Chapter 32: Q. 32.2LO (page 710)
Understand common arguments against free trade.
States may also adopt import tariffs to curb natural capital exportation. Shipment, charges, and additional obstructions also including government are almost all conceivable business major hurdles.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Describe ways that nations restrict foreign trade.
Critics of the North American Free Trade Agreement (NAFTA) suggest that much of the increase in exports from Mexico to the United States now involves goods that Mexico otherwise would have exported to other nations. Mexican firms choose to export the goods to the United States, the critics argue, solely because the items receive preferential treatment under NAFTA tariff rules. What term describes what these critics are claiming is occurring with regard to U.S.-Mexican trade as a result of NAFTA? Explain your reasoning.
Residents of the nation of Border Kingdom can forgo production of digital televisions and utilize all available resources to produce bottles of high-quality wine per hour. Alternatively, they can forgo producing wine and instead produce digital TVs per hour. In the neighboring country of Coastal Realm, residents can forgo production of digital TVs and use all resources to produce bottles of high-quality wine per hour, or they can forgo wine production and produce digital TVs per hour. In both nations, the opportunity costs of producing the two goods are constant.
a. What is the opportunity cost of producing digital TVs in Border Kingdom? Of producing bottles of wine in Border Kingdom?
b. What is the opportunity cost of producing digital TVs in Coastal Realm? Of producing bottles of wine in Coastal Realm?
Suppose that the two nations in Problems and choose to specialize in producing the goods for which they have a comparative advantage. They agree to trade at a rate of exchange of pastry for sandwich. At this rate of exchange, what are the maximum possible numbers of pastries and sandwiches that they could agree to trade?
Some critics of the North American Free Irade Agreement (NAFTA) suggest that firms outside NAFTA nations sometimes shift unassembled inputs to Mexico, assemble the inputs into final goods there, and then export the final product to the United States in order to take advantage of Mexican trade preferences. What term describes what these critics are claiming is occurring with regard to U.S.-Mexican trade as a result of NAFTA? Explain your reasoning.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
