eco322-exam1 - Graph Un-skill or skill worker (shift to...

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Pg. 885 Pg 147 f4-3 (identify graphly) A. Identify the major fallacies of international trade Trade is a zero-sum activity” Both partners gain from trade “Imports reduce employment and act as a drag on the economy, while exports promote growth and employment” Failure to consider the link between imports and exports “Tariffs, quotas, and other import restrictions will save jobs and promote a higher level of employment” Failure to recognize that a reduction in imports does not occur in isolation Free trade Increases competition, lowers prices Makes better products available to consumers Higher consumption B. What do researchers have to say about between a firm’s productivity and exposure to global competition? C. What is meant by increasing opportunity cost? Under what conditions will a country experience increasing opportunity cost? When the homeland increases the production of those goods that have comparative advantage, the marginal costs will equal to marginal revenue before the predominant industry doesn’t realize full specialty in the homeland. Thereby, the production in the homeland can’t reach the full specialization. when changing comparative advantage. D. How did Adam Smith’s views of international trade differ from those of the mercantilists? Absolute advantage (Adam Smith) Countries benefit from exporting what they make cheaper than anyone else. But: nations without absolute advantage do not gain from trade. Adam Smith's criticism of mercantilism stemmed from the notion that the wealth of the world is not fixed, but created by human labor. He also believed that mercantilists failed to understand the notions of absolute advantage and comparative advantage E. The gains from international trade are discussed in terms of production gains and consumption gains. What do these terms mean? The measure of welfare separately on producers and consumers. In production you sell and in consumption you buy F. Explain what is meant by the trade triangle. A country spends the money on B country that gains from C country, while B country spends the money on C country that gains from A country. A nation’s trade triangle denotes its exports, imports, and terms of trade. In a two nation, two product world, the trade triangle of one nation equals that of the other nation; one nation’s exports equal the other nation’s imports, and there is one equilibrium terms of trade. G.
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This note was uploaded on 07/07/2011 for the course ECON 322 taught by Professor Steven during the Spring '11 term at Southern New Hampshire University.

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eco322-exam1 - Graph Un-skill or skill worker (shift to...

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