EC 111- Hasan Final || with 100% Errorless Solutions.
Imports correct answers Goods and services that people and firms in one country buy from firms
in other countries
Exports correct answers Goods and services firms in one country sell to people and firms in other
countries
Comparative Advantage correct answers The fundamental force that generates trade between
nations
National Comparative Advantage correct answers The ability of a nation to perform an activity
or produce a good or service at a lower opportunity cost than any other nation
If the opportunity cost of producing a T-shirt is lower in China in the United States, so China has
a ________ ________ in producing T-shirts. correct answers Comparative Advantage
Where is the point of no trade on a graph? correct answers At the equilibrium (the middle of the
x)
What does it mean when world price is above the equilibrium point? correct answers The
country has a comparative advantage in producing a product
What is the equation to find the exports of a graph? correct answers Point of supply- point of
demand
What does international trade lower the price of? correct answers Imported goods
What does international trade raise the price of? correct answers Exported goods
Tariff correct answers A tax on a good that is imposed by the importing country when an
imported good crosses its international boundary
Import quota correct answers A quantitative restriction on the import of a good that limits the
maximum quantity of a good that may be imported in a given period
Voluntary Export Restraint correct answers A quota allocated to a foreign exporter of the good
What are the 3 Traditional Arguments for Protection? correct answers 1. The National Security
Argument
2. The Infant Industry Argument
3. The Dumping Argument
National Security Argument correct answers A country must protect industries that produce
defense equipment and armaments and those on which the defense industries rely for their raw
materials and other intermediate inputs
, Infant-Industry Argument correct answers It is necessary to protect a new industry from import
competition to enable it to grow into a mature industry that can compete in world markets
Dumping Argument correct answers When a foreign firm sells its exports at a lower price than
its cost of production. The two reasons this might occur is when predatory pricing and subsidy
occur
Predatory Pricing correct answers When a firm sells below cost in the hope of driving out
competitors
Subsidy correct answers A firm receiving a subsidy can sell at price below cost and make profit
What are the four newer arguments for protection? correct answers 1. Saves jobs
2. Allows us to compete with cheap foreign labor
3. Brings diversity and stability
4. Penalizes lax environmental standards
Saves Jobs correct answers - Idea that buying foreign goods costs domestic jobs is wrong
- Free trade destroys some jobs and creates other better jobs
- Free trade also increases foreign incomes and enables foreigners to buy more domestic
production
Allows us to Compete with Cheap Foreign Labor correct answers - The idea that a high-wage
country cannot compete with a low-wage country is wrong.
- Low-wage labor is less productive than high-wage labor.
- And wages and productivity tell us nothing about the source of gains from trade, which is
comparative advantage.
Brings Diversity and Stability correct answers -a diversified investment portfolio is less risky
than one that has all of its eggs in one basket
-the same is true for an economy's production
-a diversified economy fluctuates less than an economy that produces only one or two goods
-but big, rich, diversified economies like those of the United States, Japan, and Europe do not
have this type of stability problem
Penalizes Lax Environmental Standards correct answers -The idea that protection is good for the
environment is wrong
-Free trade increases incomes and poor countries have lower environmental standards than rich
countries
-These countries cannot afford to spend as much on the environment as a rich country can and
sometimes they have a comparative advantage at doing "dirty" work, which helps the global
environment achieve higher environmental standards.
Rent Seeking correct answers Lobbying and other political activity that seeks to capture the gains
from trade
Imports correct answers Goods and services that people and firms in one country buy from firms
in other countries
Exports correct answers Goods and services firms in one country sell to people and firms in other
countries
Comparative Advantage correct answers The fundamental force that generates trade between
nations
National Comparative Advantage correct answers The ability of a nation to perform an activity
or produce a good or service at a lower opportunity cost than any other nation
If the opportunity cost of producing a T-shirt is lower in China in the United States, so China has
a ________ ________ in producing T-shirts. correct answers Comparative Advantage
Where is the point of no trade on a graph? correct answers At the equilibrium (the middle of the
x)
What does it mean when world price is above the equilibrium point? correct answers The
country has a comparative advantage in producing a product
What is the equation to find the exports of a graph? correct answers Point of supply- point of
demand
What does international trade lower the price of? correct answers Imported goods
What does international trade raise the price of? correct answers Exported goods
Tariff correct answers A tax on a good that is imposed by the importing country when an
imported good crosses its international boundary
Import quota correct answers A quantitative restriction on the import of a good that limits the
maximum quantity of a good that may be imported in a given period
Voluntary Export Restraint correct answers A quota allocated to a foreign exporter of the good
What are the 3 Traditional Arguments for Protection? correct answers 1. The National Security
Argument
2. The Infant Industry Argument
3. The Dumping Argument
National Security Argument correct answers A country must protect industries that produce
defense equipment and armaments and those on which the defense industries rely for their raw
materials and other intermediate inputs
, Infant-Industry Argument correct answers It is necessary to protect a new industry from import
competition to enable it to grow into a mature industry that can compete in world markets
Dumping Argument correct answers When a foreign firm sells its exports at a lower price than
its cost of production. The two reasons this might occur is when predatory pricing and subsidy
occur
Predatory Pricing correct answers When a firm sells below cost in the hope of driving out
competitors
Subsidy correct answers A firm receiving a subsidy can sell at price below cost and make profit
What are the four newer arguments for protection? correct answers 1. Saves jobs
2. Allows us to compete with cheap foreign labor
3. Brings diversity and stability
4. Penalizes lax environmental standards
Saves Jobs correct answers - Idea that buying foreign goods costs domestic jobs is wrong
- Free trade destroys some jobs and creates other better jobs
- Free trade also increases foreign incomes and enables foreigners to buy more domestic
production
Allows us to Compete with Cheap Foreign Labor correct answers - The idea that a high-wage
country cannot compete with a low-wage country is wrong.
- Low-wage labor is less productive than high-wage labor.
- And wages and productivity tell us nothing about the source of gains from trade, which is
comparative advantage.
Brings Diversity and Stability correct answers -a diversified investment portfolio is less risky
than one that has all of its eggs in one basket
-the same is true for an economy's production
-a diversified economy fluctuates less than an economy that produces only one or two goods
-but big, rich, diversified economies like those of the United States, Japan, and Europe do not
have this type of stability problem
Penalizes Lax Environmental Standards correct answers -The idea that protection is good for the
environment is wrong
-Free trade increases incomes and poor countries have lower environmental standards than rich
countries
-These countries cannot afford to spend as much on the environment as a rich country can and
sometimes they have a comparative advantage at doing "dirty" work, which helps the global
environment achieve higher environmental standards.
Rent Seeking correct answers Lobbying and other political activity that seeks to capture the gains
from trade
