Unit 4: International Economics Unit Overview
|
|
- Ruby Clark
- 7 years ago
- Views:
Transcription
1 Unit 4: International Economics Unit Overview 4.1 Reasons for trade Differences in factor endowments Variety and quality of goods Gains from specialization Higher level extension topic >>Absolute and comparative advantage (numerical and diagrammatic representations) >>opportunity cost >>limitations of the theory of comparative advantage 4.2 Free trade and protectionism Definition of free trade Types of protectionism Tariffs Quotas Subsidies Voluntary Export Restraints (VERs) Administrative obstacles Health and safety standards Environmental standards Arguments for protectionism Infant industry argument Efforts of a developing country to diversify Protection of employment Source of government revenue Strategic arguments Means to overcome a balance of payments disequilibrium Anti-dumping Arguments against protectionism Inefficiency of resource allocation Costs of long-run reliance on protectionist methods Increased prices of goods and services to consumers The effect of protected imports on export competitiveness Blog posts: "Free trade" Blog posts: "Protectionism" Blog posts: "International trade" Blog posts: "Barriers to trade" 1
2 Reasons for Trade Introduction Abraham Lincoln was once advised to buy cheap iron rails from Britain to finish the transcontinental railroad. He replied, "It seems to me that if we buy the rails from England, then we've got the rails and they've got the money. But if we build the rails here, we've got our rails and we've got our money." To paraphrase: "If I buy meat from the butcher, then I get the meat and he gets my money. But if I raise a cow in my backyard for three years and slaughter it myself, then I've got the meat and I've got my money." Why don't we keep cows in our backyard? 1. Why do nations trade? 2. What is specialization? 3. How does a nation determine what it should specialize in? 4. How do nations benefit from trade? Blog post: "The Lord of the Ring of Free Trade" 2
3 Reasons for Trade Introduction "You could say that globalization, driven not by human goodness but by the profit motive, has done far more good for more people than all the foreign aid and soft loans provided by well-intentioned governments and aid agencies." -Paul Krugman What evidence is there to support Krugman's claim? What evidence is there to refute it? Group A: Research and find data or an article that supports the statement. Group B: Research and find data or an article that refutes the statement. 3
4 Reasons for Trade Why do nations trade? Why do nations trade? Three facts help answer this question: Uneven distribution of natural, human and capital resources Efficient production requires different combinations of resources People may simply prefer products made in other countries due to non-price attributes Labor-intensive goods -Examples: -Where? Land-intensive goods -Examples: -Where? Capital-intensive goods -Examples -Where? 4
5 Reasons for Trade Comparative Advantage Opportunity cost: the cost to society of producing a particular good is what it could have produced with those resources instead. The opportunity cost is what was given up in order to produce something. Comparative advantage: When a country can produce a good or service at a lower domestic opportunity cost than a potential trading partner. Absolute advantage: When a country can produce a particular good or service more efficiently than another country. Fewer resources are required to produce a particular good. The principle of comparative advantage: says that total output will be greatest when each nation produces the good for which it has the lowest domestic opportunity cost. Nations should specialize in the goods they produce at the lowest opportunity cost, and trade with other nations for other goods in which they do not have a comparative advantage. 5
6 Reasons for Trade Comparative Advantage Define absolute advantage: The ability of a particular person or a country to produce a particular good with fewer resources than another person or country Explain the principle of comparative advantage: Total global output will be greatest when each good is produced by the nation that has the lowest opportunity cost domestically for that good. Blog posts: "Comparative advantage" 6
7 Reasons for Trade Comparative Advantage country goods Televisions Financial services China UK Who has the absolute advantage in television production? Financial services?. Who has the comparative advantage in television production? Financial services?. How do you know? Should trade take place? If so, who should produce what? Illustrate the PPCs for the UK and China before and after trade. 7
8 Reasons for Trade Comparative Advantage TVs PPC for China and the UK China UK Financial services PPC analysis: Clearly China has an absolute advantage in both TVs and financial services. With its existing resources, China can produce more TVs and more financial services than the UK. Should China and the UK trade? If so, who should specialize in what? China can either produce 50 TVs or 40 financial services. To produce one TV it must give up 0.8 financial services. 1 financial service "costs" China 1.25 TVs the UK can either produce 10 TVs or 30 financial services. To produce 1 TV it must give up 3 financial services. 1 financial service only "costs".33 TVs. Financial services "cost" the UK less than they do China. TVs "cost" China less than they do the UK. China should produce TVs, the UK financial services 8
9 Reasons for Trade Comparative Advantage Practice with Comparative Advantage: Two countries: United States Korea Two goods: Apples Cell phones apples 39 PPC - USA apples 24 PPC - Korea Absolute advantage? Apples: Cell phones: Comparative advantage? Apples: Cell phones: 13 cell phones 12 cell phones How much do apples "cost"? How much do cell phones "cost" in the US? -> 1a = 1/3c in Korea? -> 1a = 1/2c in the US? -> 1c = 3a in Korea? -> 1c = 2a Should the countries trade? Why or why not? 9
10 Reasons for Trade Gains from Trade 39 Trading possibilities line USA 36 Trading possibilities line Korea apples apples cell phones cell phones United States: Specialize in apples -> trade apples for cell phones with Korea. Korea should be willing to trade 1 apple for anything up to, but not beyond, 1/2 cell phone. Before trade, 1 apple could only be get America 1/3 cell phone. The US has gained from trade. Korea: Specialize in cell phones -> trade cell phones for apples with the US. The US should be willing to exchange up to three apples for one cell phone. Before trade, Korea could only get two apples for each cell phone it gave up. Korea has gained from trade. 10
11 Reasons for Trade Gains from Trade 30 PPC for Mexico and USA Soybeans A USA Mexico Mexico Soybeans 15 Avocados B USA Avocados Suppose the US and Mexico had been producing at points A and B before trade: -What was total output of soybeans? Avocados? Suppose the countries specialize and trade based on comparative advantage: -What is the total output of soybeans? Avocados? -What are the "gains from trade"? 11
12 The economic argument FOR free trade, in a nutshell: Through free trade based on the principle of comparative advantage, the world economy can achieve a more efficient allocation of resources and a higher level of material well-being than it can without free trade. Discussion Questions: Introduction How may free trade help less economically developed countries? How may free trade help more economically developed countries? How could it hurt both LEDCs and MEDCs? How could free trade lead to a loss of jobs in one country and create new jobs at the same time (in the SAME country)? NCEE Workbook Activity 50: Economic Efficiency and Gains from Trade 12
13 Impact of Free Trade Questions: Without trade, how many cars would American firms produce? P US Automobile Market (with trade) S d Why is S world horizontal? Why is P w less than P d? With trade, how many cars will American firms produce? P d How many cars will be imported with free trade? P w S world Who benefits from free trade? D d Who is harmed by free trade? Q 1 Q e Q 3 Q Is society as a whole better or worse off with free trade? How do you know? Give one argument for free trade and one against, referencing the diagram 13
14 Impact of Free Trade Based on simple supply/demand analysis, there are winners and losers from free trade. Draw a supply and demand diagram for a good that is manufactured domestically but also imported to your home country. P Show the domestic price and quantity before trade Show the domestic price and quantity after trade Illustrate the impact of trade on total welfare (consumer and producer surplus) in the economy Identify who benefits and who loses from free trade in this particular market in your country and in the countries where the good is imported Q from. Based on your diagram, formulate an argument in favor of protecting the domestic market for the good you chose. 14
15 Impact of Free Trade P Milk market in Switzerland S d Before trade: Domestic producers produce Qe and sell at a price of Pd Total welfare is represented by the red shaded area. P d P w Q 1 Q e Q 3 S world Winners: Domestic consumers and foreign producers. Foreign household should benefit as well due to increased demand for exports, meaning higher AD and higher incomes. Losers: Domestic producers and their employees. Forced to compete and sell milk at lower price. Must lower wages or lay off workers. Producer surplus declines. D d Q After trade: Market becomes perfectly competitive, which means domestic producers no longer have ability to control price by increasing or decreasing output. The world price is lower due to more competition from overseas milk farmers. Lower price prompts domestic milk farmers to decrease Q s to Q 1 Q d increases to Q 3. Since there is domestic shortage at P w imports will equal Q 3 -Q 1. Total welfare in this society increases from red area to the red and gray shaded areas. 15
16 Barriers to Trade In order to "protect" domestic industries, governments create barriers to trade: Revenue tariff: A revenue tariff is a tax placed on a good produced overseas and sold domestically. The purpose of such a tariff is to raise government revenue, but the effect is to make foreign goods less attractive to consumers. Protective tariff: designed to shield domestic producers from foreign competition. Put foreign producers at a competitive disadvantage in selling in domestic markets. Should shift world supply up, increasing price. Import quota: Import quotas specify the maximum amount of a commodity that may be imported from abroad into a country in any period. The purpose is to limit the supply of imported products, to keep domestic prices higher and domestic producers in business. 16
17 Non-tariff barriers: Barriers to Trade Voluntary Export Restraints (VERs): an agreement between two nations to limit trade in particular commodities so that the producers in one nation can remain in business providing commodities to the domestic market, rather than be forced to compete with more efficient foreign producers. Administrative obstacles: "the red tape" that governments may erect when free trade agreements limit the imposition of tariffs and quotas. May include overly burdensome quality controls, safety regulations, living-wage and other workplace standards to be met by foreign producers. If foreign producers cannot meet these standards, their products are forbidden from being sold domestically. May include environmental, health and safety standards. Subsidies: Payments from the government to producers, for example farmers, in order to reduce the costs of production. Meant to lower the price of domestic goods to consumers, could have the effect of keeping foreign goods out of domestic market. Dumping: the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production 17
18 Impact of a protective tariff: Before tariff: Domestic producers supply Q 1 Demand is Q 4 country imports Q 4 -Q 1 Barriers to Trade P US Automobile Market (with tariffs) S domestic After tariff: World supply shifts up as foreigner producers face higher cost to sell their cars P w increases to P w+t Domestic producers supply Q 2 country imports Q 3 - Q 2 Blue area represents CS that is transferred to PS due to higher price of cars Gov't tariff revenue equal to yellow area. DWL equal to black triangles P w+t P w 0 Gov't rev. DWL Q 1 Q 2 Q 3 Q 4 S world + tariff S world D domestic Q Total world efficiency in automobile production declines by an amount represented by the black triangles. Americans now pay more for their cars and have fewer to choose from. 18
19 Quick Quiz Explain two benefits (gains) which might arise from international trade. (Total 10 marks) Students might explain the benefits in terms of any two of the following: a more efficient allocation of resources the principle of absolute and comparative advantage enlargement of markets greater employment prospects possibility of economies of scale international competition and the overcoming of abuse of monopoly power greater choice for consumers. Some answers might be framed entirely in terms of comparative advantage and if this is done fully and well and at least two distinct points are made, it should be possible to earn full marks. Using an appropriate diagram, explain who gains and who loses from the introduction of a tariff. (Total 10 marks) definition of a tariff diagrammatic representation of a tariff illustration of impact of tariff on the government and analysis illustration of impact of tariff on the consumer and analysis illustration of impact of tariff on the producer and analysis 19
20 Impact of a protective subsidy: A subsidy to domestic producer is a payment to from the gov't to the firm per unit of output. Barriers to Trade P US Automobile Market (with subsidy) S domestic S w/ subsidy Before subsidy: domestic producers supplied Q 1 Demand was Q 3 country imported Q 3 - Q 1. DWL After subsidy: Subsidy increases the price producers receive. Increases producer surplus by blue area. costs taxpayers amount equal to blue + black area. Domestic output increases to Q 0 2 country imports only Q 3 - Q 2. P s P w Subsidy Q 1 Q 2 Q 3 S world D domestic Q Black triangle represents DWL to society. Cost of subsidy exceeds benefits to society, therefore there is a total loss of welfare. Consumers will still pay Pw, so there's no gain nor loss of consumer surplus. But since their tax dollars are being used to subsidize inefficient domestic producers, society as a whole is worse off after the subsidy. 20
21 Impact of a protective quota: Before the quota: Domestic producers supplied Q 1 Demand was Q 4 country imported Q 4 - Q 1 Barriers to Trade P US Automobile Market (with quota) S domestic S w/ quota Gov't sets a quota of Qu foreign autos At P w, domestic output is still Q 1, but imports are reduced to Q 1 -Q 2 At P w there is excess demand of Q 4 -Q 2. The shortage leads to an increase in the price to P q, higher price attracts new domestic producers into the market, shifting S d out to S w/quota. Domestic producers now produce 0- Q 1 and Q 2 -Q 3. P q P w 0 Q 1 Qu Q 2 Q 3 Q 4 DWL S world D domestic Q Consumers buy fewer cars and pay a higher price. Purple and pink areas used to be CS and are now PS. Blue are is now PS for foreign producers who are getting a higher price for their cars. Gray area is DWL since it used to be CS but is now lost welfare. This triangle represents a net loss of world efficiency resulting from the restriction of free trade. 21
22 Barriers to Trade P US Automobile Market (with tariffs) S domestic Gov't rev. P w+t S world + tariff P w S world DWL D domestic 0 Q 1 Q 2 Q 3 Q 4 Q 22
23 Barriers to Trade P US Automobile Market (with subsidy) S domestic S w/ subsidy DWL P s S world D domestic 0 Q 1 Q 2 Q 3 Q 23
24 P Barriers to Trade US Automobile Market (with quota) S domestic S w/ quota P q DWL P w Qu S world D domestic 0 Q 1 Q 2 Q 3 Q 4 Q 24
25 Barriers to Trade Evaluating the effects of trade barriers: Direct effects What direct effect will a tariff that raises the price of a commodity in the domestic market have on: domestic consumers? Indirect effects What indirect effects might the introduction of a tariff have on: domestic consumers? domestic producers of the commodity? domestic producers? domestic producers of other products? foreign producers? domestic incomes? foreign incomes? domestic government? Global allocative efficiency? Is a tariff a regressive, progressive, or proportional tax? Who is affected more, rich or poor? Practice Barriers to Trade: NCEE Workbook Activity
26 Protecting domestic employment: Protecting the economy from low-cost labor: Protecting an infant industry: To avoid the risks of over-specialization: Strategic reasons: Protection against dumping : To protect product standards: To raise government revenue: To correct a balance of payments deficit: Barriers to Trade Arguments for protectionism: Despite the apparent economic benefits free trade brings, there are still many who oppose it on several grounds. Which of these arguments for protectionism do you feel are most valid? Discuss with a partner
27 Arguments against protectionism: Most economists today acknowledge the value of free trade. Their opposition to protectionism rests on the following grounds: Protectionism leads to... Barriers to Trade Higher prices for producers and consumers: Less choice for consumers: Less competition, less efficiency: Distorts comparative advantage, less efficient allocation of resources, total world output declines: May hinder economic growth: Which of these arguments against protectionism do you feel are most valid? Discuss with a partner
28 Barriers to Trade Points to consider in evaluation of protectionism: 1. The European Union has prospered as trade barriers have been eliminated. 2. The world economy has grown under the trend toward more tariff reduction since the mid-1930s. 3. High tariffs were a factor in causing the Great Depression. 4. Nations with high protectionist policies have slower growth than those with no barriers. Find an article from the current press relating to a free trade agreement (FTA). Read and discuss with your partners at your table. On a poster, identify the following points: What are the pros and cons of the Free Trade Agreement discussed in your article? What are the alleged benefits of the agreement being discussed? Who are the opponents of free trade and what are their arguments? Who are the supporters of free trade and what are their arguments? Possible articles: Korea, EU Look Forward to Progress in Free Trade Talks Bush: New Free Trade Deals Will Strengthen U.S. Economy, Create Jobs India-Sri Lanka Free Trade Agreement (FTA): Success and the road ahead Rice Pushes for Free Trade Pacts Smart trade, the Clinton way Peru's president embraces free trade 28
29 Barriers to Trade Conflicting views Follow the links below for some ideas from the opposing sides: Evaluate the video or article: 1) what views on trade are expressed in the video? 2) Are there biases expressed by the people in the video? If so, what are they? 3) Evaluate the arguments for or against free trade made in the video. Make Trade Fair - by Oxfam Lou Dobbs on the dangers of trade Joseph Stiglitz on globalization More Lou Dobbs with guest David Sirota Columbian FTA, why it's good for America Ambassador to Columbia on the Benefits of Free Trade Kenyans want trade not aid Obama vs. McCain on Free Trade - 3rd Debate
30 Barriers to Trade Quick Quiz: Who benefits from protectionism? Who is hurt? Why do most economists agree that free trade is beneficial overall? Protectionism Benefits: Domestic producers may benefit b/c they receive a higher price for their output. The federal government may gain through revenue from tariffs. Hurts: Consumers are harmed b/c they pay higher prices for goods produced by the protected industry. Foreign producers are hurt b/c they are not able to sell their as much of their output as they would be able to otherwise, so their profits are reduced. Economists oppose most protectionism because: In most cases, the costs of protectionism exceed the benefits. Consumers are hurt by the higher prices they pay, while producers often benefit less. Also, industry employs large amounts of economic resources in rent-seeking as they lobby congress to erect barriers to trade. In most cases, protectionism results in deadweight loss for society, meaning economic inefficiency. Blog post: "Excuse me China, could you lend us another billion?" 30
31 Attachments APMacroUnits56.pdf APMacroUnits jnt
Review Question - Chapter 7. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Review Question - Chapter 7 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) International trade arises from A) the advantage of execution. B) absolute
More informationGEORGIA PERFORMANCE STANDARDS International Domain [Type the author name]
GEORGIA PERFORMANCE STANDARDS International Domain [Type the author name] GEORGIA PERFORMANCE STANDARDS INTERNATIONAL ECONOMICS Fundamental Economic Concepts SSEF3 The student will explain how specialization
More informationMidterm Exam - Answers. November 3, 2005
Page 1 of 10 November 3, 2005 Answer in blue book. Use the point values as a guide to how extensively you should answer each question, and budget your time accordingly. 1. (8 points) A friend, upon learning
More informationASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2. DUE DATE : 3:00 p.m.
Page 1 of 13 ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2 DUE DATE : 3:00 p.m. 19 MARCH 2013 TOTAL MARKS : 100 INSTRUCTIONS TO CANDIDATES
More informationComparative Advantage and the Gains from International Trade
Chapter 8 Comparative Advantage and the Gains from International Trade Prepared by: Fernando & Yvonn Quijano 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O Brien,
More informationChapter 13 International Trade: Does it Jeopardize American Jobs
Chapter 13 International Trade: Does it Jeopardize American Jobs Multiple Choice Questions 1. In 2006, trade made up percent of the U.S. economy. a. 1.3 b. 5.0 C. 11.5 d. 22.7 2. In 2005, the U.S. experienced
More informationFinal Exam 15 December 2006
Eco 301 Name Final Exam 15 December 2006 120 points. Please write all answers in ink. You may use pencil and a straight edge to draw graphs. Allocate your time efficiently. Part 1 (10 points each) 1. As
More information3) The excess supply curve of a product we (H) import from foreign countries (F) increases as B) excess demand of country F increases.
International Economics, 8e (Krugman) Chapter 8 The Instruments of Trade Policy 8.1 Basic Tariff Analysis 1) Specific tariffs are A) import taxes stated in specific legal statutes. B) import taxes calculated
More informationKnowledge Enrichment Seminar for Senior Secondary Economics Curriculum. Macroeconomics Series (3): Extension of trade theory
Knowledge Enrichment Seminar for Senior Secondary Economics Curriculum Macroeconomics Series (3): Extension of trade theory by Dr. Charles Kwong School of Arts and Social Sciences The Open University of
More informationFor centuries, people of the world have traded. From the ancient silk routes and spice trade to modern
International Trade For centuries, people of the world have traded. From the ancient silk routes and spice trade to modern shipping containers and satellite data transfers, nations have tied their economies
More informationECO 445/545: International Trade. Jack Rossbach Spring 2016
ECO 445/545: International Trade Jack Rossbach Spring 2016 Instruments of Trade Policy Many instruments available to affect international trade flows and prices. Non-exhaustive list: Tariffs: Taxes on
More informationCHAPTER 19 INTERNATIONAL TRADE
CHAPTER 19 INTERNATIONAL TRADE Chapter in a Nutshell In the second chapter of the text, you were introduced to the concepts absolute advantage and comparative advantage that are the principles on which
More informationMaximising Consumer Surplus and Producer Surplus: How do airlines and mobile companies do it?
Maximising onsumer Surplus and Producer Surplus: How do airlines and mobile companies do it? This is a topic that has many powerful applications in understanding economic policy applications: (a) the impact
More informationEconomic Efficiency, Government Price Setting, and Taxes
CHAPTER 4 Economic Efficiency, Government Price Setting, and Taxes Modified by: Changwoo Nam 1 Economic Efficiency, Government Price Setting, and Taxes A legally determined maximum price that sellers may
More informationChapter 17 review. Multiple Choice Identify the letter of the choice that best completes the statement or answers the question.
Chapter 17 review Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Which of the following resulted in a retaliation by the United States of
More informationIII. INTERNATIONAL TRADE
III. INTERNATIONAL TRADE A. Gains from Trade -- a history of thought approach 1. The idea of mercantilism (15-175) argued that a country s well-being is directly tied to the accumulation of gold and silver.
More informationThe Balance of Payments, the Exchange Rate, and Trade
Balance of Payments The Balance of Payments, the Exchange Rate, and Trade Policy The balance of payments is a country s record of all transactions between its residents and the residents of all foreign
More informationEcon 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.
, Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR
More informationGov t Intervention: Price Floors & Price Ceilings / Taxes & Subsidies
Gov t Intervention: Price Floors & Price Ceilings / Taxes & Subsidies Price Floor: Regulated price, cannot charge below this price. A price floor will be binding if it is set above the true equilibrium
More informationName Eco200: Practice Test 2 Covering Chapters 10 through 15
Name Eco200: Practice Test 2 Covering Chapters 10 through 15 1. Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is
More informationQuantity of trips supplied (millions)
Taxes chapter: 7 1. The United tates imposes an excise tax on the sale of domestic airline tickets. Let s assume that in 2010 the total excise tax was $6.10 per airline ticket (consisting of the $3.60
More informationChapter 7. Comparative Advantage and the Gains from International Trade
Chapter 7. Comparative Advantage and the Gains from International Trade Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics International Trade
More informationGlobal Economic Issues and Policies
Global Economic Issues and Policies First edition Chapter 4 Regulating International Trade Trade Policies and Their Effects PowerPoint Presentation by Charlie Cook Copyright 2004 South-Western/Thomson
More informationThe Economic Environment for Business
B. FINANCIAL MANAGEMENT ENVIRONMENT 1. The economic environment for business 2. The nature and role of financial markets and institutions The Economic Environment for Business What are the targets of macroeconomic
More informationDEMAND AND SUPPLY CURVES: CONSUMER & PRODUCER SURPLUS by Kenneth Matziorinis
1 EMAN AN UPPLY CURVE: CONUMER & PROUCER URPLU by Kenneth Matziorinis Price (P / Q) P emand () Pd Po 0 Qo Qd Q Quantity (Q / time) FIGURE 1.1 THE EMAN CURVE The emand Curve and the Law of emand The demand
More informationMUTUAL GAINS FROM TRADE
eties. While aid particularly technical assistance can play a constructive role during the transition, trade, not aid, is the most important force for integrating these economies into the world market.
More informationCHAPTER 6 BUSINESS-GOVERNMENT TRADE RELATIONS
CHAPTER 6 BUSINESS-GOVERNMENT TRADE RELATIONS LEARNING OBJECTIVES: 1. Describe the political, economic, and cultural motives behind governmental intervention in trade. 2. List and explain the methods governments
More informationGeneral Certificate of Education Advanced Level Examination January 2010
General Certificate of Education Advanced Level Examination January 2010 Economics ECON4 Unit 4 The National and International Economy Tuesday 2 February 2010 1.30 pm to 3.30 pm For this paper you must
More informationEconomic Systems. 1. MARKET ECONOMY in comparison to 2. PLANNED ECONOMY
Economic Systems The way a country s resources are owned and the way that country takes decisions as to what to produce, how much to produce and how to distribute what has been produced determine the type
More informationInterdependence and the Gains from Trade
CHAPTER 3 Interdependence and the Gains from Trade Goals in this chapter you will Consider how everyone can benefit when people trade with one another Learn the meaning of absolute advantage and comparative
More informationTRADE WITH SCALE ECONOMIES AND IMPERFECT COMPETITION (CONT'D)
ECO 352 Spring 2010 No. 14 Mar. 25 OLIGOPOLY TRADE WITH SCALE ECONOMIES AND IMPERFECT COMPETITION (CONT'D) Example using numbers from Precept Week 7 slides, pp. 2, 3. Ingredients: Industry with inverse
More informationTrade Barriers Ing. Mansoor Maitah Ph.D. et Ph.D.
Trade Barriers Ing. Mansoor Maitah Ph.D. et Ph.D. Economic Basis for Trade Distribution of Economic Resources Different Technologies Goods are Differentiated as to Quality and other Non - price Attributes
More informationWorkers Total Output Average Marginal 0 0 1 40 40 40 2 70 35 30 3 90 30 20 4 100 25 10
Producers Workers Total Output Average Marginal 0 0 1 40 40 40 2 70 35 30 3 90 30 20 4 100 25 10 At a wage of $11, what is the profit-maximizing number of workers? At a wage of $25? Workers Total Output
More informationGeneral Certificate of Education Advanced Level Examination June 2014
General Certificate of Education Advanced Level Examination June 2014 Economics ECON3 Unit 3 Business Economics and the Distribution of Income Tuesday 3 June 2014 9.00 am to 11.00 am For this paper you
More informationChapter 6 Supply, Demand, and Government Policies
Chapter 6 Supply, Demand, and Government Policies Review Questions Using supply-demand diagrams, show the difference between a non-binding price ceiling and a binding price ceiling in the wheat market.
More informationa) Aggregate Demand (AD) and Aggregate Supply (AS) analysis
a) Aggregate Demand (AD) and Aggregate Supply (AS) analysis Determinants of AD: Aggregate demand is the total demand in the economy. It measures spending on goods and services by consumers, firms, the
More informationChapter 9 1. Use Exhibit 3 to answer the following questions.
Chapter 9 1. Use Exhibit 3 to answer the following questions. Exhibit 3 a. If trade is not allowed, what is the equilibrium price and quantity in this market? Price = 4, quantity = 40 units. b. If trade
More informationCHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH
CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
More informationChapter 4 Specific Factors and Income Distribution
Chapter 4 Specific Factors and Income Distribution Chapter Organization Introduction The Specific Factors Model International Trade in the Specific Factors Model Income Distribution and the Gains from
More informationWTO E-Learning. WTO E-Learning Copyright August 2012. The WTO and Trade Economics: Theory and Policy
WTO E-Learning WTO E-Learning Copyright August 2012 The WTO and Trade Economics: Theory and Policy 1 Introduction This is a multimedia course on The WTO and Trade Economics: Theory and Policy. The course
More informationTracking the Macroeconomy
chapter 7(23) Tracking the Macroeconomy Chapter Objectives Students will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product,
More informationANSWERS TO END-OF-CHAPTER QUESTIONS
ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms
More informationI. Introduction to Taxation
University of Pacific-Economics 53 Lecture Notes #17 I. Introduction to Taxation Government plays an important role in most modern economies. In the United States, the role of the government extends from
More informationEC2105, Professor Laury EXAM 2, FORM A (3/13/02)
EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each
More informationMEASURING GDP AND ECONOMIC GROWTH*
Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Gross Domestic Product Topic: GDP 1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final and
More informationAgenda. Saving and Investment in the Open Economy, Part 2. Globalization and the U.S. economy. Globalization and the U.S. economy
Agenda Globalization and the U.S. Economy Saving and Investment in the Open Economy, Part 2 Saving and Investment in Large Open Economies (LOE) The U.S. Current Account Deficit Fiscal Policy and the Current
More informationMICROECONOMIC PRINCIPLES SPRING 2001 MIDTERM ONE -- Answers. February 16, 2001. Table One Labor Hours Needed to Make 1 Pounds Produced in 20 Hours
MICROECONOMIC PRINCIPLES SPRING 1 MIDTERM ONE -- Answers February 1, 1 Multiple Choice. ( points each) Circle the correct response and write one or two sentences to explain your choice. Use graphs as appropriate.
More informationLab 17: Consumer and Producer Surplus
Lab 17: Consumer and Producer Surplus Who benefits from rent controls? Who loses with price controls? How do taxes and subsidies affect the economy? Some of these questions can be analyzed using the concepts
More informationEconomics. Worksheet 11.1. Circular Flow Simulation
Worksheet 11.1 Circular Flow Simulation Please note this is a class activity. Why not suggest it to your teacher? Objective: To understand how productive resources, goods and services and money flow from
More informationCLASSIFICATION OF MARKETS Perfectly competitive, various types of imperfect competition
ECO 352 Spring 2010 No. 15 Mar. 30 TRADE POLICIES: TARIFFS AND QUOTAS CLASSIFICATION OF POLICIES Price-type: import tariffs, export taxes and subsidies Quantity-type: quotas, voluntary restraint and orderly
More informationHow To Calculate Profit Maximization In A Competitive Dairy Firm
Microeconomic FRQ s 2005 1. Bestmilk, a typical profit-maximizing dairy firm, is operating in a constant-cost, perfectly competitive industry that is in long-run equilibrium. a. Draw correctly-labeled
More informationCandy Companies Flee U.S. Workers, Not U.S. Sugar Prices
Sugar Issue Brief: Candy Companies Flee U.S. Workers, Not U.S. Sugar Prices February 2006 AMERICA S SUGAR PRODUCERS Meeting America s Needs 1 Candy Companies Flee U.S. Workers, Not U.S. Sugar Prices Over
More informationCHAPTER 16 EXCHANGE-RATE SYSTEMS
CHAPTER 16 EXCHANGE-RATE SYSTEMS MULTIPLE-CHOICE QUESTIONS 1. The exchange-rate system that best characterizes the present international monetary arrangement used by industrialized countries is: a. Freely
More informationEconomics 101 Multiple Choice Questions for Final Examination Miller
Economics 101 Multiple Choice Questions for Final Examination Miller PLEASE DO NOT WRITE ON THIS EXAMINATION FORM. 1. Which of the following statements is correct? a. Real GDP is the total market value
More information4 THE MARKET FORCES OF SUPPLY AND DEMAND
4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what
More informationChapter 10. Trade Policy in Developing Countries. Slides prepared by Thomas Bishop
Chapter 10 Trade Policy in Developing Countries Slides prepared by Thomas Bishop Preview Import substituting industrialization Trade liberalization since 1985 Export oriented industrialization Copyright
More informationMeasuring GDP and Economic Growth
20 Measuring GDP and Economic Growth After studying this chapter you will be able to Define GDP and explain why GDP equals aggregate expenditure and aggregate income Explain how Statistics Canada measures
More informationBailouts and Stimulus Plans. Eugene F. Fama
Bailouts and Stimulus Plans Eugene F. Fama Robert R. McCormick Distinguished Service Professor of Finance Booth School of Business University of Chicago There is an identity in macroeconomics. It says
More informationCourse Outline SS212 Economy of Micronesia
Course Outline SS212 Economy of Micronesia Course Description This course is an in-depth exploration of the FSM economy with an emphasis placed on the development of a broad knowledge base as well as the
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chatper 34 International Finance - Test Bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The currency used to buy imported goods is A) the
More informationChapter 15: Spending, Income and GDP
Chapter 15: Spending, Income and GDP By the end of this chapter, you will be able to: Define GDP Calculate GDP by: adding up value added of production. adding up expenditure. adding up income. Distinguish
More informationMacroeconomics: GDP, GDP Deflator, CPI, & Inflation
HOSP 2207 (Economics) Learning Centre Macroeconomics: GDP, GDP Deflator, CPI, & Inflation Macroeconomics is the big picture view of an economy. Microeconomics looks at the market for a specific good, like
More informationChapter 5: GDP and Economic Growth
Chapter 5: GDP and Economic Growth Be Mean Green! Please consider the environment before printing this Chapter Outline. It ll be available online throughout the semester. For Firms private accounting measures
More informationWho gains and who loses from an import tariff? An export tax? (Assume world prices are fixed).
Who gains and who loses from an import tariff? An export tax? (Assume world prices are fixed). Governments usually impose import tariffs, taxes levied on imports, to promote industries considered to be
More informationEconomics 380: International Economics Fall 2000 Exam #2 100 Points
Economics 380: International Economics Fall 2000 Exam #2 100 Points Name (ID) YOU SHOULD HAVE 7 PAGES FOR THIS EXAM. EXAM WILL END AT 1:50. MAKE SURE YOUR NAME IS ON THE FIRST AND LAST PAGE OF THE EXAM.
More informationREVIEW ONE. Name: Class: Date: Matching
Name: Class: Date: ID: A REVIEW ONE Matching Complete the following using these terms. a. outsourcing b. diversity c. entrepreneur d. competitive differentiation e. strategic alliance f. capital g. vision
More informationMONOPOLIES HOW ARE MONOPOLIES ACHIEVED?
Monopoly 18 The public, policy-makers, and economists are concerned with the power that monopoly industries have. In this chapter I discuss how monopolies behave and the case against monopolies. The case
More informationUNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education
UNIVERSITY OF MRIGE INTERNTIONL EXMINTIONS International General ertificate of Secondary Education EONOMIS 0455/01 Paper 1 Multiple hoice For Examination from 2014 SPEIMEN PPER dditional Materials: Multiple
More informationChapter 2 The Measurement and Structure of the National Economy
Chapter 2 The Measurement and Structure of the National Economy Multiple Choice Questions 1. The three approaches to measuring economic activity are the (a) cost, income, and expenditure approaches. (b)
More informationRefer to Figure 17-1
Chapter 17 1. Inflation can be measured by the a. change in the consumer price index. b. percentage change in the consumer price index. c. percentage change in the price of a specific commodity. d. change
More informationNotes - Gruber, Public Finance Chapter 20.3 A calculation that finds the optimal income tax in a simple model: Gruber and Saez (2002).
Notes - Gruber, Public Finance Chapter 20.3 A calculation that finds the optimal income tax in a simple model: Gruber and Saez (2002). Description of the model. This is a special case of a Mirrlees model.
More information7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts
Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
More informationMODULE 62: MONOPOLY & PUBLIC POLICY
MODULE 62: MONOPOLY & PUBLIC POLICY Schmidty School of Economics 1 LEARNING TARGETS I CAN Ø Compare & Contrast the effect that perfect competition and monopoly has upon society's welfare. Ø Explain how
More informationA version of this essay was published as "Reduziert die Globalisierung die Kinderarbeit?" in Neue Zürcher Zeitung, February 23/24, 2002 p29.
Globalization and the Economics of Child Labor A version of this essay was published as "Reduziert die Globalisierung die Kinderarbeit?" in Neue Zürcher Zeitung, February 23/24, 2002 p29. Eric V. Edmonds
More informationCompetition based Industrial Policy. Outline. What is industrial policy? What is industrial policy? Framework for Industrial Policy
What is industrial policy? Competition based Industrial Mari Pangestu Jakarta, May 3, 2005 Source of growth often thought to matter: indigenous vs. foreign Is it confined to industries/manufacturing? How
More informationNEWS FROM NATIONALBANKEN
1ST QUARTER 2016 NO. 1 NEWS FROM NATIONALBANKEN PROSPERITY IN DENMARK IS KEEPING UP Since the crisis in 2008, the Danish economy has generated an increase in prosperity, which is actually slightly higher
More informationEcon 202 Section 4 Final Exam
Douglas, Fall 2009 December 15, 2009 A: Special Code 00004 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 4 Final Exam 1. Oceania buys $40
More informationBusiness-Government Trade Relations
6: Business-Government Trade Relations 1 C H A P T E R S I X Business-Government Trade Relations 6 Learning Objectives Describe the political, economic, and cultural motives behind governmental intervention
More informationDemand, Supply and Elasticity
Demand, Supply and Elasticity CHAPTER 2 OUTLINE 2.1 Demand and Supply Definitions, Determinants and Disturbances 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities of Supply and
More informationTopic 2: Fossil Fuel Supply and Demand: Effect of Subsidies and Taxation. () Global Energy Issues, Industries and Markets 1 / 53
Topic 2: Fossil Fuel Supply and Demand: Effect of Subsidies and Taxation () Global Energy Issues, Industries and Markets 1 / 53 Introduction This topic follows strategy I plan in using in this course A
More informationEcon 101: Principles of Microeconomics
Econ 101: Principles of Microeconomics Chapter 14 - Monopoly Fall 2010 Herriges (ISU) Ch. 14 Monopoly Fall 2010 1 / 35 Outline 1 Monopolies What Monopolies Do 2 Profit Maximization for the Monopolist 3
More informationEconomics 101 Fall 2011 Homework #3 Due 10/11/11
Economics 101 Fall 2011 Homework #3 Due 10/11/11 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).
More informationHow to Study for Class 4: The Determinants of Demand and Supply
1 How to Study for Class 4: The Determinants of Demand and Supply Chapter 4 introduces the factors that will shift the shift plus two new elasticity concepts. 1. Begin by looking over the Objectives listed
More informationEcon 202 Exam 2 Practice Problems
Econ 202 Exam 2 Practice Problems Principles of Microeconomics Dr. Phillip Miller Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 6 1. If a binding
More informationEconomic Policy and State Intervention (Richards and Waterbury CHs #2,3,7,8,9) 1. Recovery Since 1800 2. Growth Policies 3. Why the Middle East Chose
Economic Policy and State Intervention (Richards and Waterbury CHs #2,3,7,8,9) 1. Recovery Since 1800 2. Growth Policies 3. Why the Middle East Chose Import Substitution 4. MENA vs. Asia 5. Reform Disparity
More informationEconomics. Social Studies Curriculum Framework. Revised 2006 Amended June 2009
Economics Social Studies Curriculum Framework Revised 2006 Course Title: Economics Course/Unit Credit: 0.5 Course Number: 4743000 Teacher Licensure: Please refer to the Course Code Management System (https://adedata.arkansas.gov/ccms/)
More informationDemand, Supply, and Market Equilibrium
3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for $50 in 2000, but by 2003 the price had risen to $500 per kilogram. The price
More informationExam 1 Review. 3. A severe recession is called a(n): A) depression. B) deflation. C) exogenous event. D) market-clearing assumption.
Exam 1 Review 1. Macroeconomics does not try to answer the question of: A) why do some countries experience rapid growth. B) what is the rate of return on education. C) why do some countries have high
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Hint: draw graphs in the margins to check your answers. And remember that an increase in
More informationQuantity Tax Incidence Subsidy Welfare Effects Case Study. Equilibrium Chapter 16
Equilibrium Chapter 16 Competitive Equilibrium: Motivating Questions Firms are price-takers in competitive markets, but how is the market price (and quantity) determined? competitive equilibrium What happens
More informationThe Circular Flow of Income and Expenditure
The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital
More informationChapter 18. MODERN PRINCIPLES OF ECONOMICS Third Edition
Chapter 18 MODERN PRINCIPLES OF ECONOMICS Third Edition Fiscal Policy Outline Fiscal Policy: The Best Case The Limits to Fiscal Policy When Fiscal Policy Might Make Matters Worse So When Is Fiscal Policy
More informationECON 600 Lecture 5: Market Structure - Monopoly. Monopoly: a firm that is the only seller of a good or service with no close substitutes.
I. The Definition of Monopoly ECON 600 Lecture 5: Market Structure - Monopoly Monopoly: a firm that is the only seller of a good or service with no close substitutes. This definition is abstract, just
More informationChapter 8 Application: The Costs of Taxation
Chapter 8 Application: The Costs of Taxation Review Questions What three factors must be taken into account in order to fully understand the effect of taxes on economic well-being? ANSWER: In order to
More informationChapter 14 Monopoly. 14.1 Monopoly and How It Arises
Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a
More informationchapter >> Consumer and Producer Surplus Section 3: Consumer Surplus, Producer Surplus, and the Gains from Trade
chapter 6 >> Consumer and Producer Surplus Section 3: Consumer Surplus, Producer Surplus, and the Gains from Trade One of the nine core principles of economics we introduced in Chapter 1 is that markets
More informationPaper 2 (SL and HL) markschemes
Paper 2 (SL and HL) markschemes Examples of markschemes for Exam practice: paper 2 in the Economics for the IB Diploma CD-ROM are provided below. Paper 2 section A: International economics Chapter 13 International
More informationDavid M. Woodruff Dilemmas and tradeoffs in Russian exchange rate policy
David M. Dilemmas and tradeoffs in Russian exchange rate policy Policy Memo Original citation:, David M. (1999) Dilemmas and tradeoffs in Russian exchange rate policy. PONARS Policy Memo, Center for Strategic
More informationa) Find the equilibrium price and quantity when the economy is closed.
Economics 102 Fall 2007 Answers to Homework 2 Problem 1: In Schulzland, a small closed economy, the supply and demand for bushels of peanuts are given by D: P = 200 5Q and S: P = 40 + 3Q. The world price
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 6 - Markets in Action - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The short-run impact of the San Francisco earthquake
More information