Chapter 15: international trade bhaye

Question 1

what are the two main exports of canada in 2012

Answer 1

Energy (24.5%)

Industrial goods and material (25.5%)

Question 2

what are most countries trying to do

Answer 2

maximize their revenue by maximizing their exports

Question 3

who is Canada’s mains partner

Answer 3

the United-States

Question 4

Trade issues for Canada and the rest of the world

Answer 4

Agriculture protection

globalization

Trade or aid

Question 5

agricultural protection

Answer 5

the lower envelope of all possible short-run AC (average cost curves) curves

high barriers to trade to protect their local agriculture

will hurt less developed countries because they want to maximize exports, they will lose out because of high barriers to trade

Question 6

globalization

Answer 6

Outsourcing of manufactures to Less Developed Countries

Has the West lost good jobs due to outsourcing?

Or is the loss of manufacturing jobs due to technological change?

Or structural change in the economy?

Question 7

trade or aid

Answer 7

Do trade barriers offset aid to Less Developed Countries?

can be tariffs or non tariffs

Question 8

why outsource to less developed countries

Answer 8

to lower costs since they have lower labour wages

also reduce cost of machinery as well as resources sometimes

Question 9

how to lower or weaken trade barriers

Answer 9

with international trade agreements

Question 10

Trans Pacific partnership

Answer 10

Canada and trade agreements between pacific rim countries

Trump low-key fucking this shit up

Question 11

Comprehensive Economic and Trade Agreement (2017)

Answer 11

reducing trade barriers between Canada and the European Union

Question 12

The Law of Absolute Advantage

Answer 12

If one economy uses fewer inputs than another economy to produce a good or service

that economy has an absolute advantage in its production

it means their cost are most probably less to produce outputs than another economy

Question 13

if a country has an absolute advantage in two goods, would trade still be beneficial?

Answer 13

yeeee boooyyy

will lead to consumption gains

Question 14

The Law of Comparative Advantage

Answer 14

Countries specialize in the production and export of products they produce at lower relative cost than other countries

take advantage of trade (contries can consume outside of PPF)

principle of comparative advantage:
where one economy is absolutely more efficient in producing both goods, but the degree of that efficiency differs

Question 15

one individual was more efficient in producing one of the goods than the other in chapter 1, is this a case of absolute advantage?

Answer 15

yeees

we can also do the same for two countries

we will examine the principle of comparative advantage

Question 16

autarky

Answer 16

no trade world

whatever you produce, you will consume each

Cannot consume outside the PPF

Question 17

in a comparative advantage between two economies or individuals, is it important to consider the opportunity cost

Answer 17

yes, it is important to consider what each could produce instead of producing whatever they’re producing

to be the most efficient and have a comparative advantage in a certain good, opportunity cost of producing the good

leads to specialization

Question 18

if a counter has advantage in both goods compared to another country, would it still specialize?

Answer 18

yeeee boooy

the opportunity cost of of a good will be bigger than the other country, hence they will specialize in the good with the lowest opportunity cost

Question 19

what is the source of comparative advantage

Answer 19

endowments: economies are naturally endowed with different advantages

Endowments as the result of investments – the knowledge economy
A knowledge labour force with high skilled workers will be advantage cause it will use less ressources

But scale economies can also give rise to trade where no strong advantages exist

Question 20

terms of trade

Answer 20

rate of trade

The result must benefit both economies if they are to trade

Any trading/exchange rate between the rates of transformation will provide the potential for both to consume more

Question 21

if two countries trade efficiently, can they trade outside of their PPF?

Answer 21

yeee boyyy

Question 22

does local currency affect trade

Answer 22

yes cause these products are cheaper in the local currency

Question 23

how are exchange rates between currencies determined

Answer 23

in the the market for foreign exchange

Question 24

when the Canadian currency goes down, what happens to exports

Answer 24

they increase cause it cheaper to buy Canadian Hayes

Question 25

supply chains

Answer 25

getting many suppliers worldwide international business relationships they produce intermediate goods

Question 26

what can a tariff do to production

Answer 26

it is a type of tax it can increase the costs of production for assembly of a local producer it increases domestic production tho the increase in price will increase the quantity demanded

Question 27

what increases the cost go the supply chain of a domestic competing company

Answer 27

if manufacturer of the final good edited to buy components internationally

Question 28

does a more free trade benefit everyone?

Answer 28

consumers do benefit some producing sectors do lose out Example: Clothing manufacturers in the West have lost out as the consumer has gained through cheaper manufacture in Asia Example: Canada’s natural resource and food sectors gain as a result of free trade and comparative advantage

Question 29

why do we have some trade barriers

Answer 29

some segments of the economy gain from trade protection

Question 30

is trade a zero sum game?

Answer 30

nah boyyyy

Question 31

quota

Answer 31

physical limit on imports

Question 32

non-tarrif barrier

Answer 32

standards designed to make sales difficult for overseas manufacturer

Question 33

subsidies and loans

Answer 33

used by aircraft manufacturers in many economies

Question 34

what can a tariff do to consumption

Answer 34

it lowers domestic consumption the tariff will increase the price, so the quantity demanded will lower

Question 35

what can a tariff do to imports

Answer 35

they decline

Question 36

what is a negative consequence of tariffs since it increases the price since the Qs increasesand Qd decreases

Answer 36

it creates deadweight loss due to reduction in total purchases another cause ofdeadwieghvt loss is that consumers replace high cost local products with cheaper costs imports consumer surplus decreases

Question 37

what is a positive consequence of tariffs of the big G

Answer 37

increases the government revenue

Question 38

what does a per-unit subsidy to domestic suppliers?

Answer 38

shifts their supply curve and increases their market share still creates deadweight loss in the market tho

Question 39

what does the deadweight loss of a subsidy reflect

Answer 39

additional higher cost of domestic producers relative to international producers the latter have been squeezed out of the market

Question 40

whys there no deadweight loss on the demand side with a subsidy?

Answer 40

QD and price remain unchanged

Question 41

what are the negative consequences of lower trade barriers and globalization

Answer 41

some specific industries lose job globalization facilitates outsourcing to lower-cost economies decline of manufacturing in the West Job losses in Canada

Question 42

why has there been a decline in production in the west

Answer 42

caused by the opening up of Asia and Mexico to trade

Question 43

how are the job losses dealt with in Canada

Answer 43

Employment Insurance in the short term many long-tenured employees will not regain a comparable high-paying job

Question 44

why does the dairy industry benefit from protectionism

Answer 44

Dairy sector is frequently governed by supply management policies Cheese import quotas are small and marginal tariffs are at 250%

Question 45

Why are protectionist policies successful in many instances?

Answer 45

benefits are concentrated among a relatively small group benefits are large on a per-beneficiary basis costs are small per person, and spread over many more individuals aggregate costs normally outweigh benefits (this is bad doe)

Question 46

what is the argument of protectionism for infant industries

Answer 46

give the infant time to grow, learn and expand, at which point protection will no longer be required Unfortunately without incentives, infants rarely mature Hence temporary protection more usually becomes permanent protection

Question 47

what is dumping

Answer 47

a predatory practice aimed at driving out domestic producers resulting from surpluses in overseas markets bhaye illegal

Question 48

what are way of life arguments

Answer 48

frequently in the agricultural sector Canada agricultural protectionist policy benefits predominantly large farms not small family farms farm consolidation in recent decades has been enormous

Question 49

The World Trade Organization (WTO - formerly GATT)

Answer 49

Objective is to dismantle existing barriers and prevent further barriers from being erected

Question 50

European Union

Answer 50

EU has expanded to 29 members Originally founded with the belief that economic integration would improve political relations after WW II: economic integration would lead to political integration, and peace Now includes many former ‘Eastern Block’ economies

Question 51

North American Free Trade Agreement

Answer 51

Canada, Mexico, US (1994) Followed the FTA of 1989 between Canada and US Centerpiece is the dispute resolution mechanism Canada’s export share of GDP has grown dramatically since these agreements came into being

Question 52

do trade agreements usually come with content requirements?

Answer 52

ye boyyy