MyLab Economics with Pearson eText -- Access Card -- for Principles of Microeconomics
17th Edition
ISBN: 9780134081168
Author: CASE, Karl E.; Fair, Ray C.; Oster, Sharon E.
Publisher: PEARSON
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Question
Chapter 20, Problem 5.1P
To determine
Identify the role of the trade agreement in an economy.
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Comment on the following statement:
"The United States is more productive in most activities than are most of other countries because it has an absolute advantage in the production of most goods and services. Therefore we should restrict international trade as it only benefits other countries at the expense of the United States."
Suppose the nation of Isoland is an importer of textiles and is looking for a way to raise government revenue. The following graph shows the effect of a tariff on textile imports.
Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including both imported and domestically produced textiles). Compared to the free trade scenario, the quantity of textiles consumed in Isoland will **FALL/REMAIN UNCHANGED/RISE** , and the quantity produced in Isoland will **FALL/REMAIN UNCHANGED/RISE** under a textile consumption tax.
The following table shows the effect of an import tariff on the nation of Isoland. Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption.
Which of the following is true of foreign trade zones?
These are areas that are physically outside U.S. soil but are considered to be inside U.S. commerce.
Goods entering foreign trade zones are subject to duty until they leave the zones.
Federal government has made it mandatory for U.S. companies to set up manufacturing plants within the foreign trade zones.
Companies that have set up manufacturing plants within the foreign trade zones are free from paying duty on defective materials.
Chapter 20 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Principles of Microeconomics
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- In the past 20 years the United States has entered into several "free trade agreements." The commonality of these free trade agreement has been making it easier for foreign companies to sell their goods in the United States (imports) and for American companies to sell their goods overseas (exports) What are the key points of specific trade agreement the United States has entered into in the last 25 years? And what other countries are involved and what kinds of trade restrictions and/or tariffs were changed as a result of that agreement.arrow_forwardAt the start of 2010 a new free trade area was established incorporating China and the six founding members of the Association of South East Asian Nations (ASEAN). These countries are Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand. The aim is to eliminate 90% of imported goods. This deal created the largest trade area in the world, with nearly 1.9bn people. Although there are undoubted gains there have also been warnings from South East Asia that some industries are not ready to compete with China and that jobs will be lost. Question: What factors determine the extent to which industries within a country gain or lose?arrow_forwardAt the start of 2010 a new free trade area was established incorporating China and the six founding members of the Association of South East Asian Nations (ASEAN). These countries are Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand. The aim is to eliminate 90% of imported goods. This deal created the largest trade area in the world, with nearly 1.9bn people. Although there are undoubted gains there have also been warnings from South East Asia that some industries are not ready to compete with China and that jobs will be lost. Questions What is a free trade area? Outline the potential advantages and disadvantages of joining this area for the member countries. What factors determine the extent to which industries within a country gain or lose?arrow_forward
- Use the specific factor model to analyze a simplified version of a liberalization of trade between Brazil and Japan. Assume that there are two goods that people want to buy: coffee and cars. Assume that there are three production factors: land, capital and labor. Land is specific to coffee, capital is specific to cars and workers can work in both industries.arrow_forwardConsider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel. Because this country exports steel, the world price is represented by(p1 or p2) . Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad. With this export subsidy, the price paid by domestic consumers is $______ per ton, and the price received by domestic producers is$_______per ton. The quantity of steel consumed by domestic consumers (reamins unchanged, decrease, and increase) , the quantity of steel produced by domestic producers (reamins unchanged, decrease, and increase) , and the quantity of steel exported (reamins unchanged, decrease, and increase) . True or False: With the export subsidy, this country will start importing steel from abroad. Under the export subsidy, consumer surplus is…arrow_forwardQ95 The division of the gains from trade between two trading countries depends on the... a. Long-run costs. b. Quantity of resources held by each country. c. Level of unemployment in both countries. d. Size of the absolute advantages possessed by each country. e. Difference between the terms of trade and the countries' autarkic relative prices.arrow_forward
- Tariffs and import quotas promote economic inefficiency and reduce the real income of a nation. Economic analysis suggests that nations can gain by eliminating trade restrictions. Which of following best explains why, despite the resulting inefficiencies, trade restrictions exist in the real world? Trade restrictions are favored by many special-interest groups. Trade restrictions do not exist in most real-world scenarios. Trade restrictions promote economic prosperity in the long run. Trade restrictions are favored by most citizens and opposed by most special-interest groups. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardBased on the information from the previous graph, the absent international trade surplus is (_________). Part II. When South Africa adjusts its trade policy to allow free trade of limes, the price of one ton of limes in South Africa becomes $800. At this price, (_____)tons of limes will be demanded in South Africa, and(____)tons will be supplied by domestic suppliers. Therefore, South Africa will export(____)tons of limes. Part III. Using the info from previous tasks, complete the following to analyze the welfare effect of allowing free trade: With free trade (dollars) Consumer Surplus= Producer Surplus= WIthout free trade (dollars) Consumer Surplus= Producer Surplus=arrow_forwardQ53 Many people argue that the imposition of tariffs in industry X will increase factor incomes in that industry and therefore be good for the country as a whole. The counter-argument is that... a. Factor incomes would first rise and then decrease in industry X. b. The increase in industry X factor incomes would be more than offset by reductions in real incomes to all other domestic residents. c. The increase in factor incomes in industry X would reduce profits to business owners by an equal amount. d. Factor incomes overall would increase, but wages in industry X would fall, which would hurt workers in that industry. e. The increase in factor incomes would increase unemployment.arrow_forward
- Which of the following is one of the implications of the New Trade Theory? Group of answer choices A country can gain by using government policies to promote exports. Consumers lose from the lower quality of goods that trade makes available. Countries as a whole must gain from trade. A country may export a good or import it, but not both.arrow_forwardAssume that Singapore, a country with an abundance of skilled labor, trades with China, a country with an abundance of unskilled labor. Choose the TRUE statement about the income effects of international trade based on the framework of the Heckscher–Ohlin model. a.International trade reduces the income gap in China only. b.International trade reduces the income gap in Singapore and China. c.International trade increases the income gap in Singapore and China. d.International trade reduces the income gap in Singapore only.arrow_forwarddo you think countries with distinctively different cultural, historical, and economic histories can effectively enter into a trade agreement? (at least one paragraph). Select one regional trading bloc and discuss the economic motivations for that group of countries to form an agreement. (at least one paragraph) Do you think the countries in the trading bloc you selected are likely to have cross-cultural similarities or differences? Explain. (at least one paragraph).arrow_forward
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