International Economics - Chapter 1
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What are the main reasons why countries engage in international trade?

  • To consume goods and services that are difficult or impossible to produce domestically.
  • To take advantage of differences in climate and resources.
  • To specialize in production and improve labor productivity.
  • All of the above. (correct)

    • What is a potential negative consequence of international trade within a country?

  • Increased competition from foreign businesses.
  • Loss of jobs in import-competing industries. (correct)
  • A reduction in consumer choice.
  • A decrease in the quality of domestic products.

    • According to the content, which of these is NOT a reason for gains from Trade?

  • More efficient use of endowments.
  • Increased government revenue through tariffs. (correct)
  • Differences in climate and resources.
  • Efficient use of time and labor productivity.

    • What does the content suggest is a potential consequence of globalization?

    <p>Increased homogeneity in cultures across the world. (D)</p> Signup and view all the answers

    What is the primary argument presented in the content regarding protectionism?

    <p>Protectionism can protect domestic industries but may negatively impact consumers. (C)</p> Signup and view all the answers

    What does the term "gravity model" refer to in the context of international trade?

    <p>The tendency for large economies to trade more with each other. (D)</p> Signup and view all the answers

    What is a key takeaway from the content regarding the relevance of international trade in the USA?

    <p>The US relies heavily on international trade for its economic prosperity. (B)</p> Signup and view all the answers

    Based on the content, what is the primary argument for the benefits of international trade?

    <p>International trade promotes economic growth and development. (A)</p> Signup and view all the answers

    Approximately what percentage of world trade is attributed to trade within Europe?

    <p>21% (C)</p> Signup and view all the answers

    What is a primary reason for the large volume of trade within the European Union?

    <p>The geographical proximity of member countries. (B)</p> Signup and view all the answers

    What percentage of global trade is represented by the combined trade between Europe and the United States?

    <p>26% (B)</p> Signup and view all the answers

    Which factor primarily drives trade between industrialized nations, according to 'new' trade theory?

    <p>Similarities in industrial development. (A)</p> Signup and view all the answers

    Compared to trade within the EU, approximately what fraction is the trade within the Americas?

    <p>One-half (C)</p> Signup and view all the answers

    What is the primary characteristic of export goods from the Middle East and Russia?

    <p>Oil and natural gas. (B)</p> Signup and view all the answers

    What is the current global rank of China in terms of world exports, starting from 2014?

    <p>Largest exporter. (D)</p> Signup and view all the answers

    What percentage of global trade is attributed to exports from Africa?

    <p>2% (C)</p> Signup and view all the answers

    What term describes sellers in a perfectly competitive market who cannot influence the market price?

    <p>Price Takers (A)</p> Signup and view all the answers

    What is a defining characteristic of buyers and sellers in a market operating under perfect competition?

    <p>They are well informed about market opportunities. (D)</p> Signup and view all the answers

    In which of the following markets is the example of price-taking behavior illustrated?

    <p>Market for wheat (C)</p> Signup and view all the answers

    What does the Supply and Demand model primarily analyze?

    <p>The interactions between market demand and supply. (B)</p> Signup and view all the answers

    What is one factor that does NOT shift the demand or supply curves?

    <p>Currents in political instability (C)</p> Signup and view all the answers

    International Economics (IE) primarily examines interactions between nations through which channel?

    <p>International Trade (C)</p> Signup and view all the answers

    According to the gravity model, what is a key factor in determining the volume of trade between two countries?

    <p>The geographic distance between the trade partners (D)</p> Signup and view all the answers

    Which category constitutes the largest portion of global trade volume in the present day?

    <p>Manufactured goods like automobiles and computers (D)</p> Signup and view all the answers

    Which of the following is NOT a key element of the Supply and Demand model?

    <p>Consumer surplus (B)</p> Signup and view all the answers

    Which international issue is NOT addressed by International Economics?

    <p>National healthcare systems (C)</p> Signup and view all the answers

    Which sector has the potential to see the greatest growth in international trade due to the increased ability to relocate operations to various locations?

    <p>Services (B)</p> Signup and view all the answers

    What percentage of jobs are considered 'tradable' and thus could be potentially outsourced?

    <p>40% (B)</p> Signup and view all the answers

    How have the types of goods imported by the United States changed from 1925 to 2018?

    <p>Imports of food, feed, and beverages went from 90% to 30% of total imports. (C)</p> Signup and view all the answers

    What was the primary change in US export composition between 1925 and 2018?

    <p>The export of capital, consumer goods, and automobiles moved from 20% to 60%. (A)</p> Signup and view all the answers

    According to the data provided, which of the following best describes the relationship between a country's GDP and its trade volume?

    <p>Larger economies generally have higher trade volumes due to extensive production and purchasing power. (B)</p> Signup and view all the answers

    Based on the provided information, which of the following best explains why trade between the U.S., Mexico, and Canada as a fraction of GDP is greater than that between the U.S. and the EU?

    <p>Geographic proximity and trade agreements like NAFTA play a pivotal role. (C)</p> Signup and view all the answers

    Based on the information, what was the approximate percentage of total U.S. trade attributed to its top 20 trading partners in 2021?

    <p>80% (D)</p> Signup and view all the answers

    Which of the following is considered a non-tradable job?

    <p>A dentist (A)</p> Signup and view all the answers

    Which of the following countries is NOT listed as one of the top 5 trading partners of the U.S. in 2015?

    <p>France (B)</p> Signup and view all the answers

    According to the provided graph of total U.S. trade with major partners in 2022, which country had the highest trade value with the U.S.?

    <p>Canada (D)</p> Signup and view all the answers

    According to the information provided, what is a key reason why larger economies tend to export more goods and services than smaller economies?

    <p>They produce a wider variety of goods and services. (B)</p> Signup and view all the answers

    Which of the following is NOT explicitly mentioned as one of the top three largest European economies in the context of U.S. trade?

    <p>Italy (A)</p> Signup and view all the answers

    Based on the provided content, what is a possible economic benefit for African economies engaging more in world trade?

    <p>Potential for poverty reduction through development (C)</p> Signup and view all the answers

    What does GDP measure, according to the text?

    <p>The value of goods and services produced in an economy. (A)</p> Signup and view all the answers

    What is the average cost per launch when NASA has completed 3 launches?

    <p>$5 billion (B)</p> Signup and view all the answers

    Which of the following describes a characteristic of perfectly competitive markets?

    <p>There are many buyers and sellers. (B)</p> Signup and view all the answers

    What is the marginal cost of the first launch?

    <p>$3 billion (A)</p> Signup and view all the answers

    If NASA launches 2 shuttles, what is the total cost incurred?

    <p>$7 billion (D)</p> Signup and view all the answers

    What comparison can be made about the average cost when increasing launches from 1 to 2?

    <p>Average cost decreases. (C)</p> Signup and view all the answers

    If the marginal cost of the fifth launch is $6.4 billion, how does this compare to the marginal benefit?

    <p>Marginal cost is greater than marginal benefit. (D)</p> Signup and view all the answers

    Study Notes

    International Economics - Chapter 1

    • Economics: The social science of satisfying unlimited wants with scarce resources, involving trade-offs. Having more of one good generally means having less of another.
    • Two Perspectives:
      • Microeconomics: Focuses on individual decision-making, analyzing costs and benefits in various economic processes (markets, pricing, public policy).
      • Macroeconomics: Studies economic aggregates (GDP, price levels, income distribution) and their evolution in the short and long-run (like economic growth).
    • Analyzing Economics:
      • Scientific methods: Observing reality, seeking to understand it, and testing/correcting theories based on data.
      • Theory: Economic models (formalized descriptions of how the economy works)
      • Data: Econometrics (statistical analysis of economic data)
    • Cost-Benefit Principle: An individual should take an action if, and only if, the extra benefits (MB) from taking that action are at least as great as the extra costs (MC). Should be used in decision-making
      • Relevant question is not average cost but the extra costs (MC) of each additional unit.
    • Not All Costs and Benefits Matter Equally Principle:
      • Some costs and benefits (opportunity cost, marginal cost/benefit) matter greatly when making decisions.
      • Other costs and benefits (sunk costs, average cost/benefit) don't matter.
    • Average-Marginal Distinction: When determining the appropriate level to pursue an activity, evaluate whether the marginal benefit of the activity exceeds its marginal cost. Do not compare average cost and average benefit
    • Examples using cost-benefit principle: Should NASA launch additional space shuttles?
    • Perfectly Competitive Markets: Four conditions:
      • All firms sell the same, standardized product; buyers are willing to switch between firms if prices change
      • Many buyers and sellers; no one person can influence the market price
      • Productive resources (labor, capital, etc.) are mobile (free entry/exit); easy for new firms to enter market
      • Buyers and sellers are well-informed; all participants are aware of reasonable opportunities
    • Examples of Perfectly Competitive Markets: Wheat market (more like a competitive market than other markets); not perfect example for all products (e.g. operating systems).

    International Economics - Chapter 2

    • Preview of Main Trends (Map of World Trade):
      • Largest Trading Partners: The countries the US trades most heavily with
    • Gravity Model
      • Relationship between Economic Size and Trade: Larger economies trade more.
      • Relationship between Distance and Trade: Closer countries trade more.
      • Formula: Larger economies trade more frequently and with those closer to them. (Tij = Y₁ x Yj/Dij)
      • Limitations: Cultural ties, barriers to trade, economic geography (ports, transportation costs), multinational corporations, trade agreements and political boundaries.
    • Changing patterns in World Trade:
      • Globalization (past and present): Trends and changes over time
      • Changing composition of trade: Sectors/industries that trade most
      • Service Outsourcing. Trends and impact

    International Economics - Additional Topics

    • PPP: Purchasing Power Parity: Adjustment method on exhange rates to reflect the relative purchasing power of currencies between countries.
      • Allows for fairer international comparisons of GDP by using a common set of prices
      • The impact of GDP per capita adjustment
    • Trade Concepts:
      • Imports: Purchase of goods/services from a foreign country
      • Exports: Sale of goods/services by one country to another
      • Trade Balance: Difference between value of exports and imports
      • Trade Surplus: Country exports more than it imports
      • Trade Deficit: Country imports more than it exports
    • International Trade Relevance:
      • Trilpling of US trade: The proportion of international trade in national economies has tripled in the past 40 years
      • Ties to global trade: Many countries are heavily dependent on global trade, compared to the US.
      • Engine for prosperity: Trade is a force for prosperity and world peace
    • Trade Data (Graphs and Charts): Relevant data displayed in graph format on imports, exports, GDP, etc.

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    Related Documents

    International Economics CH 1 & 2 Student Notes PDF

    Description

    Explore the essential concepts of International Economics in this quiz based on Chapter 1. Delve into micro and macroeconomic perspectives, the methods used to analyze economics, and the cost-benefit principle. Test your understanding of how individual decisions shape economic processes and aggregates.

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