Problem 2
Distinguish among land-, labor-, and capital-intensive goods, citing an example of each without resorting to book examples. How do these distinctions relate to international trade? How do distinctive products, unrelated to resource intensity, relate to international trade?
Problem 3
Explain: "The United States can make certain toys with greater productive efficiency than can China. Yet we import those toys from China." Relate your answer to the ideas of Adam Smith and David Ricardo.
Problem 4
Suppose Big Country can produce 80 units of \(X\) by using all its resources to produce \(X\) or 60 units of \(Y\) by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of \(\mathrm{X}\) and 60 units of \(\mathrm{Y}\). Assuming constant costs, in which product should each nation specialize? Explain why. What are the limits of the terms of trade between these two countries? How would rising costs (rather than constant costs) affect the extent of specialization and trade between these two countries?
Problem 5
What is an export supply curve? What is an import demand curve? How do such curves relate to the determination of the equilibrium world price of a tradable good?
Problem 6
Why is a quota more detrimental to an economy than a tariff that results in the same level of imports as the quota? What is the net outcome of either tariffs or quotas for the world economy?
Problem 7
"The potentially valid arguments for tariff protection - military self- sufficiency, infant industry protection, and diversification for stability -are also the most easily abused." Why are these arguments susceptible to abuse?
Problem 8
Evaluate the effectiveness of artificial trade barriers, such as tariffs and import quotas, as a way to achieve and maintain full employment throughout the U.S. economy. How might such policies reduce unemployment in one U.S. industry but increase it in another U.S. industry?
Problem 9
In 2013 , manufacturing workers in the United States earned average compensation of \(\$ 36.34\) per hour. That same year, manufacturing workers in Mexico earned average compensation of \(\$ 6.82\) per hour. How can U.S. manufacturers possibly compete? Why isn't all manufacturing done in Mexico and other lowwage countries?
Problem 10
How might protective tariffs reduce both the imports and the exports of the nation that levies tariffs? In what way do foreign firms that "dump" their products onto the U.S. market in effect provide bargains to American consumers? How might the import competition lead to quality improvements and cost reductions by American firms?
Problem 11
Identify and state the significance of each of the following trade-related entities: \((a)\) the \(\mathrm{WTO} ;(b)\) the \(\mathrm{EU} ;(c)\) the eurozone; and \((d)\) NAFTA.
