Chapter 17

Question 1

Absolute Advantage

Answer 1

Lower cost in terms of resources used

Question 1

Comparative Advantage

Answer 1

Lower opportunity cost to produce

Low cost of production and exporting it, and importing goods that other countries can do with low cost.

Question 2

Export Subsidies

Answer 2

Paying domestic exporters to encourage domestic export to help with GDP, Growth, and employment.

Question 3

Min Domestic Content

Answer 3

Min proportion of product that must be sourced domestically, so you are not dependent too much on others.

Question 4

VER
Voluntary Export Restraint

Answer 4

Agreement by one country to limit the quantity of goods it will export to another country

Question 5

Tariff placed on imported good increases and decreases what?

Answer 5

Increases its domestic price
Decrease quantity imported
Increases quantity supplied domestically

Question 6

Quota restricts what ?
What happens to domestic producers& domestic consumers ?

Answer 6

Restrict quantity of a good imported to the quota amount.

Domestic producers gain, and domestic consumers lose from an increase in the domestic price.

Question 7

Quota and import licenses

Answer 7

The right to export a specific quantity to the domestic country is granted by the domestic government, which may or may not charge for the import licenses to foreign countries.

If the import licenses are sold, the domestic government gains the revenue.

Question 8

Customs Union

Answer 8

All barriers to import and export of goods and services among member countries are removed.

All countries adopt a common set of trade restrictions with nonmembers

Question 9

Free Trade Areas

Answer 9

All barriers to import and export of goods and services among member countries are removed.

Question 10

Common Market

Answer 10

All barriers to import and export of goods and services among the countries are removed.

All countries adopt a common set of trade restrictions with nonmembers.

All barriers to the movement of labor and capital goods among member countries are removed.

Question 11

Economic Union

Answer 11

All barriers to import and export of goods and services among the countries are removed.

All countries adopt a common set of trade restrictions with nonmembers.

All barriers to the movement of labor and capital goods among member countries are removed.

Member countries establish common institutions and economic policy for the union.

Question 12

Monetary Union

Answer 12

All barriers to import and export of goods and services among the countries are removed.

All countries adopt a common set of trade restrictions with nonmembers.

All barriers to the movement of labor and capital goods among member countries are removed.

Member countries establish common institutions and economic policy for the union.

Member countries adopt a single currency.