ADM 3318 Chapter Notes - Chapter 5: New Trade Theory, Paul Krugman, Factor Endowment

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browndonkey822

13 Apr 2020

School

University of Ottawa

Department

Administration

Course

ADM 3318

Professor

Radhakrishnan Swaminathan

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Document Summary

Check slide for this chapter (examples, charts, etc) Free trade: the absence of barriers to the free flow of goods and services between countries. The absence of government-imposed barriers, such as quotas or duties, that impede the free flow of goods and services between countries. Adam smith"s theory of absolute advantage argued that the invisible hand of the market mechanism, rather than government policy, should determine what a country imports and what it exports. Common sense notion of international trade dictates that countries should export products they can produce at low cost, and import products they cannot produce. Countries should trade exports that are most efficiently produced in their economy, even though a country can already produce it themselves. Climate and and natural resource endowments explain why certain countries are able to export certain commodity goods at different times of the year.

Related Questions

Mention if the following statements are true or false. Explain clearly why, using ideas and concepts.

a. Under free trade, one country gains at the expense of the other.

b. The theory of comparative advantage states that free trade benefits all countries.

c. The Neo-classical trade theory states that trade arises due to different amounts of labor and capital in a country.

d. The H-O theory states that trade arises due to different PPFs in a country.

e. Under free trade, prices fall, so trade becomes easier.

f. A country should not have any imports and should increase exports if it wants to increase its employment levels.

g. Adam Smith recommended very strong government regulation of trade.

h. A country with higher labor productivity than another country will have a comparative advantage in the production of all goods.

i. The Theory of absolute advantage explains producer and consumer equilibriums under free trade.

j. Developed countries do not gain under free trade with developing countries.

skywasp336

what is a key factor that determines a firm's profitability?

A differentiation of a firm's product from other products

B factors affecting a firm's entire market

C a firm's average cost of production relative to that of competing firms

D chance events

E all of the above

economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage (and less of that for which a country does not have a comparative advantage). However, countries rarely specialize completely, why?

even with international trade, countries rarely specialize completely because

A, all goods and services can be traded internationally

B, some countries would lose as a result of free trade

C, consumers in different countries have homogeneous tastes

D, some countries do not have an absolute advantege producing anything

E, production of most goods involves increasing opportunity costs.

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

ADM 3318 Chapter Notes - Chapter 5: New Trade Theory, Paul Krugman, Factor Endowment

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