Practice
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Self-assessed set — rate yourself after answering.
- 1
Explain how a tariff reduction causes an increase in the equilibrium quantity of imports and a decrease in the equilibrium price. Hint: Consider the Work It Out "Effects of Trade Barriers."
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- 2
Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.
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- 3
Explain how trade barriers save jobs in protected industries, but only by costing jobs in other industries.
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- 4
Explain how trade barriers raise wages in protected industries by reducing average wages economy-wide.
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- 5
How does international trade affect working conditions of low-income countries?
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- 6
Do the jobs for workers in low-income countries that involve making products for export to high-income countries typically pay these workers more or less than their next-best alternative?
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- 7
How do trade barriers affect the average income level in an economy?
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- 8
How does the cost of “saving” jobs in protected industries compare to the workers’ wages and salaries?
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- 9
Explain how predatory pricing could be a motivation for dumping.
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- 10
Why do low-income countries like Brazil, Egypt, or Vietnam have lower environmental standards than high-income countries like the Germany, Japan, or the United States?
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- 11
Explain the logic behind the “race to the bottom” argument and the likely reason it has not occurred.
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- 12
What are the conditions under which a country may use the unsafe products argument to block imports?
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- 13
Why is the national security argument not convincing?
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- 14
Assume a perfectly competitive market and the exporting country is small. Using a demand and supply diagram, show the impact of increasing standards on a low-income exporter of toys. Show the tariff's impact. Is the effect on toy prices the same or different? Why is a standards policy preferred to tariffs?
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- 15
What is the difference between a free trade association, a common market, and an economic union?
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- 16
Why would countries promote protectionist laws, while also negotiate for freer trade internationally?
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- 17
What might account for the dramatic increase in international trade over the past 50 years?
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- 18
How does competition, whether domestic or foreign, harm businesses?
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- 19
What are the gains from competition?
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