chapter 5

Question 1

international trade

Answer 1

arises from comparative advantage between countries, assuming that the country won’t pay more than the opportunity cost of producing it itself
imports and exports
hyper globalization

Question 2

ricardian trade model

Answer 2

creating more goods in shared economies is more efficient than in a selfsufficient economy

Question 3

sources of comparative advantage

Answer 3

climate and environment
factros endowments

Question 4

factor intensity of a good

Answer 4

measure of which is used in relatively greater quantity than other factor of production

Question 5

Hecksher-Olin model

Answer 5

country with abundant supply of a factor will have a comparative advantage in goods whose production is intensive in that factor
- technology and productivity

Question 6

autarky vs. open market

Answer 6

opening the market is a gain for consumers and producers

Question 7

domestic market with imports

Answer 7

price is below the autarky price, consumer surplus increases, producer surplus decreases

Question 8

domestic market with exports

Answer 8

world price is above autarky price, increase in producer surplus, decrease in consumer surplus

Question 9

effects of international trade on wages

Answer 9

with international trade, export factories will have more surplus, while the import-competing industries will suffer from the imports

Question 10

trade protection

Answer 10

many goverments engage with trade protection through tariffs and quotas

Question 11

tariff

Answer 11

tax levied on imports, raises the domestic priceabove the world price benefiting domestic producers.
it creates government revenue = (tariff price - world price) x (quantity demanded with tariff - quantity supplied with tariff)

Question 12

import quota

Answer 12

legal limit of the quantity of a good imported, to benefit domestic producers.
does not create government revenue, but those who have licencies to import in a country

Question 13

why do we need trade?

Answer 13

countries that trade together, stay together (Bretton Woods treaties after WWII)
but it is also true that with international trade there are also a lot of losers (infant industry and little factories)

Question 14

concerning effects of globalization

Answer 14

income inequality
offshore outsourcing
immigration
isolationism (Brexit)
Chinese or Russian new imperialism