Chapter 5

Question 1

International Trade

Answer 1

trade amongst countries and overall improves the well being of a country

Question 2

Hyper-globalization

Answer 2

is the phenomenon of extremely high levels of international trade

Question 3

Imports

Answer 3

goods and services purchased from other countries

Question 4

exports

Answer 4

goods and services sold to other countries

Question 5

globalization

Answer 5

phenomenon of growing economic trade linkages among countries

Question 6

Ricardian Model of Int. Trade

Answer 6

Analyzes international trade under the assumption opportunity cost is constant and countries trade for which they have comp advantage in.

Question 7

Autarky

Answer 7

country doesn’t trade w/ other countries

Question 8

Does trade liberate countries from self sufficiency

Answer 8

yes trade liberates both countries from self sufficiency- from the need to produce the same mixes of goods they consume

Question 9

2 Misconceptions of trade between high and low wage countries

Answer 9

Pauper labour fallacy, sweatshop labour fallacy

Question 10

pauper labour fallacy

Answer 10

high wage country imports good from low wage, high wage works affected has they need to compete with lower wage and low wage workers benefit because of this.

Question 11

sweatshop

Answer 11

without trade, low wage wont have chance to sell, high wage workers affect with trade, sweat shop workers and consumers benefit

Question 12

real explanation for low wage countries is

Answer 12

the value that is generated through production which in there case is very low production

Question 13

sources or factors of a country possibly having comparative advantage (5)

Answer 13

Factor endowments, abundance, intensity,, technology, climate

Question 14

factor abundance

Answer 14

how large a countries supply of a factor of production is to other factors

Question 15

factor intensity

Answer 15

ranking of goods, how intense a factor is used in production of a given good related to other factors

Question 16

heckscher-ohlin model

Answer 16

describes relationship between comp advantage and factor ability: a country that has abundant supply of a factor of production will have a comparative advantage in goods whose production is intensive in that factor.

Question 17

heckscher-ohlin model example

Answer 17

a country that has relative abundance of capital will have comp advantage in capital intensive industries ex oil. country that has relative abundance of labour will have come advantage in labour intensive industries

Question 18

industry gets more efficient as it grows=

Answer 18

fewer producers, producers take place only in a few countries

Question 19

we can use demand and supply model to determine the effects of trade on (4)

Answer 19

• domestic equilibrium price and quantity
• imports
• everyone apart of country
• producer and consumer surplus

Question 20

we can use demand and supply curve model to determine effects of barriers (2)

Answer 20

• on domestic equilibrium price and quantity

- imports

Question 21

Producer Surplus in autarky

Answer 21

area above supply curve, below market price. Difference between the market price (actual payment) and the minimum price a producer would be willing to accept

Question 22

consumer surplus in autarky

Answer 22

area below demand curve and above market price. Difference between what a customer is willing to pay and what the customer actually pays

Question 23

Domestic market with imports what happens and what happens to producer surplus

Answer 23

country opens to trade, world price drops, consumers want to buy more, firms do not wanna produce that much so country needs to import g/s, producer surplus decreases

Question 24

domestic market with exports and what happens to consumer surplus

Answer 24

country opens to trade, world price is greater then autarky, firms want to supply more, consumers want to buy less which creates a surplus for producers to export, consumer surplus decrease

Question 25

free trade

Answer 25

government does not attempt influence imports or exports

Question 26

trade protection and 2 examples

Answer 26

policies that limit imports, quota and tax

Question 27

quota

Answer 27

legal limit on quantity of goods and service that can be imported

Question 28

tax/tariff what does it increase and decrease, what does it do to the gains from trades

Answer 28

tax levied on imports, increase in domestic production and reduction in domestic consumption, less is consumed leading to lower gains from trade

Question 29

quota and tariff similar effects (3)

Answer 29

creates deadweight, raises price, efficiency loss

Question 30

governments reasons for trade protection (4)

Answer 30

protect nation security, protect domestic industries that are to strategic or vulnerable, fulfill other international obligations, implement united nations security council trade sanctions

Question 31

What is Inequality in wages from trade consequence

Answer 31

wage gap between more educated and less educated domestic workers widen

Question 32

offshore outsourcing

Answer 32

hiring people in another country to perform work and other various tasks

Question 33

world price

Answer 33

price at which good and service can be bought or sold abroad

Question 34

tendency of trade (production)

Answer 34

trade leads to increase production of exporting industries and decrease production of importing industries.

Question 35

tendency of trade (income towards factors)

Answer 35

Income tends to be redistributed toward a country’s abundant factor and away from its scarce factors.

Question 36

National Security argument

Answer 36

countries should limit amount of trade so they are not completely reliant on it incase of a conflict

Question 37

job creation argument

Answer 37

points to the additional jobs created with out Importing

Question 38

Infant industry

Answer 38

newly industrializing countries require a temporary period of trade protection to get established

Question 39

When countries trade they typically will export g/s or factors of production for which they have_____abundance

Answer 39

relatively high

Question 40

when countries export g/s or factors of production, domestically the price will______

Answer 40

rise

Question 41

When countries trade they typically will import g/s or factors of production for which they have_____abundance

Answer 41

relatively low

Question 42

when countries import g/s or factors of production, domestically the price will______

Answer 42

fall