EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 38, Problem 2DQ
To determine
The land, labor and capital intensive goods.
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Which of the following statements about foreign trade is
correct? Choose an answer:
O 1. A good is imported if the world market price for this good is higher than the domestic
opportunity costs of producing this good.
O 2. A good is exported if the world market price for this good is lower than the domestic
opportunity costs of producing this good.
3. The levying of a domestic duty rate on an imported good increases the
producer surplus and reduces the domestic consumer surplus.
O 4. If a country has an absolute advantage in one good, it also has a comparative advantage
in that good.
O 5. A particularly productive country can have a comparative advantage in all goods.
3. The following hypothetical production
possibilities tables are for China and the
United States. Assume that before
specialization and trade, the optimal
product mix for China is alternative B
and for the United States is alternative
U. LO20.2
a. Are comparative-cost conditions such
that
the
two
countries
should
specialize? If so, what product should
each produce?
b. What is the total gain in apparel and
chemical output that would result
from such specialization?
c. What are the limits of the terms of
trade? Suppose that the actual terms
of trade are 1 unit of apparel for 1 unit
of chemicals and 4 units of apparel for
6 units of chemicals. What are the
gains from specialization and trade for
each nation?
China Production Possibilities
Product
A
D
F
Apparel (in thousands)
30
24
18
12
Chemicals (in tons)
12
18
24
30
U.S. Production Possibilities
Product
R
T.
V
Apparel (in thousands)
hemicals (in tons)
10
8.
4
4
8.
12
16
20
p. 579
25
20
15
10
LO
0
P
a
0
O
3
(d) areas (b) + (c) + (d) + (e)
(e) areas (a) + (b) + (c) + (d)
e
6
b
O
S
9 12 15 18
25. If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by
O(a) area (a) in this graph
(b) area (b) in this graph
(c) areas (c) + (d)
P*
21
IP
D
24 Q
Chapter 38 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 38.2 - Prob. 1QQCh. 38.2 - Prob. 2QQCh. 38.2 - Prob. 3QQCh. 38.2 - Prob. 4QQCh. 38 - Prob. 1DQCh. 38 - Prob. 2DQCh. 38 - Prob. 3DQCh. 38 - Prob. 4DQCh. 38 - Prob. 5DQCh. 38 - Prob. 6DQ
Ch. 38 - Prob. 7DQCh. 38 - Prob. 8DQCh. 38 - Prob. 9DQCh. 38 - Prob. 10DQCh. 38 - Prob. 11DQCh. 38 - Prob. 12DQCh. 38 - Prob. 13DQCh. 38 - Prob. 14DQCh. 38 - Prob. 1RQCh. 38 - Prob. 2RQCh. 38 - Prob. 3RQCh. 38 - Prob. 4RQCh. 38 - Prob. 5RQCh. 38 - Prob. 6RQCh. 38 - Prob. 7RQCh. 38 - Prob. 8RQCh. 38 - Prob. 9RQCh. 38 - Prob. 10RQCh. 38 - Prob. 11RQCh. 38 - Prob. 12RQCh. 38 - Prob. 13RQCh. 38 - Prob. 1PCh. 38 - Prob. 2PCh. 38 - Prob. 3PCh. 38 - Prob. 4P
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Similar questions
- 5. Suppose that the comparative-cost ratios of two products- baby formula and tuna fish-are as follows in the hypotheti- cal nations of Canswicki and Tunata: Canswicki: 1 can baby formula = 2 cans tuna fish 1 can baby formula = 4 cans tuna fish Tunata: In what product should each nation specialize? Explain why terms of trade of 1 can baby formula = would be acceptable to both nations. 25 cans tuna fisharrow_forwardA small country is facing the following domestic supply curve of a product: S = 200 + 20P, as well as the following domestic demand curve of a product: D = 400 - 20P. It can import it at a world price of 10 per unit. In addition, each unit of production yields a marginal social benefit of 10. The effect on welfare of an import tariff of 6 per unit is $. O -420 O 500 O -480 O 420 O 320 -500 O :180 O -320 480 O 180arrow_forwardGovernments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier? O a requirement that imports meet health and safety requirements restrictions on imports for national security reasons 4 O a requirement that the employees of domestic firms that engage in foreign trade pay income taxes O a requirement that the U.S. government buy military uniforms only from US, manufacturersarrow_forward
- American apparel makers complain to Congress about competition from China. Congress decides to impose either a tariff or a quota on apparel imports from China. Which policy would Chinese apparel manufacturers prefer? LO26.4 a. Tariff. b. Quota.arrow_forwardPrice (dollars per shirt) 44 40 36 32 28 24 20 16 12 O 8 O 32 million The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. 24 million S In the figure above, with the tariff the United States imports 8 million D O 16 million 16 24 32 40 48 56 64 Quantity (millions of shirts per year) million shirts per year.arrow_forwardFigure: Trade 1 Price $200 175 150 Domestic Supply 500 7501,000:1,300 1,150 World Supply + Tariff World Supply Domestic Demand Quantity If the world price for the good in this figure is higher than the domestic price, a move to free international trade means that the domestic economy will become: O either a net importer or a net exporter of the good, but it is impossible to say which. O a net importer of the good. neither a net importer nor a net exporter of the good. a net exporter of the good.arrow_forward
- 5. Assess all the statements below and judge which of them is true and which is false.Provide a short justification for your assessment.a) One reason that a large share of the trade between high-income industrial economies is intraindustry trade is because higher incomes permit them to spend more money abroad.b) Economies of scale at a firm level imply the benefit of falling average costs in the long-runproduction.c) Simultaneous exports and imports of sub-compact cars of different brand names by a countryis a good example of intra-industry trade.d) External economies of scale occurring in a country or region imply that firms abroad canbenefit from more intensive trade relations.e) If Germany imports copy machines from the rest of the world for a total value of €100 millionand at the same time exports copy machines to the rest of the world for a total value of €500million, the index of intra-industry trade in this case is equal to 0.6.arrow_forward25 20 15 10 LO 5 P COUNTRY 1 s1 IP d1 EQ 0 0 3 6 9 1215182124 INTERNATIONAL MARKET P 25 20 15 10 5 0 0 3 6 9 12 15182124 Under open trade, who will gain and who will lose in country 2? O a) consumers gain and producers lose. b) producers gain and consumers lose. c) both producers and consumers lose. O d) the poor lose and the rich gain. S2 S1 IP D2 D1 Q P COUNTRY 2 25 20 15 10 5 d2 0 0 3 6 9 1215182124 Q s2 IParrow_forwardIn Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles? LO26.2 a. Country A. b. Country Barrow_forward
- Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. Assuming constant costs, in which product should each nation specialize? Explain why. What are the limits of the terms of trade between these two countries? How would rising costs (rather than constant costs) affect the extent of specialization and trade between these two countries?arrow_forwardWhen a small country imposes a tariff on an imported good, domestic consumers bear of the statutory burden and of the economic burden of the tariff. O 100%; 0% 50%; 50% 100%; 100% 0%; 100%arrow_forwardSuppose that two countries can produce wheat or cotton. If country A produces only wheat it can produce 38 units of wheat, and if it only produces cotton it can produce 45 units of cotton. If country B produces only wheat it can produce 27 units of wheat, and if it only produces cotton it can produce 35 units of cotton. Given the production possibilities frontiers above which of the following would be feasible terms of trade between country A and country B? O a. One unit of cotton for 0.92 units of wheat. O b. One unit of cotton for 0.72 units of wheat. O c. One unit of wheat for 1.08 units of cotton. O d. One unit of wheat for 1.35 units of cotton. O e. None of the other answers are feasible terms of trade.arrow_forward
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