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econ 270
| Question | Answer |
|---|---|
| COST PER BUSHEL OF CORN US $4 BRAZIL $7 MEXICO $9 Suppose Mexico initially imposes a $ per bushel tariff on foreign corn. In this case Mexico will import ____ corn. | U.S |
| COST PER BUSHEL OF CORN US $4 BRAZIL $7 MEXICO $9 Now let Mexico and Brazil form a customs union, with the tariff on outside corn increased to $4 per bushel. In this case Mexico will import _ corn and will experience a welfare change that is _ | Brazilian, a loss |
| COST PER BUSHEL OF CORN US $4 BRAZIL $7 MEXICO $9 The customs union has proven detrimental to Mexico because it led to | costlier corn trade diversion less efficient resource use |
| What responsibilities does the International Monetary Fund have | assists national governments with necessary but difficult reorganizations acts as a lender of last resort in the case of debt crisis or foreign exchange crisis |
| What responsibilities does the World Bank have | assists developing nations through the provision of loans and advice |
| What responsibilities does the GATT have | keep markets for goods as open as possible ensures nations follows a set of rules governing free trade |
| The GATT was | an international treaty governing trade. |
| What is the relationship between GATT and WTO? | WTO continues and expands the efforts of GATT. |
| Which list places regional trade agreements in an order moving from the LEAST provisions to the most? | Free-trade Area, Common market, Economic Union. |
| US imports wool from $ NZ. If US signed a regional trade agreement with Britain (B produces wool $$ than NZ) that lowers tariffs on British wool, US might switch to importing wool from Britain. This shows the potential for regional trade agreements to | bring about "Trade Diversion" which is harmful to the world economy. |
| Public goods differ from private goods in that public goods are | non diminishable. nonexcludable. often provided collectively. |
| Examples of public goods | a fireworks display clean air safe streets |
| Examples of private goods | Fast food Vacations Concerts |
| You believe that market-based economies are inherently stable. How would you view the need for international institutions to address the provision of each of the public goods listed below? EX: open markets in recession -->prevent fall in exports | Inherently stable market-based economies may still be exposed to instances of government failure (inefficient policies). Thus, the need for international institutions to address the provision of international public goods is not obviated. |
| Partial trade agreement | Allows a limited number of goods and services to cross international borders without paying a tariff and without limitations imposed by quotas. |
| Customs Union | Allows goods and services to cross international borders without paying a tariff and without limitations imposed by quotas plus a common set of tariffs toward nonmembers. |
| Economic union | Goods and services can cross intl borders w/o paying a tariff w/o limitations from quotas + set of tariffs toward nonmembers + an agreement to allow the free mobility of inputs such as labor and capital + a coordination of policies and a common currency. |
| Common market | Allows goods and services to cross international borders without paying a tariff and without limitations imposed by quotas plus a common set of tariffs toward nonmembers plus an agreement to allow the free mobility of inputs such as labor and capital. |
| Free Trade Area | Allows goods and services to cross international borders without paying a tariff and without limitations imposed by quotas. |
| Argument in favor of intl organizations | they reduce uncertainty and increase stability |
| Argument against intl organizations | Unequal negotiation power and ability to absorb costs will impose implantation and adjustment costs issues of sovereignty since they may force adoption of domestic policies against nations will economic inequality and risks to vulnerable groups |
| A key criticism of international institutions is that | they impose high compliance/adjustment costs. their decision making lacks transparency. they are ideologically biased. they violate national sovereignty. |
| What can be said about the future role for the U.S. in the world economy? | The U.S. needs to become more cognizant of and integrate into the economic success of other countries. |
| Why is the trade-to-GDP ratio for Canada greater than that for the United States? | Because Canada has a smaller population and GDP, it cannot specialize in producing as many goods. |
| Between 1950 and 2014, U.S. manufacturing experienced | a large increase in value-added and a small decrease in employment. |
| Which of the following is not a reason for Canada proposing and signing the Canadian-U.S. Free Trade Agreement? | Canada wanted to take advantage of the currency in the United States. |
| Which of the following is a reason that assisted in the Mexican economy having market reforms and market opening in the mid-1980s? | The debt crisis that began in 1982. There was a need to gain additional foreign investment and to lessen the role of government. There was a widespread recognition that market forces needed to play a much larger role in the economy. |
| Which of the following is not a reason for Mexico proposing and signing the North American Free Trade Agreement? | The Mexican government wanted to borrow more in order to spend and stimulate the national economy. |
| The international debt crisis of early 1982 was precipitated when _____ could not pay its international debts. | Mexico |
| Which of the following is not a factor determining the number of immigrants to the United States from Mexico? | The political party that is in power in the presidency and the congress of the United States. |
| GDP per capita can be measured using market exchange rates or purchasing power parity. If one is interested in learning about living standards in Mexico, as compared with the U.S. it is best to compare | GDP per capita using purchasing power parity. |
| A preferential agreement is a ___ decision to ___ market access ____ reciprocation. | unilateral , provide, without |
| What are the reasons why the U.S. would make use PREFERNTIAL AGREEMENTS? | To influence the political environment in the target country(ies) to prevent communist or socialist dominance in the target country(ies) |
| Which of the following is a reason why claims about job creation and job destruction due to NAFTA are likely to be difficult to prove? | prob knowing what would happen w/o the agreement. Prob if US firm that buys supplies from other US firms moves to MEX or CAN, the inputs firm buys become exports. no new jobs created. job destruction is marred by the fact imports from Mexico may displa |
| Trade agreements such as the NAFTA force governments to consider the effects on jobs, | trade agreements raise these issues politically, even though jobs are more tightly connected to national labor market, fiscal and monetary policies. |
| In periods of economic crisis, international institutions help mitigate problems of free riding | by changing countries' expectations about the actions of other countries, through commitments and coordination. |
| complaints about sovereignty issues | covers the rights of nations to be free from unwanted foreign interference in their affairs. |
| complaints about transparency concerns | related to questions about the decision making that occurs within international institutions. Specifically, that decision making is dominated by countries pursuing their own interests. |
| complaints about ideological basis | the advice and technical assistance provided to developing countries are a reflection of the beliefs and wishes of developed country interests. |
| complaints about implementation and adjustment costs | associated with the asymmetries in negotiating skills and the ability to handle the requirements and responsibilities handed down by these institutions. |
| Which of the following is NOT an immediate result of the Bretton Woods Agreement? | The creation of the Marshall Plan. |
| In periods of economic crisis, international institutions help mitigate problems of free riding | by changing countries' expectations about the actions of other countries, through commitments and coordination. |
| IMF Conditionality" refers to the idea that countries that seek to borrow funds from the IMF may only be able to do so if | there are reforms in the way the borrowing government interacts with the market. |
| A Customs Union allows for: | free movement of goods. a common external tariff on non-members. |
| Which list places regional trade agreements in an order moving from the LEAST provisions to the MOST? | Free-trade Area, Common market, Economic Union. |
| A key criticism of international institutions is that | they are ideologically biased. they violate national sovereignty. their decision making lacks transparency. they impose high compliance/adjustment costs. |
| An important insight of international trade theory is that when countries exchange goods and services one with the other, it | benefits both countries, and is usually not equally beneficial to both countries. |
| Economists use the term opportunity cost to refer to | the value of the next best alternative occurring as a result of making a particular choice. |
| Assume the U.S. currently grows 3 million tons of fresh winter fruit and that the resources absorbed in the production of this fruit could have produced 200,000 laptop computers. Therefore, the opportunity cost of those 3 million tons of fruit is | 200,000 computers |
| opportunity cost of 3.0 tons of fruit is 200,000 computers country can produce 3.0 tons of fruit for 150,000 computers Trade gives the possibility of | a mutually beneficial rearrangement of world production. |
| The potential for gains from the rearrangement of production among countries is due to | differing opportunity costs. |
| Mercantilism advocated that a country | promote exports over imports because it viewed trade as zero sum, believing that one nation's gain was another nation's loss. |
| A country has a comparative advantage in producing a good if | its opportunity cost of producing that good is lower than elsewhere. |
| suppose that the resource base in Country X can produce either 150 units of alpha or 400 units of beta. Country Y is capable of producing 150 units of alpha or 300 betas. The OC cost of 150 alpha is lower in | Country Y |
| For each hour worked, a U.S. worker can produce 4 loaves of bread, or 2 tons of steel. Canadian workers can produce 2 loaves of bread, or 1 ton of steel per hour. The information indicates that | the U.S. has absolute advantage in bread, and the U.S also has absolute advantage in steel. |
| Gains from trade can only be achieved if: | a country has a comparative productivity advantage |
| HOME - CHEESE 5 LBS WHISKEY 4 GAL FOREIGN - CHEESE 1LBS 3 GAL what statement is true | home has comparative advantage in both cheese and whiskey and comparative advantage in cheese |
| HOME - CHEESE 5 LBS WHISKEY 4 GAL FOREIGN - CHEESE 1LBS 3 GAL home uses 1 hour to produce whisky. through trade home can gain: | 2 lbs of cheese |
| GER has bananas and exports them. to accomplish this, large tax incentives are granted to investors in banana production. Soon, GER industry is competitive and can sell bananas at the lowest price anywhere. A comp adv for GER in bananas | does not exist since the tax incentives do not reduce the high opportunity cost for German banana production. |
| What are the consequences for the overall economy with no comparative advantage | Labor and capital are used up in a relatively inefficient endeavor. Economic welfare falls. Tax revenues are diverted from other uses, creating an additional opportunity cost. |
| A nation gains from trade even though some individuals benefit while others are hurt because | the economic gains of the winners exceed the economic losses of the losers. |
| people believe that the goal of intl trade should be to create jobs. but when workers are laid off due to a firm's inability to compete against cheaper and better imports, they assume that trade must be bad for the economy. This assumption is | incorrect since trade is about improving living standards through a more efficient allocation of resources. |
| What can be said about the future role for the U.S. in the world economy? | The U.S. needs to become more cognizant of and integrate into the economic success of other countries. |
| NAFTA has much more tension over issues such as immigration and environmental and labor standards than other trade blocs. What is the most likely reason? | There is more variation in GDP per capita among NAFTA members than among members in other trade blocs. |
| Which of the following is one of the three main features of the NAFTA agreement? | mechanisms for dispute resolution |
| Canadian opponents of CUSTA worried that it would | lead to U.S. news and media overwhelming Canadian culture, and that it would force Canada to abandon some of its social programs. |
| What factor did NOT cause the U.S. to shift its focus to a more bilateral and unilateral trade approach from a multilateral approach? | Growing power of the U.S. in the world economy allowed the U.S. to choose its trade partners more carefully. |
| Why is the trade-to-GDP ratio for Canada greater than that for the United States? | Because Canada has a smaller population and GDP, it cannot specialize in producing as many goods. |
| The U.S. Canada Auto Pact | allows for free trade in automobiles. allowed the automakers to realize economies of scale. |
| A preferential agreement is a ____ decision to ____ market access ___ reciprocation. | unilateral, provide, without |
| why would the US agree to preferential trade agreements | To influence the political environment in the target country(ies) To aid in economic development of the target country(ies) |
| A country has a comparative advantage in the production of a good because | its endowments of production inputs determine the relative costs of products. |
| UK - CAPITAL 40 MACH LABOR 200 WORK BRAZIL - CAPITAL 10 MACH LABOR 60 WORK According to the table to the right, the relatively more labor-abundant country | brazil |
| UK - CAPITAL 40 MACH LABOR 200 WORK BRAZIL - CAPITAL 10 MACH LABOR 60 WORK the relatively capital-abundant country | UK |
| US - CAPITAL 90 MACH LABOR 360 WORK CANADA - CAPITAL 30 MACH LABOR 90 WORK steel = 4 mach and 16 work bread=3 mach and 15 work capital intensive | steel |
| US - CAPITAL 90 MACH LABOR 360 WORK CANADA - CAPITAL 30 MACH LABOR 90 WORK steel = 4 mach and 16 work bread=3 mach and 15 work labor intensive | bread |
| US - CAPITAL 90 MACH LABOR 360 WORK CANADA - CAPITAL 30 MACH LABOR 90 WORK given factor endowments, bread will be exported by | US |
| US - CAPITAL 90 MACH LABOR 360 WORK CANADA - CAPITAL 30 MACH LABOR 90 WORK Heckscher-Ohlin model, a country exports goods that | are intensive in its abundant factors. |
| The sources of modern trade are largely rooted in | country differences in human and human-created resources. |
| In this closed economy it is the case that | consumption cannot occur anywhere outside the production possibilities frontier. |
| In 2 country, factor, good, of the factor-proportions model, Home is labor-abundant and coal is labor-intensive. The movement from no-trade to free-trade between H and F can be expected to cause the relative price of coal to __ in Home. | increased |
| Suppose that the Home government is somewhat beholden to landowners. Which of the following adjectives might describe the Home government's stance toward the opening of trade? | resistant |
| Suppose furniture production is more capital-intensive relative to clothing production. If the U.S. is capital abundant compared with Thailand, the Heckscher-Ohlin model implies that the U.S. should import | clothing. |
| Suppose that there are three factors of production: capital, labor, and land. Wool requires inputs of land and labor, and cement requires capital and labor Of the three factors, land and capital are | specific |
| Suppose that there are three factors of production: capital, labor, and land. Wool requires inputs of land and labor, and cement requires capital and labor Of the three factors, labor is | variable |
| Suppose Canada's endowments are 80 capital and 400 land and factor endowments for US are 80 capital and 200 land. When trade opens, wool will be exported by | Canada |
| Suppose Canada's endowments are 80 capital and 400 land and factor endowments for US are 80 capital and 200 land. When trade opens, cement will be exported by | US |
| In the aftermath of trade between Canada and US, the return to land will rise in __ and return to capital will rise in __ | Canada, US |
| (US CANADA EXAMPLE) regarding the return to labor, it will be the case in both the US and Canada that trade has __ impact on return | indeterminates' |
| Within each country that opens itself to international trade, | some factor owners gain, but other factor owners lose. |
| Economists do not, generally, stress the income redistribution effects of international trade. Which of the following is NOT a reason why economists tend to de-emphasize the impact of international trade on the distribution of income? | Those that lose from trade tend to be marginally impacted by trade, poorly organized, and largely devoid of political influence. |
| Suppose a country has two factors, land and labor, and assume that wheat is a land-intense product. If the relative price of wheat increases by 10 percent, the "magnification effect" implies that | the income earned by land owners will increase by more than 10 percent. |
| The Ricardian model of international trade makes predictions about actual international trade flows that: | are supported with qualification by the empirical evidence. |
| EARLY phases of product cycle | Access in needed to capital that is willing to risk failure and an initial period of little or no profits there must be a consumer base with substantial income and skilled marketing to advertise information about the product |
| MIDDLE phases of product cycle | experimentation with fundamentally new designs begins to wane as product development shifts toward incremental improvements in a basic design the product itself begins to be standardized in size, features, and manufacturing process |
| LATE phases of product cycle | pressure is on high - income markets to turn toward the use of new products an increase share of worlds output is moving to countries where labor costs are low |
| Intrafirm trade and the theory of comparative advantage | are not usually a contradiction since former constitutes role for latter but products prod. process is divided into stages, with some of the stages relocated to countries where the factor endowments are consistent w production requirements of each stage. |
| If a U.S. firm moves some of its assembly operations to the firm's foreign affiliate located in Mexico, this is an example of | off-shoring. |
| Suppose Spain were to open its borders to the large number of unskilled Africans seeking to immigrate. Which of the following would you expect to see in Spain's trade patterns and its comparative advantage? | SPA may be relatively abundant in unskilled labor, acquiring a comp adv in products that use intensive unskilled labor. influx of unskilled labor into SPA works in nontraded goods sector of SPA economy, having no impact on comp adv + trade patterns. |
| Gains from trade can only be achieved if: | a country has a comparative productivity advantage. |
| Adam Smith was critical of trade barriers, since he believed that trade barriers | reduce specialization, technological progress and wealth creation. |
| For each hour worked, a U.S. worker can produce 4 loaves of bread, or 2 tons of steel. Canadian workers can produce 2 loaves of bread, or 1 ton of steel per hour. The information indicates that | neither country has comparative advantage in steel or bread. |
| A country has a comparative advantage in producing a good if | its opportunity cost of producing that good is lower than elsewhere. |
| Competitive advantage and comparative advantage will differ for China if | rue production costs are inaccurately measured due to production externalities such as pollution. the Chinese currency (the Renimbi or "yuan") is overvalued. |
| For each hour worked, a U.S. worker can produce 4 loaves of bread, or 2 tons of steel. Canadian workers can produce 2 loaves of bread, or 1 ton of steel per hour. The information indicates that | the U.S. has absolute advantage in bread, and the U.S also has absolute advantage in steel. |
| When countries such as the U.S. promote production of domestic cotton, developing countries that produce cotton are hurt. Why? | By increasing cotton supply, the U.S. limits ability of comparative advantage cotton producers to exploit their production opportunities. |
| For each hour worked, a U.S. worker can produce 4 loaves of bread, or 2 tons of steel. Canadian workers can produce 2 loaves of bread, or 1 ton of steel per hour. The information indicates that | neither country has comparative advantage in steel or bread. |
| Suppose a country is abundant in capital and the relative price of the good that intensely uses capital for its production increases. The Stolper-Samuelson theorem predicts that it will: | see wage decreases for labor, because of the higher demand for the good that uses capital intensively. |
| Suppose again that furniture production is more capital-intensive relative to clothing production, which is more labor-intensive. If the relative price of furniture to clothing rises, this will | raise the income of capital owners. |
| Product cycles are characterized by early, middle and late periods. Which of the following is FALSE? | In the late period, consumption in the low income country grows more rapidly than production by the low income country. |
| In the specific factors model, a country's comparative advantage is determined by | the country's factor endowments relative to its trading partners. |
| The opposition to expanded trade comes from people who fear that it will | reduce the demand for their labor or capital and lead to a decline in income. |
| If Heckscher-Ohlin is taught in all the textbooks, why don't more countries utilize its concepts and conclusions? | Measurement errors make it difficult to test. |
| WORKERS - US 100 CAN 10 MACHINES - US 20 CAN 4 Based on Table 4.1, according to the HeckscherOhlin Theorem, U.S. exports should be goods that | intensively use labor input. |
| Suppose again that furniture production is more capital-intensive relative to clothing production, which is more labor-intensive. If the relative price of furniture to clothing rises, this will | raise the income of capital owners. |
| Examples of demand pull factors that influence international migration include | the cost of moving to the destination country. the probability of finding a job in the destination country. the wage a worker may earn in the destination country. |
| A counter-example to the Stolper-Samuelson theorem has firms using more skilled labor as it becomes more expensive, and less unskilled labor as it become less expensive, even if the firms have time to adjust their labor mix. How can this possibly be? | Broader technology applications require more skilled labor and less unskilled labor. |
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emmapasqualino