ECON 1000 Chapter Notes - Chapter 7: Import Quota, Economic Surplus, Deadweight Loss

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2 Feb 2018

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Comparative advantage person can perform an activity or produce a good at lower opportunity cost. National comparative advantage nation can produce at a lower cost than another nation. Ex: opportunity cost of producing t-shirt is lower in china, than canada, china has ca in t-shirts. We measure gains and losses from imports by examining their effect on consumer, producer and total surplus. Winners are those whose surplus increases and losers are those whose surplus decreases. We measure the gains and losses from exports like we measured those from imports. Domestic demand and supply determine the price and quantity, the consumer surplus and the producer surplus. Consumer surplus and producer surplus change when the good is exported. Quantity bought decreases to the quantity demanded at the world price and the consumer surplus shrinks. Tax on a good coming from another country imposed by the importing country. Gov"t of india imposes a (cid:883)(cid:882)(cid:882)% tariff on wine imported from ontario.

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25) Canada exports athletic coaching services and imports computer tech support. The price of athletic coaching services in Canada is higher with international trade than without international trade. As a result of trade in athletic coaching services, the Canadian producer surplus from athletic coaching services increase and the Canadian consumer surplus from athletic coaching services dorten A) lower, decreases; decreases B) higher, increases, increases Exports> means chegar lo produce C) higher, increases; decreases Imports more egersine D) lower; decreases: increases E) higher, decreases: increases

Under a binding price ceiling, what does the change in consumer surplus represent?
A) The gain in surplus for those buyers who can still purchase the product at the lower price.
B) The loss in surplus for those buyers who previously purchased some units of the good at the higher price, but these units are no longer produced at the lower price.
C) The loss in surplus for those buyers who would like the purchase the excess demand created by the price ceiling policy.
D) Both A and B are correct.
E) Both A and C are correct.

When the market price is held above the competitive level, the deadweight loss is composed of:

A) producer surplus losses associated with units that used to be traded on the market but are no longer exchanged.

B) consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
C) producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
D) There is no deadweight loss if the government uses a price floor policy to increase the price.

Compared to a tariff, an import quota, which restricts imports to the same amount as the tariff, will leave the country as a whole
A) worse off than a comparable tariff.
B) not as bad off as a comparable tariff.

C) about the same as a comparable tariff.

D) Any of the above can be true.

What is the welfare impact of a subsidy policy?
A) Producer surplus increases, consumer surplus declines, and total welfare declines.
B) Producer and consumer surplus increase, and these gains are larger than the government cost.

C) Producer and consumer surplus increase, and these gains are smaller than the government cost.

D) Producer surplus increases, consumer surplus declines, and total welfare increases due to the subsidy program.

Why is there a deadweight loss associated with subsidy payments?
A) There is no deadweight loss from a subsidy.
B) Quantity supplied is less than the equilibrium amount, so consumers and producers lose surplus value on those units that are no longer produced.
C) Quantity supplied exceeds the equilibrium amount, and consumer willingness to pay for these additional units is smaller than the marginal cost of producing them.
D) The subsidy payment does not distort quantities in the market, but the government cost exceeds consumer willingness to pay for the quantity demanded.

violetmole943

1. We can conclude that international trade is beneficial because, regardless of whether the country imports or exports a good, the overall increase in well-being outweighs the losses associated with trade.

Is the statement true or false?

2. Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run. This observation helps to explain why many economists are skeptical about the:

a. Unfair-competition argument.

b. Infant-industry argument.

c. national-security argument.

d. Jobs argument

3. Suppose that the U.S. has a comparative advantage in the production of spreadsheet software. As a result of opening up the market to international trade:

a. U.S. citizens benefit from lower software prices, increasing consumer surplus in the market.

b. U.S. producers benefit from higher software prices, increasing producer surplus in the market.

c. U.S. software producers are harmed since the price that these producers receive will decline as the price falls to the world price.

d. total surplus in this market will remain unchanged, as the decline in benefits received by software producers exactly balances the increase in benefits received by US software consumers.

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ECON 1000 Chapter Notes - Chapter 7: Import Quota, Economic Surplus, Deadweight Loss

ECON 1000 Full Course Notes

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