Gains From Trade
True of false: Countries import goods which they have a comparative advantage in
False countries export goods in which they have a comparative advantage in
THE AMOUNT PRODUCERS ARE WILLING TO PRODUCE AT EVERY PRICESUPPLY
SUPPLY
elasticity of demand for a horizontal demand curve
perfectly elastic
A negative externality will exist when...?
Spillover costs are given to others not directly involved in the consumption or production of a good or service
True or False: If studded snow tires cause an estimated $10 damage to the highways per vehicle each year, then the most efficient outcome for society would be to ban the use of studded snow tires
False: even if studded tires cause $10 damage to highways, it is efficient to use them if their benefit exceeds their costs (including the $10 external cost to society). A $10/tire tax would let the market determine whether or not they were worth their full cost to society.
Which one of the following statements reflects the principle of CA
A) countries with a CA in the production of every good need not specialize
B) countries should specialize in the production of goods that they enjoy consuming more than the other countries enjoy consuming them
C) Countries should specialize in the production of good for which they use fewer resources in production than do their trading partners
D) countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.
D) countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.
THE PRICE OF BEEF INCREASES. HOW WOULD THIS AFFECT THE DEMAND FOR PORK?
IT WOULD CAUSE AN INCREASE IN DEMAND FOR PORK
What is the midpoint formula
(Q2 - Q1) / ((Q2 + Q1)/2) ÷ (P2 - P1) / ((P2 + P10)/2)
Imposing a sales tax on a product will ______ consumer surplus and ______ producer surplus
decrease, decrease
Many goods with negative externalities are overproduced relative to the socially optimal level. What is directly responsible for this?
A) market failure
B) government failure
C) producer failure
D) consumer failure
A) market failure
A technologically advanced country, which is better than its neighbour at producing everything, would be better off if it closed its borders to trade, because the less productive country is a burden to the advanced country. Why is this not advisable?
All countries can gain form trade is their opportunity costs of production differ. Even the least productive country will have a CA at producing a good which would create optimal conditions for trade.
THE MINIMUM PRICE THAT CAN BE CHARGED (ALWAYS ABOVE THE EQUILIBRIUM PRICE) ALWAYS RESULTS IN A SURPLUS BECAUSE SUPPLY EXCEEDS DEMAND--DRIVES PRICES DOWN
PRICE FLOOR
Which one of the following describes a circumstance in which an increase in demand will NOT have any affect on price?
A) where supply is unit elastic
B) where supply is perfectly elastic
C) where supply is perfectly inelastic
D) where supply is a straight line through the origin
B) where supply is perfectly elastic
Describe the effect of a rising tax rate on deadweight loss
The increase of the tax rate increases DWL
List and briefly explain the arguments for trade restrictions
1. Protect job industries
2. Provide protecting for infant industries
3. National security
4. Retalliation against unfair competition
5. Threat of protectionism
Suppose a lawyer earning $200 per hours can also type 200 words per minute. Should the lawyer hire a secretary who can only type 50 words per minute? Why or why not?
Yes, as long as the secretary earns less than $50 per hour.
THE GOVERNMENT CHARGES PIG FARMERS A TAX. HOW DOES THIS AFFECT THE MARKET FOR PORK
IT WOULD CAUSE THE SUPPLY CURVE FOR PIGS TO MOVE TO THE LEFT
Suppose Ishani buys 7 pre-rolls each week regardless of price and smokes one every night. What is Ishani's price elasticity of demand?
PED=0
Sales taxes cause markets to allocate resources inefficiently because they distort incentives. How?
A sales tax raises the price to buyers and lowers the price to sellers, thereby giving buyers an incentive to consumer less and sellers andincentive to produce less than they other would.
What is the best response if Mexico subsidizes its textile production, making it impossible for Canadian producers to compete.
Canada would maximize its economic well-being by purchasing the subsidized textiles from Mexico.
In an election a debate candidate says "We need to stop the flow of foreign automobiles into out country. If we limit the importation of automobiles, out domestic auto production will rise and Canada will be better off"
Is it likely that Canada will be better off it it limits auto imports? Explain
No, if Canada is importing automobiles it is because the opportunity cost of producing them elsewhere is lower than in Canda.
THE GOVERNMENT GIVES PEANUT FARMERS A SUBSIDY
IT WOULD CAUSE THE SUPPLY CURVE FOR PEANUTS TO MOVE TO THE RIGHT
Which one of the following is the MAIN reason that the Organization of the Petroleum Exporting Countries (OPEC) has NOT been able to keep oil prices high?
A) Government regulation have prevented it
B) Supply tends to become more inelastic in the long run
C) Demands tends to become more inelastic in the long run
D) Massive petroleum discoveries have increased the supply
C) Demands tends to become more inelastic in the long run
What effect does a tariff have on economic welfare
Tariffs lower overall economic well being reducing the sum of producer and consumer surplus just as any other tex would do- by distorting behaviour and reducing output below the competitive market equilibrium.
Because positive externalities harm no one, there is no need for government intervention. Would an economist agree?
Positive externalities lead markets to produce a smaller quantity and charge a lower price than is socially desirable, therefore, government intervention will interalize this externality