Trade

What is a source of comparative advantage?

• climate

• institutions

• answer choices a & b

• None of the above.

In 30 minutes, Kana can either make miso soup or she can clean the kitchen. In 15 minutes, Mitchell can make miso soup; it takes Mitchell an hour to clean the kitchen.

• Kana has the absolute and comparative advantage at making miso soup.

• Mitchell has the absolute and comparative advantage at making miso soup.

• Kana has the absolute and comparative advantage at cleaning the kitchen.

• Mitchell has the absolute and comparative advantage at cleaning the kitchen.

In one hour, Ethan can bake 20 cookies or lay the drywall for two rooms. In one hour, Sienna can bake 100 cookies or lay the drywall for three rooms.

• Ethan has the absolute and comparative advantage at baking cookies.

• Sienna has the absolute and comparative advantage at baking cookies.

• Ethan has the absolute and comparative advantage at laying drywall.

• Sienna has the absolute and comparative advantage at laying drywall.

Data can write 12 excellent poems per day or solve 100 difficult physics problems per day. Riker can write one excellent poem per day or solve 0.5 difficult physics problems per day.

• Data has the absolute and comparative advantage at writing poems.

• Riker has the absolute and comparative advantage at writing poems.

• Data has the absolute and comparative advantage at solving physics problems.

• Riker has the absolute and comparative advantage at solving physics problems.

• None of the above

Spend some time driving in Detroit, MI—the Motor City—and you’re sure to see bumper stickers with messages like “Buy American” or “Out of a job yet? Keep buying foreign!” or “Hungry? Eat your foreign car!” Explain these bumper stickers in light of what you’ve learned: Who is hurt most by imported automobiles?

• American (domestic) consumers

• American (domestic) car manufacturers

• Foreign consumers

• Foreign car manufacturers

Trade restrictions on sugar cause U.S. consumers to pay more than twice the going world price for sugar. However, you are very unlikely to ever encounter bumper stickers that say things like “Out of money yet? Keep taxing foreign sugar!” or “Hungry? It’s probably because domestic sugar is so expensive!” Why?

• Sugar is unhealthy and therefore it’s unpopular to lower its cost.

• The sugar tariff benefits more Americans than it hurts.

• The price increase of sugar per person is small.

• None of the above.

There are three conditions that explain why a free market is efficient: 1. The supply of goods is sold by the sellers with the lowest cost. 2. There are no unexploited gains or wasteful trades. 3. The supply of goods is purchased by the buyers that place the highest value on the goods. Which condition or conditions cease to hold in the case of a tariff on imported goods?

• 1 only

• 2 only

• 3 only

• A and B only.