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Exam 20: International Trade

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Question 61

True/False

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The world price for a traded product will be between the domestic no-trade prices of the trading nations.

A) True
B) False

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Question 62

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A key difference between import quotas and voluntary export restraints (VERs) is that the

A) domestic government administers the former, whereas the foreign government administers the latter.
B) foreign government administers the former, whereas the domestic government administers the latter.
C) one is a tax, whereas the other is a quantity limit.
D) one raises the price of the imported product involved, whereas the other one does not.

E) A) and B)
F) A) and C)

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Question 63

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${ \text { Domestic Market For Steel, Alpha } }$ $\begin{array}{l}\begin{array} { | c | c | c | } \hline Q _ { S } & P & Q _ { d } \\\hline 60 & \$ 5 & 10 \\\hline 40 & 4 & 20 \\\hline 30 & 3 & 30 \\\hline 20 & 2 & 40 \\\hline 10 & 1 & 50 \\\hline\end{array}\\\\\\{ \text { Domestic Market For Steel, Beta } } \\\begin{array} { | c | c | c | } \hline Q _ { S } & P & Q _ { d } \\\hline 80 & \$ 5 & 20 \\\hline 70 & 4 & 30 \\\hline 60 & 3 & 40 \\\hline 50 & 2 & 50 \\\hline 40 & 1 & 60 \\\hline\end{array}\end{array}$ The accompanying tables show data for the hypothetical nations of Alpha and Beta. $Q _ { S }$ is domestic Quantity supplied, and $Q _ { d }$ is domestic quantity demanded. Alpha's export supply is represented by

$\begin{array} { | c | c | c | } \hline & \begin{array} { c } \text { Meat per Worker } \\\text { per Day }\end{array} & \begin{array} { c } \text { Houses per } \\\text { Worker per Day }\end{array} \\\hline A & 40 & 80 \\\hline B & 10 & 40 \\\hline\end{array}$ The accompanying table shows labor-productivity ?gures in two countries facing constant costs. It can be deduced that

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { Supplied } \\\text { (Domestic) }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (Domestic) }\end{array} \\\hline 12 & \$ 5 & 2 \\\hline 10 & 4 & 4 \\\hline 7 & 3 & 7 \\\hline 4 & 2 & 11 \\\hline 1 & 1 & 16 \\\hline\end{array}$ With a $1-per-unit tariff, price and total quantity sold will be

A nation's import demand curve for a specific product

Dumping is the sale of a product in a foreign market

$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity Demanded } \\\text { Domestically }\end{array} & \text { Price } & \begin{array} { c } \text { Quantity Supplied } \\\text { Domestically }\end{array} \\\hline 1,400 & \$ 10 & 2,200 \\\hline 1,600 & 9 & 2,000 \\\hline 1,800 & 8 & 1,800 \\\hline 2,000 & 7 & 1,600 \\\hline 2,200 & 6 & 1,400 \\\hline 2,400 & 5 & 1,200 \\\hline\end{array}$ Refer to the accompanying table for a certain product's market in Econland. Assume that the world price of the product is $6. What would be the difference in the total revenue received by foreign Producers after a quota of 400 units is imposed, compared against the total revenue received by Foreign producers when a $1 per unit tariff is paid?

The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case,

Refer to the graphs. These production possibilities curves

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Alpha would prefer terms of trade at, or close to, 1X = 1½Y.

Define a trade deficit and a trade surplus. Does the United States have a trade deficit or surplus in goods? Services?

An export subsidy for a product will benefit

The basic difference in the economic effects of a tariff compared with a quota is that a

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $0.50, this nation will Experience a domestic

$\begin{array}{l}{ ~~~~~~~~~~~~~~~~~~~~~\text { Wat's Production Possibilities } }\\\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Product } & A & B & C & D & E & F \\\hline \text { Rice } & 750 & 600 & 450 & 300 & 150 & 0 \\\hline \text { Corn } & 0 & 50 & 100 & 150 & 200 & 250 \\\hline\end{array}\\\\{ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\text { Xat's Production Possibilities } }\\\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Product } & A & B & C & D & E & F \\\hline \text { Rice } & 2,500 & 2,000 & 1,500 & 1,000 & 500 & 0 \\\hline \text { Corn } & 0 & 100 & 200 & 300 & 400 & 500 \\\hline\end{array}\end{array}$ The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Assume that Wat originally produced rice and corn at combination C and that Xat originally produced combination B. If the nations now fully specialize based on comparative Advantage, the total gains from specialization and trade are

Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. If Alpha had produced 20X and 30Y and Beta had produced 30X and 20Y before specialization and trade, then we can say that the gains from specialization and trade are 10X and 10Y.

The table shows a schedule of the import demand in Country $A$ and the export supply in Country $B$ at various dollar prices. Column 1 is the price of the product. Column 2 is the quantity demanded for imports $\left(Q_{\text {diA) }}\right.$ in Country $A$ . Column 3 is the quantity of exports supplied $\left(Q_{se B) }\right.$ by Country $B$ . $\begin{array}{|c|c|c|}\hline \text { Price } & Q_{\text {diA }} & Q_{\text {SeB }} \\\hline \$ 4.00 & 0 & 200 \\\hline 3.00 & 100 & 100 \\\hline 2.00 & 200 & 0 \\\hline 1.00 & 300 & 0 \\\hline\end{array}$ The equilibrium world price in this two-nation model will be