Question

2. trade surplus 3. import quota 4. intra-industry trade 5. factor intensity 6. producer surplus II. TRUE OR FALSE? (20%) 1, A production possibilities frontier graphically represents the maximum output of a country when the supply of resources and technology are constant.() 2. Absolute advantage theory shows that two nations could both gain from trade by exporting products in which their labor productivity was higher than that of the other nation. () 3, Mercantilists believed that each nation should try to achieve balanced trade, with exports equal to imports. ( 4. A producer willing to sell a good for $2 but receiving a price of $5 gains producer surplus of $3.( ) 5. Mill's theory of reciprocal demand shows that the equilibrium terms of trade between two nations depends only on production costs in the two nations. (O 6, Constant opportunity costs results in upward sloping supply curves and concave production possibility frontiers.) 7, In the presence of economies of scale, the production possibilities frontier is concaxe from the origin 8. Adam Smith believed that the wealth of nations was established primarily through exports used to purchase gold and silver rather than imports.() 9, A country should import a product in which it has a comparative disadvantage( 10. With a tariff, total surplus in the market increases by an amount referred to as a deadweight loss.( 11. Offer curve bulges toward the axis measuring its exportable commodity 12. Tariff will cause the consumption of importing goods increase() 13. Local content requirements is a regulation by importing country that requires that some specified fraction of a final good be produced domestically. 14. If the nominal tariff rate of final goods is larger than that of input, the effective rate of protection of final goods is larger than its nominal tariff rate. a

Answer 1

1) Solution: True

Explanation: The production possibility frontier (PPF) is a graph that depicts all maximum output possibilities for two goods that can be produced by an economy, given a set of inputs consisting of limited available resources

2) Solution: False

Explanation: The absolute advantage states that global trade is beneficial to the world when one country holds an absolute cost advantage in the production of one commodity while the other country has an absolute cost advantage in the other commodity

3) Solution: False

Explanation: The Mercantilists advocated that the global trade was a zero-sum game

4) Solution: True

Explanation: Producer surplus: Price received for good - Producer willing price to sell a good = $5 - $2 = $3

5) Solution: False

Explanation: Mill's theory of reciprocal demand states that the equilibrium trade terms between two countries depends on the demand of the two countries

6) Solution: False

Explanation: Constant opportunity costs results in downward sloping supply curves

　

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