2 and 4.

5. Suppose the world price of a bicycle is 2 snowboards, which of the following trading scenarios is consistent with this price?

A.Chile exports 20 bicycles and imports 40 snowboards.

B.Chile exports 20 snowboards and imports 40 bicycles.

C.Argentina exports 20 snowboards and imports 40 bicycles.

D.Argentina exports 20 bicycles and imports 40 snowboards.

6. Suppose the world price of a bicycle is 2 snowboards, what will be a Chilean worker's real wage at the international trade equilibrium?

A.4 bicycles

B.8 snowboards

C.both A and B are correct

champagnewater-buffalo516

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

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

ECON 1B03 Chapter Notes - Chapter 9: North American Free Trade Agreement, Shortage, Comparative Advantage

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