国际贸易双语教案问题答案Pugel_14_SG_AKEY (9)
国际贸易双语教案问题答案Pugel_14_SG_AKEY (4)
CHAPTER 4 TRADE: FACTOR AVAILABILITY AND FACTORPROPORTIONS ARE KEY Objectives of the ChapterThe previous chapter laid the foundation for our basic model in which international trade is driven by price differentials resulting only from differences in (constant) costs of production. In the real world, however, production costs are rarely constant, and demand-side factors such as tastes may affect pre-trade price differentials. Chapter 4 extends our model of international trade to account for increasing costs and for heterogeneous tastes. Here, the production possibility curve may be non-linear, and the pre-trade prices of goods will be determined by a country’s pre-trade production point on that curve. Tastes, as represented by community indifference curves, help us understand how the pre-trade point is established. Because international taste differentials do not seem to be the major determinant of pre-trade prices, we focus our attention once again on supply-side differences in developing the Heckscher-Ohlin model of international trade. A simple H-O model posits a world with two factors of production and two goods. Countries can be characterized as relatively abundant in one factor or another; goods can be characterized as intensively using one factor or another in production. As with all trade, we assume that a country will export the good that it produces relatively cheaply compared to the rest of the world, and will import the good that it produces relatively expensively. Using H-O, we can conclude that a country will export the good that intensively uses its relatively abundant (i.e., cheap) factor of production and will import the good that intensively uses its relatively scarce (i.e., costly) factor of production.After studying Chapter 4, you should be able to1. explain how increasing marginal costs affect the shape of the production possibility curves.2. describe how tastes can be represented by community indifference curves.3. show how the theory of comparative advantage developed in Chapter 3 can be generalized to include:a. increasing marginal costs.b. differences in tastes.c. differences in resource endowments.d. differences in how intensively goods use factors of production.4. use the production possibility curves and the community indifference curves to illustrate how tradeaffectsa. the production patterns in each country.b. the consumption patterns in each country.c. the overall well-being in each country.Important ConceptsCommunity indifference curve:An illustration of the different combinations of two goods thatwould provide the community (here, the nation) with the samelevel of well-being.Factor abundance (scarcity): A country is relatively abundant (scarce) in a factor of productionif the ratio of the endowment of that factor to other factors in thecountry is higher (lower) than in the rest of the world.Factor intensity: A good is intensive in a factor of production if the value of thatfactor accounts for a greater share of total production cost in thatgood than in any other good.Heckscher-Ohlin (H-O) theory: A country will export the good that intensively uses the country’sabundant (cheap) factor of production and will import the goodthat intensively uses its scarce (expensive) factor of production. Terms of trade:The ratio of the price received for a country’s exports to the price itpays for its imports.Warm-up QuestionsTrue or False? Explain.1. T / F Under the Heckscher-Ohlin theory, a country is considered “land abundant” if it has moreacres of land than another country.2. T / F With increasing marginal costs, countries will not necessarily s pecialize completely inthe production of one good.3. T / F The Heckscher-Ohlin theory assumes both countries have the same preferences for goods.4. T / F The Hecksher-Ohlin theory assumes both countries have the same access to productiontechnologies.5. T / F If factor intensities do not differ between goods, the H-O theory cannot tie trade patternsso tightly to differing factor endowments between countries.Multiple Choice1. The Hecksher-Ohlin theory indicates thatA. nations with much labor relative to other resources cannot have any comparative advantage inproduction.B. a nation with a high ratio of labor to non-labor resources should minimize its participation ininternational trade.C. a nation relatively rich in non-labor resources will gain the most from international trade.D. nations will be led by international market forces to specialize in the production and export ofgoods that heavily use their relatively abundant factors.2. For Heckscher-Ohlin, the most important cause of the differences in relative commodity pricesis the difference between countries inA. factor endowments.B. national income.C. technology.D. tastes.3. Country J has 1 million machines and 1 million workers, while country K has 2 million machinesand 3 million workers. If computers are produced mostly by capital and beer is produced mostly by labor, the H-O model predicts thatA. Country K will export computers in exchange for beer.B. Country J will export computers in exchange for beer.C. Country J is too small to be of economic interest to Country K.D. c omputers and beer don’t mix, so trade cannot increase either country’s well-being.4. When production is characterized by increasing costs, trade will be beneficial only if thecountries involved haveA. similar tastes but different production possibility curves.B. different tastes but similar production possibility curves.C. different tastes and different production possibility curves.D. any combination of tastes and production possibility curves that yield different pre-trade priceratios in the two countries.5. Smith, Ricardo, and Hecksher & Ohlin are alike in thatA. they believed international trade was driven by differences in autarkic prices.B. they believed production occurred under constant costs.C. they believed everyone could be made better off through free trade.D. they spent way too much time thinking.Problems1. Let’s try an application of the Heckscher-Ohlin model to our countries of Leinster and Saxony,which produce and consume bread and telephones. You may assume that the only two factors of production are labor and land.a. If Leinster has 8 million acres of land and 2 million laborers, while Saxony has 2 millionacres of land and 400,000 laborers, which country is “labor abundant”? Which country is“land abundant”? Explain.b. If labor accounts for 80 percent of the total cost of producing telephones but only 20 percentof the total cost of producing bread, which country is more likely to export telephones?Which country is more likely to export bread? Why?2. Suppose that Leinster’s laborers traditionally work five days a week, while Saxons usually workseven days a week. How might that difference in labor hours per week cause you to modify your answer above? What does this tell you about potential limitations in the simple H-O model?3. Consider two countries that have exactly the same increasing-cost production possibility curves.Show how a difference in the tastes of t he two countries’ residents can then determine the pattern of trade between the two countries.4. Is it possible for two countries that have very different supply and demand characteristics to haveno economic reason to trade with each other?5. How would the predictions of the H-O theory change if the two factors of production are equallysuited to producing the two goods in the two countries?Discussion Topics1. Can a country do anything to modify its relative factor endowments?2. Are there reasons for a country to want relative abundance in one factor rather than another?3. How might we include technology as a factor of production? How does the international mobilityof technology then complicate the predictions of Heckscher-Ohlin regarding trade patterns?。
国际贸易双语教案问题答案Pugel_14_SG_AKEY (19)
CHAPTER 19WHAT DETERMINES EXCHANGE RATES?Objectives of the ChapterIn the short run, fluctuations in exchange rates can be related to demands for and supplies of assets denominated in different currencies—what we call ―the asset market approach to exchange rates.‖ Here, we revisit the international financial investors and incorporate the impact of interest rate differentials and exchange rate expectations into the determination of the current spot exchange rate.In the long run, purchasing power parity suggests that movements in exchange rates are determined by differences in countries’ inflation rates. The ―monetary approach to exchange rates‖ explains inflation rates as functions of relative demands for and supplies of domestic and foreign monies. Linking the two, we get a model that ties exchange rates to ―fundamentals‖ such as incomes and relative money supplies. After studying Chapter 19 you should be able to explain1. the impact of interest rates on the current exchange rate.2. the impact of expectations about future spot rates on the current exchange rate.3. what exchange rate overshooting is, and why it can occur.4. how short-run exchange rate movements can diverge from what would be predicted by marketfundamentals.5. the purchasing power parity hypothesis, in both its absolute and relative forms.6. the quantity theory of money in a two-country world.7. the difference between nominal and real exchange rates.Important ConceptsAsset market approach Explains exchange rates in terms of demands and supplies to exchange rates: of all assets denominated in different currencies. The monetaryapproach to exchange rates is a variant of this approach in whichonly demands and supplies of the money asset are considered. Bandwagon: A situation in which investors expect the recent trend in exchangerates to extend into the future.Law of one price:Asserts that a single commodity will have the same price everywhereonce the prices are expressed in the same currency. This is anotherway of stating the purchasing power parity hypothesis. It seems to betrue chiefly for commodities that are standardized and heavily tradedinternationally.Monetary approach Seeks to explain exchange rates by focusing on the demands to exchange rates: for and supplies of national monies.Nominal bilateral exchange rate: The exchange rate we see quoted in foreign exchange markets.Nominal effective exchange rate: The weighted-average exchange value of a country’s currency,where the weights reflect the importance of the other countries int he home country’s total international trade.Overshooting: When the exchange rate is driven past its ultimate equilibrium rate(usually thought to be the PPP level), and then back to that rate later,during the adjustment of the macroeconomy to an exogenous shock.This effect is the consequence of goods prices that are sticky in theshort run.Purchasing power parity: In its absolute form, this hypothesis says that the exchange rate willequal the ratio of the domestic price level to the foreign price level,or e= P/P f. (In its relative form, the hypothesis states that thedifference over time in inflation rates will be offset by changes inthe exchange rate over that period)] An approximation of relativepurchasing power parity is [e future–e today]= [(inflation rate at home)minus (inflation rate in the foreign country]).Quantity theory Theorizes that, in any country, the money supply is equal to the of money: demand for money, which is directly proportional to the value ofnominal gross domestic product. This is symbolized as M = kPY.Here, money’s only role is as a medium of exchange.Real exchange rate: A way of measuring the price of foreign goods, not just in currency-adjusted terms, but also in price-level-adjusted terms. The realexchange rate on a currency at any moment in time is calculated as:[(foreign cost of home currency) x (P/P f) x (100)]. If purchasingpower parity holds between the two countries, the real exchange ratewill be 100. When the real exchange rate is above 100, the homecurrency is overvalued and the foreign currency is undervalued;when the real exchange rate is less than 100, the home currency isundervalued and the foreign currency is overvalued.Speculative bubble: A self-confirming upward or downward movement in a price (here,the exchange rate) that is out of line with the changes in thefundamental factors that determine the price of that object.Warm-up QuestionsTrue or False? Explain.1. T / F An expectation that the yen will appreciate can cause the yen to appreciate.2. T / F An increase in the domestic interest rate will cause the home currency to depreciate.3. T / F International interest rate differentials drive exchange rates in the short run; internationalprice differentials drive exchange rates in the long run.4. T / F The purchasing power parity hypothesis is unlikely to be true for countries that do nottrade commodities internationally.5. T / F If the inflation rate in the United States is lower than the inflation rate in France, the eurowill depreciate relative to the dollar.Multiple Choice1. If there is a sudden five percent decrease in the domestic money supply, we should expectA. the domestic currency to appreciate by five percent in the long run.B. the domestic currency to appreciate by six percent in the short run.C. the foreign currency to depreciate as demand for foreign assets decreases.D. all of the above.2. Under the asset market approach, if both U.S. and British interest rates rise by three percentagepoints, we could expectA. the dollar to appreciate.B. the dollar to depreciate.C. the exchange rate between the dollar and the pound to remain unchanged.D. investors to move their funds to a third country.3. If a country’s nominal interest rate increases b y the same percentage that the inflation rate hasincreased,A. international investors will withdraw their funds from the country.B. international investors will pour more funds into the country.C. international investors will demand an increase in the real interest rate they are paid.D. none of the above.4. All other things being equal, if the British government increases the money supply by 5% whilethe British economy is experiencing 5% real growth, the exchange rate on the pound will beA. unaffected.B. higher.C. lower.D. a mystery.5. All other things being equal, which of the following would not cause the price of a foreigncurrency (e) to fall?A. A rise in the home country’s expected inflation rate.B. A rise in the foreign coun try’s expected inflation rate.C. A drop in the foreign country’s real income.D. A rise in the foreign country’s money supply.Problems1. What impact will each of the following events have on the current spot exchange rate betweenthe Saxon scudo (Ss) and the Leinster lira (Ll)? You should assume that each event was notpredicted in advance.a. Leinster residents expect the scudo to appreciate.b. Saxony’s new government was voted in on a ―Whip Inflation Now‖ platform.c. A change in saving behavior causes the real interest rate in Leinster to increase.d. The Minister of Trade announces that Saxony has incurred a much larger trade deficit thanhad been predicted.e. An earthquake flattens the major telephone factory in Leinster.f. The Minister of Finance in Leinster is charged with embezzling one billion lira from theTreasury.2. Consider the following information:▪Today’s spot exchange rate between the scudo and the lira is Ss 100/Ll.▪People believe that in the next 90 days the lira is going to appreciate to Ss 101/Ll.▪The 90-day interest rate in Saxony is 2 percent; the 90-day interest rate in Leinster is1.5 percent.a. Does uncovered interest parity hold?b. If it does not hold, at what current spot rate would it hold?3. A group of Saxon economics students is planning to spend a summer in Leinster when theygraduate from college in two years. Obviously, they are concerned about how much it will cost to vacation in Leinster. They know that, currently, the typical vacation basket of goods costs 12,000 scudos in Saxony; the same array of goods costs 120 lira in Leinster. The exchange rate now isSs 100/Ll. Suppose they have taken a course in international finance and know that the newlyelected Finance Minister of Leinster is going to decrease the lira supply by one-third in the next two weeks.a. What can the students expect the exchange rate on the lira to be when they graduate in twoyears?b. Will that exchange rate be the same one they can expect to see in the next few months?4. Suppose the Saxon monetary authorities are prone to flooding their country with new scudo,whereas Leinster’s government officials hate t o increase the supply of lira. In light of this, what would you expect to be the long-run trend in the exchange rate between the scudo and the lira?5. Calculate the real exchange rate on the British pound, assuming the following hypothetical data:e = $2/₤P UK = ₤150P US = $2006. Suppose the U.S. price level in 2008 is 120 (where the year 1998 = 100) and the price level inMexico is 180 (where the year 1998 = 100). The exchange rate in 1998 was 150 Mexican pesos per U.S. dollar. According to the purchasing power parity hypothesis, what would be theequilibrium exchange rate between the peso and the dollar in 2008?7. The ―Cambridge k‖ from the money demand formula is thought to depend on behavioralvariables that do not change much in the short run. Suppose that some sort of financialinnovation in the United States causes ―k‖ to decrease. (A good example might be theproliferation of credit cards.)a. What impact would this have on the demand for money in the U.S.?b. What impact would this have on the exchange rate between the dollar and the Mexican peso?Discussion Topics1. If the prices of goods and services are flexible even in the short run, will exchange rateovershooting occur?2. Try to match recent changes in the exchange rate of some currency to political events in thatcountry, such as elections or new criminal investigations; also compare changes in the exchange rate to economic ―news‖ about the country’s budget or trade balance.3. Discuss how a substantial movement away from free trade would nullify the purchasing powerparity hypothesis.4. If a country wants to peg its exchange rate, should it peg its nominal rate or its real rate?5. What would you expect to happen to the currency value of a country engaged in war? Relateyour answer to the observation that few countries maintain fixed exchange rates during periods of war.。
国际贸易双语教案问题答案Pugel_14_SG_AKEY (2)
CHAPTER 2 THE BASIC THEORY USING DEMAND AND SUPPLYObjectives of the ChapterChapter 2 sets up supply and demand for our basic trade model. It enables us to determine precisely the equilibrium relative price and equilibrium quantities traded, and the distribution of the gains from trade. Simply put, international trade occurs if Country A’s consumers find that they can purchase a good at a lower price in Country B than at home, or if Country J’s producers find that they can sell their goods at a higher price in Country K than at home. Abstracting from any barriers to trade, the international price of a good reaches equilibrium when aggregate world demand equals aggregate world supply, or when the quantity of imports demanded equals the quantity of exports supplied.Although both the importers of the good and the exporters of the good gain from the transaction (why else would they trade voluntarily?), it is not true that everyone gains or that all the winners enjoy equal gains from trade. Some groups will actually lose from the opening of trade: the consumers of the good in the export country (who now have to compete with the rest of the world’s buyers) and the domestic producers of the good in the import country (who now have to compete with the rest of the wo rld’s producers). On net, however, we can show that the losses that these groups experience will be smaller than the gains enjoyed by their counterparts: home producers of the exported good and home consumers of the imported good. The division of the gains from trade between buyers and sellers will depend largely on how far the international price is from the pre-trade (or “autarkic”) price of the good. The farther the trade price is from one’s own pre-trade price, the larger one’s share of the gains.After studying Chapter 2, you should understand:1. The basic theory of supply and demand and the concept of market equilibrium.2. The construction of the demand for imports curve and the supply of exports curve.3. The determination of the equilibrium world price with trade.4. The consumer surplus and producer surplus, and how they reflect the gains from trade.5. The “o ne-dollar, one-vote” concept.6. The relationship between price elasticities and gains from trade.Important ConceptsArbitrage:Buying something at a low price in one market and reselling it at a higher price in another market.Consumer surplus:The difference between what a person would be willing to pay and what she actually has to pay to buy a certain amount of a good. It is the area below thedemand curve and above the price level.Producer surplus:The difference between what a producer is paid for a certain amount of a good and the lowest price she requires in order to supply that amount. It is the areaabove the supply curve and below the price level.Warm-up QuestionsTrue or False? Explain.1. T / F When trade opens up, all consumers are made better off.2. T / F In the simple trade model, countries with identical pre-trade prices for a good have noincentive to trade in that good.3. T / F If one producer is made better off by trade, then all producers in the same country mustbe made better off by trade.4. T / F At the equilibrium trade price between two countries, the excess supply of the good inone country must equal the excess demand for the good in the other country.5. T / F There ain’t no such thing as a free lunch, but there is such a thing as free trade.Multiple Choice1. After trade has opened up, the gains that trade brings to consumers of the imported goods are, inabsolute value,A. larger than the losses to domestic producers of that good.B. smaller than the losses to domestic producers of that good.C. exactly equal to the losses to domestic producers of that good.D. immeasurable.2. Which of the following is not likely to promote free trade in lumber between countries?A. Pre-trade lumber prices that are equal across countries.B. Profit-seeking lumber arbitrageurs.C. Lumber supply differences between countries.D. Lumber demand differences between countries.3. Consumer surplus isA. what consumers must pay the government to produce goods.B. the quantity of goods consumers can get below the market price.C. the difference between the market price and the maximum price consumers would pay for agood.D. the revenues transferred from buyers to sellers.4. After trade, the distribution of income in a country changes asA. import-competing producers lose while producers of the exportable good gain.B. the nation as a whole gains while individuals lose.C. consumers lose while producers gain.D. income flows from consumers to producers.5.If export supply is less price elastic than import demand, then the A. importing country will not want to trade. B. exporting country will not want to trade.C. exporting country will receive the largest share of the gains from trade.D. importing country will receive the largest share of the gains from trade.Problems1. Consider the graphs of the domestic markets for bread in the hypothetical countries of Leinster and Saxony.Figure 2.1a. What is the pre-trade equilibrium price of bread in each country?b. Is there a reason for trade in bread between Leinster and Saxony?LeinsterSaxonyBread in millions of loavesBread in millions of loavesP r i c e o f b r e a d (t e l e p h o n e s p e r l o a f )c. Construct the appropriate import demand and ex port supply curves, assuming that “theworld” consists of only these two countries.d. What is the equilibrium trade price of bread in Leinster? In Saxony?e. On the domestic market graphs, show that, at the equilibrium trade price, the quantity ofbread imported from Saxony equals the quantity of bread imported into Leinster.f. On the domestic market graphs, indicate the changes in consumer and producer welfare thatresult from trade opening in each country.g. Which groups in the two countries will be happy with free trade in bread between thecountries? Which groups will wish free trade would be banned?h. On your “international” graph with the export and import curves, indicate the net gains fromtrade for each country.i. Which country gains the larger share from trade? Why? (Hint: Look at the elasticities of thetrade curves you derived.)j. Indicate the losses each country would incur if trade in bread were eliminated.2. Assume that, for some unknown reason, both the domestic supply of and the domestic demandfor bread in Leinster become very elastic, while the curves for Saxony are unchanged. Whatimpact would this have on the international price, the quantities traded, and the net gains fromtrade for Leinster and Saxony?3. Assume that American lumber companies make 52 billion board-feet of lumber each year, ofwhich 10 billion are exported and 42 billion are sold in the United States. The average price is 30 cents per board-foot. If lumber exports were banned by law, production (now for the domesticmarket only) would be 48 billion board-feet, and the price would drop to 25 cents per board-foot.How much producer surplus would U.S. lumber producers lose each year as a result of the export ban?4. Suppose that opening up trade would make our nation export beans and import jeans. Let’s saythat it raises the price of beans from 0.20 jeans/bushel to 0.25 jeans/bushel (so that jeans drop in price from 5 bushels of beans to 4 bushels per pair).a. What are the welfare effects of trade on bean consumers, bean producers, jeans consumers,and jeans producers?b. Describe how to measure the net national gain or loss (measured in units of real goods) fromthe opening of trade.Discussion Topics1. What ways of measuring welfare can you think of besides the “one-dollar, one-vote” metric?2. Is profiting from arbitrage in commodities a good or a bad thing for the arbitrageur? For theeconomy?3. What might motivate trade between two countries, other than price differentials?4. Using the ideas of consumer and producer surplus, try to formulate an argument for avoiding a(trade) war between two countries.。
国际贸易双语教案问题答案Pugel_14_SG_AKEY (11)
CHAPTER 11PUSHING EXPORTSObjectives of the ChapterIn contrast to limiting the number of imports into a country, governments may actively promote exports of goods from a country. While this sounds like a policy of encouraging free trade, in practice it is implemented to gain some “unfair”advantage over another exporting country or over the import-competing firms in a country.These policies have an interesting effect: unlike tariffs, an export subsidy tends to benefit other countries while causing a net loss for the exporter country offering the subsidy. The motivation, however, generally is neither goodwill toward one’s neighbor nor self-flagellation. Instead, export promotion is usually a strategy in which the exporter country takes short-run losses on selling cheap products abroad in the hopes that import-competing producers in the other countries, unable to survive in the race to the bottom, drop out of the market. At that point, the exporter country gains monopoly power and the profits that go with it. After studying Chapter 11 you should understand1. t he economic meaning of “dumping.”2. the difference between predatory dumping and persistent dumping.3. export subsidies and countervailing import duties.4. the welfare effects of subsidies and duties.5. the special status of agricultural goods in international trade.Important ConceptsAntidumping duty: Tariffs sanctioned under the International Anti-Dumping Code (signedby most members of the WTO) to counteract or prevent dumping.Some countries may levy antidumping duties not to counteract exportdumping but to further protect domestic import-competing producerswithout levying import tariffs.Countervailing import duties: Retaliatory duties against a foreign government that is subsidizingexports into your national market.Dumping: A form of international price discrimination in which an exporting firmeither sells at a lower price in a foreign market than it charges in othermarkets (usually its domestic market) or sells its exports at a price thatis below its costs or fair market value.Export subsidy: Government policy to encourage export of goods and discourage sale ofgoods on the domestic market through low-cost loans or tax relief forexporters, or government-financed international advertising or researchand development (R&D). The WTO prohibits most subsidies directlylinked to the volume of exports.Persistent dumping: Dumping that goes on indefinitely, as opposed to predatory dumping or“cyclical dumping,”which occurs only during periods of economicdownturn. It is used by firms that can price-discriminate betweenmarkets.Predatory dumping: Dumping that occurs when an exporting firm temporarily reduces theprice charged to some foreign buyers with the intent of eliminatingcompetitors and later raising its price after the competition is dead. Safeguard policy:Temporary protection against a sudden surge of imported goods. Strategic trade policy: A government campaign to develop export advantage in targetedsectors or to gain market share in global industries characterized byoligopolies.Warm-up QuestionsTrue or False? Explain.1. T / F An export subsidy is more common than an export duty.2. T / F Although it discourages most tariffs, the WTO allows an importing country to levyantidumping tariffs.3. T / F Strategic trade policy and predatory dumping are weapons of economic warfare.4. T / F Japan is the world’s leading steel exporter.5. T / F If a country levies a countervailing duty against a subsidized exporter, trade volumes andprices end up being about the same as those that would exist without the subsidy and duty.Multiple Choice1. Which of the following is a correct statement?A. Dumping is a money-losing venture for any firm. Therefore, it can only be a temporaryphenomenon.B. Firms engage in dumping for the sole purpose of driving competition out of the market in orderto later raise prices.C. Dumping is only possible when a firm can discriminate between markets. Otherwise, thedumpee can re-export the dumped goods at a profit.D. Dumping is always a profitable venture. Otherwise, no one would ever engage in dumping.2. In 1970, a major dumping case was brought against Sony of Japan. Sony was selling televisionsmade in Japan to U.S. consumers for $180 while charging Japanese consumers $333 for the same model. In response to the threat issued by the U.S. government, Sony shifted its supply for theU.S. market to a plant built in California, but did not change prices of televisions in either country.This case best describesA. protection by the U.S. government of Japanese producers and consumers.B. persistent dumping.C. predatory dumping.D. trade retaliation.3. If a foreign government is subsidizing exports into your national market, what should you do tomaximize the net welfare effect on your nation (assuming there is no monopsony power)?A. Enjoy the bargain prices for imports.B. Retaliate by imposing a countervailing duty to protect the domestic industry.C. Subsidize your own exports to foreign markets.D. Retaliate by imposing an import quota.4. For profitable persistent dumping to take place,A. demand elasticities in both markets must be the same.B. demand in both markets must be inelastic.C. demand in both markets must be elastic.D. demand in the foreign market must be more elastic than the demand in the home market.5. Agricultural price supportsA. may require a country to limit imports of agricultural products.B. may result in surplus domestic production being dumped on world markets.C. may turn an importer of agricultural products into an exporter of those products.D. all of the above.Problems1. Suppose that Leinster subsidizes exports of telephones to Saxony by paying exporters a “bounty”of one loaf of bread for each telephone exported. How would that affect the level of welfare inLeinster and in Saxony?2. Continuing with the export subsidy on Leinster’s telephones:a. Given that welfare in Saxony actually increases as a result of Leinster’s export subsidy fortelephones, why might the Saxon government retaliate against these inexpensive imports?b. Given that welfare in Leinster decreases as a result of its export subsidy, why would Leinsterimplement such a subsidy?c. If Saxony levies a countervailing duty on telephone imports of exactly one loaf of bread pertelephone, how will this affect Saxon, Leinsterian, and world welfare?3. Which of the following television-exporting countries is guilty of dumping in the Saudi Arabianmarket?4. Suppose Hibernia is a country with a single domestic producer of steel, Rigid Inc. Rigid Inc. cansell as much steel as it wishes at home, where demand is relatively inelastic, or to the rest of theworld (where there are many other steel suppliers). Show how such a situation may lead Rigid Inc.to dump its steel on the world market.5. On a brief break from school, you decide to go lie on some remote South American beach, whereyou run into the Trade Minister for Venezuela. Having exhausted the topics of beer and soccer,he asks you to outlin e for him the likely costs and benefits of eliminating the country’s $2 perpound export subsidy on coffee beans. He gives you some information by drawing Figures 11.5aand 11.5b in the sand at your feet. Using this information, dazzle him with your answer.Figure 11.5aFigure 11.5b6. As a result of massive street marches by Leinsterian bakers, the Prime Minister has decided toset a “fair” price for bread at 0.75 telephones/loaf.a. What will be the effect of this support price on bread production in Leinster and oninternational trade in bread?b. What will be the effect of this support price on welfare in Leinster?Discussion Topics1. Try to formulate arguments for export subsidies in terms of the national defense and the infantindustry models.2. What sectors (if any) do you think are likely to be the objects of strategic trade policy of the U.S.government in the future?。
国际贸易双语教案问题答案Pugel_14_SG_AKEY (14)
CHAPTER 14TRADE POLICIES FORDEVELOPING COUNTRIESObjectives of the ChapterChapter 14 examines the interactions between emerging economies and the rest of the world. It begins by offering perspectives on the link between growth and foreign trade, on the changing pattern of comparative advantage in the Third World, on the collective political voice gained by the developing countries after World War II, and on the movement toward market-oriented economies in the countries of the former Soviet Union. The “New International Economic Order” movement urged that incomes of developing countries be raised through cartels to restrict trade in primary products, schemes to stabilize primary product prices, and preferential tariff reductions to foster developing country exports of manufactured goods.Several alternatives to free trade have been proposed specifically for developing countries. New industries can be nurtured by restricting imports of manufactured goods. Price-raising cartels can be used to increase the prices of primary product exports. Finally, there are attempts to increase exports of manufactured goods to industrialized countries. Special obstacles are faced in the transition economies of Central and Eastern Europe. These countries are trying to move from isolation, central planning, and a goal of self-sufficiency to openness, capitalist markets, and a goal of increased national income.After studying Chapter 14 you should know how to1. contrast the growth rates for high-, middle-, and low-income countries.2. identify the forms taken by the increased political awareness and voice of developing countries inthe international arena.3. explain how declining prices for primary products can work against developing countries.4. explain the concept of import-substituting industrialization and how this strategy for developmenthas been implemented, and evaluate its performance relative to a strategy of promoting exports of manufactured goods.5. describe the challenges faced by transition economies moving from central planning to market-driven trade with the world economy.Important ConceptsCMEA:Council for Mutual Economic Assistance (1949-1991), an organizationof Soviet Bloc countries intended to promote and coordinatemultilateral trade within the centrally-planned economies of the bloc. Engel’s Law:Because the income elasticity of demand for food is less than one, asper capita incomes rise in the long run, demand will shift away fromfood and the relative price of food will fall.ISI:Import-substituting industrialization. A strategy for development thatcalls for governments of developing countries to identify largedomestic markets as indicated by substantial imports over the years toensure technologies of production can be mastered by localmanufacturers or supplied by foreign investors, or to use subsidies tomake it profitable for potential investors or state enterprises to set uphigh-cost local production facilities.NICs:Newly-industrializing countries. Most prominent of these are SouthKorea, Taiwan, Hong Kong, and Singapore (“the Four Tigers”), whoseper capita incomes rose to the level of the industrialized countries,thanks to high income growth rates through the late 1990s. “Newly-globalizing developing countries” are those that had closed economiesin 1980, but whose growth rates skyrocketed in the late 1990s as tradewas liberalized. This group includes China, Brazil, and India. OPEC: Organization of Petroleum Exporting Countries. Established in 1960,this cartel has a membership of 12 producers (from the Middle East,Africa, and South America) as of 2008. OPEC was successful inengineering enormous increases in the price of crude oil during1973-74 and 1979-80. Because of supply conditions, it is unlikely thatcartels in other primary products could ac hieve anything like OPEC’ssuccess.Transition economies: Countries of the former Soviet Union (FSU) and its satellites that aremoving from central planning to market orientation. Beginning in1989, these countries started to “liberalize” by moving toward market-determined prices, private ownership of resources and businesses, andopenness to international competition and trade. These countries maysuffer from a “transition recession” early in the liberalization period asold business practices and relationships are re-organized.Warm-up QuestionsTrue or False? Explain.1. T / F All OPEC countries are both wealthy and developed.2. T / F Developing countries all have the same problems and potentials.3. T / F Engel’s Law means trouble for food produc ers in a prospering world.4. T / F A cartel that is optimal for its members is also optimal for the world.5. T / F “Shock Therapy” appears to work better in transition economies than a “kinder andgentler” approach.Multiple Choice1. The optimal monopoly markup isA. higher with more elastic demand for cartel sales.B. higher with less elastic demand for cartel sales.C. lower with less elastic demand for cartel sales.D. higher with more elastic supply schedules.2. An international cartel that maximizes its profits is optimal forA. the member countries and the world.B. the member countries but not the world.C. the consuming countries of the world.D. no country at all.3. Which of the following is not a valid argument in favor of ISI?A. There can be large economic and social side benefits from industrialization.B. For a large country, replacing imports can bring better terms-of-trade effects.C. Replacing imports of manufacturers uses cheap, convenient market information.D. GDP per capita has grown faster in countries with ISI.4. Arguments in favor of having developing countries focus on exporting manufactured goodsincludeA. strong support in industrialized countries for free trade in manufactured goods.B. very low tariffs on manufactured textiles, apparel, and footwear in industrialized countries.C. political preference for VERs among importing countries.D. a downward trend in the prices of primary products.5. Which of the following causes a downward trend in the relative prices of primary products?A. Slow productivity growth in the primary sector.B. Development of synthetic substitutes for primary products.C. The nonrenewable nature of many primary products.D. A high income elasticity of demand for food.Problems1. You have been appointed as an advisor to the Saxon government, which is consideringimplementing measures to increase Saxon production of electronic equipment.a. What are arguments in favor of promoting such industrialization? Are there any argumentsagainst it?b. What methods would you suggest the Saxon government use to encourage suchindustrialization?2. Is our hypothetical country of Saxony doomed to poverty because of its reliance on foodproduction and export?3. Instead of focusing exclusively on exporting raw rubber, Malaysia is increasingly involved in theproduction and export of rubber-based goods such as surgical gloves. Discuss motives forchoosing this new strategy and policies for implementing it.4. Assume that you are the head of a diamond cartel called DeBooz. If the price elasticity ofdemand for exports of diamonds is –0.5, the diamond cartel’s sha re of world sales is 50 percent, and the elasticity of competing supply is 1.0, what is the optimal cartel markup rate for DeBooz?Discussion Topics1. If all countries desire to become industrialized, will no country produce primary goods?2. In a broad sense of the word, is “develop ed” always the same as “industrialized”? As“wealthy?”。
国际贸易双语教案问题答案
CHAPTER 7GROWTH AND TRADEObjectives of the ChapterIn this chapter, the Heckscher-Ohlin model of international trade is extended to include growth in the endowment of a country’s f actors of production and technological improvements. The impact of economic growth on international trade will depend on whether the growth is balanced in all goods or is biased toward one good, and on whether the country experiencing growth is large or small.An interesting result emerges from the interaction of growth and international trade: g rowth in one’s own country may not be an unmitigated blessing. First, as the Rybczynski theorem shows, growth in one sector can cause production in non-growing sectors to decline. Second, under certain conditions, export-biased growth may lead to an adverse terms of trade effect, and national well-being may actually decline. After reading Chapter 7 you should be able to1. show how trade patterns are influenced by the source of economic growth.2. show how economic growth can change the production patterns of a country.3. discuss how growth affects the terms of trade and the well-being of the country experiencing it.4. relate the rate of growth in a country to its openness to international trade.Important ConceptsDutch disease: A famous example of the phenomenon described by the Rybczynskitheorem. The term was used to describe a problem experienced bythe Netherlands, in which the discovery of new natural gas fieldswas thought to have led to a decline in the production ofmanufactured goods.Immiserizing growth: In a large trading country which is heavily dependent on trade,growth in the export sector may lead to a deterioration in its terms oftrade large enough to reduce the country’s welfare.Product cycle hypothesis: Predicts that as the technology of a product becomes morestandardized and static, production shifts from high-skilled laborcountries to countries abundant in low-cost, low-skilled labor. Rybczynski theorem: In a two-product world with constant prices, the growth of one factorof production results in a decrease in the output of the product thatdoes not use this factor intensively.Small/large country assumption: A small country has no impact on international commodity prices; alarge country can have an impact on international prices.Warm-up QuestionsTrue or False? Explain.1. T / F A country which is “large” may improve its terms of trade by investing in the growth ofthe import-competing sector rather than in the export sector.2. T / F Growth in a small country, by definition, will leave the terms of trade unchanged.3. T / F Adolescence is an example of “immiserizing growth.”4. T / F Growth in a country’s factors of production always makes the country more self-sufficient and less reliant on international trade.5. T / F A country that isolates itself from the rest of the world may doom its citizens to a lowerstandard of living.Multiple Choice1. “Rapid accumulation of new capital in a fast-growing trading country can make the countryimport more natural res ources.” This statement is implied by theA. Heckscher-Ohlin theorem.B. Stolper-Samuelson theorem.C. Rybczynski theorem.D. factor price equalization theorem.2. According to trade theory, if a nation has a comparative advantage in a capital-intensivelyproduced good, and the rate of growth of capital is greater than the rate of growth of other inputs(e.g., labor), the pattern of growth which results will beA. import-replacing.B. neutral as between capital-intensive and other products.C. export-expanding.D. none of the above.3. A necessary condition for immiserizing growth is that theA. c ountry’s growth is biased toward the export sector.B. f oreign demand for the country’s export is price elastic.C. c ountry’s consumption pref erences are heavily biased in favor of the export good.D. l evel of trade is not a significant part of the country’s economy.4. The Heckscher-Ohlin theory successfully explains theA. product-innovation process and the location of industries in countries other than the UnitedStates.B. rising importance of a country both exporting and importing the same product.C. rising trade between the United States and Canada because both are similar in factorendowments.D. trade patterns between industrialized countries and the developing countries, which differ infactor endowments.5.Which of the following is most likely to undergo a product cycle?A. Rice.B. Television sets.C. Crude oil.D. Minerals. Problems1.Back to our countries of Leinster and Saxony. PPCs for each of the countries are drawn on the following graph with the free trade price of 0.25 telephones/loaf indicated. (From this question forward, you should consider Leinster a “large country” and Saxony a “small country.”)Figure 7.1LeinsterT e l e p h o n e sSuppose that Saxony discovers a way of irrigating previously arid land.a. What would you expect to happen to the volume of trade between Leinster and Saxony?b. What would happen to the level of economic well-being in Saxony as a result of the growth itexperienced after the expansion of irrigation?Suppose, instead, that a plague wipes out 20 percent of Leinster’s labor force.c. What would you expect to happen to the volume of trade between Leinster and Saxony?d. What would happen to the level of economic well-being in Leinster after the populationdecline?2. Assume that Canada exports land-intensive wheat and imports cloth that uses unskilled laborintensively, even though Canada does make some cloth at home. If a major breakthrough inbiotechnology doubles Canada’s ability to grow wheat, and if the extra wheat supply lowers the world price of wheat (in yards of cloth per bushel of wheat),a. will this set of events make Canada better off or worse off as a nation?b. will this set of events make the rest of the world better off or worse off?c. will these events raise or lower the real wage rate of unskilled Canadian laborers?If, instead, the rest of the world’s labor supply doubles while i ts land supply remains the same,d. will this event and its effects make Canada better off or worse off as a nation?3. The trade minister for Saxony is a nationalist, a mercantilist, an isolationist, and nearly everyother kind of “ist” you can think of. She has sugge sted that Saxony close its doors to telephone imports from Leinster. Focusing on the role of technology in economic growth, try to talk her out of her anti-import stance.4. Suppose Kazakhstan is land- and unskilled-labor abundant and capital- and skilled-labor scarce.a. According to the Heckscher-Ohlin model, what type of goods will Kazakhstan export, andwhat type will it import?b. Suppose that Kazakhstan wants to achieve “import replacing” growth. What change in itsendowments would achieve this growth? If Kazakhstan were large, what would be the effecton its terms of trade?5. Some oil executives are urging Congress to open up the wildlife preserves in the Arctic region ofAlaska to oil exploration. If, indeed, huge new oil reserves are discovered there,a. what is likely to be the impact on American imports of oil?b. what is likely to be the impact on national welfare?c. could the United States ult imately suffer from “the Dutch disease?”d. in broad terms, what other costs might the country face?6. For decades the U.S. government has tried to boost the country’s savings rate. Since the U.S. isan exporter of capital-intensive goods, explain how increased saving may affect economicgrowth.Discussion Topics1. If growth can make a country worse off, why is it allowed to happen?2. Are the developed countries or the developing countries more prone to experiencingimmiserizing growth?3. What “new” goods in the U.S. do you foresee going through the product cycle in the near future?What countries do you think will ultimately end up producing these goods?。
国际贸易双语教程课后练习参考答案
Unit 1 A brief introduction to international tradeKeyI. Answer my questions1. International trade is business whose activities involve the crossing of national borders. It includes not only international trade and foreign manufacturing but also encompasses the growing services industry in areas such as transportation, tourism, banking, advertising, construction, retailing, wholesaling, and mass communications. It includes all business transactions that involve two or more countries. Such business relationship may be private or governmental.2. Sales expansion, resource acquisition and diversification of sales and supplies.3. To gain profit.4. To seej out foreign markets and procurement.5. There are four major forms which are the following:Merchandise exports and Imports, Service Exports and Imports, Investment and Multinational Enterprise.6. It is the account which is a summary statement of the flow of all international economic and financial transactions between one nation (eg.the United States ) and the rest of the world over some period of time, usually one year.7. Merchandise Exporting and Importing.8. Yes. There are great differences between them.1) direct investment takes place when control follows the investment. It usually means high commitment of capital, personnel, and technology abroad. It aims at gaining of foreign resources and foreign markets. Direct investment may often get higher foreign sales than exporting. And sometimes it involves two or more parties.2) While portfolio investments are not under control. And they are used primarily for financial purposes. Treasures of companies, for example, routinely more funds from one country to another to get a higher yield on short term investments.9. MNE is the abbreviation of the multinational enterprise. Its synonyms are NNC (the multinational corporation) and TNC (transnational corporation).10. Examples are travel, transport, fee, royalties, dividends and interest.11. The choice of forms is influenced by the objective being pursued and the environments in which the company must operate.12. It is limited by the number of people interested in a firm’s products and services and by customers’ capacity to make purchase.13. This is because at an early stage of international involvement these operations usually take the least commitment and least risk of a firm’s resources.14. Royalties means the payment for use of assets from abroad, such as for trademarks patens, copyrights, or other expertise under contract known as licencing agreements.Royalties are also paid franchising.15. It is a way of doing business in which one party (the franchiser) the use of a trademark that is an essential asset for the franchisers’ business.II Match each one on the left with its correct meaning on the right1. J2.A3.E4.B5.C6.D7.I8.G9.F 10.HIII Translate the following terms and phrases into Chinese1 购买力11经济复苏；恢复2潜在销售量12 经济衰退3加价，涨价13间接投资4国内市场14有形货物5制成品15有形进出口6边际利润16收入及支出；岁入及岁出7市场占有率17超额能力8贸易歧视18贸易中间人（商）；经纪人9时机选择19全部包建的工程承包方式10经销周期20许可证协定IV. Case Study.Batteries called “white elephant” exported from China were very popular in Southeast Asia, but in United States no one was interested in the goods. Why?[Answer]：Batteries called "white elephant" exported from China were very popular in Southeast Asia, because "white elephant" was a lucky thing in Southeast Asia, but no one was interested in it in the market of Europe and the United States. The boss of the company was very strange that the quality of the battery or the price of reasons, so he asked his staff to investigate. Finally he found that is the brand "white elephant" to be blame. The brand's name translated into English was "white elephant" which meant something were no use but cumbersome in Western countries. It was really a bad translation from culture information perspective. The meaning derived from a legend. According to the legend, there was a king who hated a minister, so he gave a white elephant to the minister for punishment. The minister has to take care of the white elephant, he couldn't give it to others or kill it because it's the king gave it to him. However, the appetite of the white elephant was so great, and the minister became poorer. So it showed people in western countries would not buy the battery for the consumers have no willing to buy something useless but cumbersome.V. Please try to find out some cases about cultural differences in doing international business.(Open)VI. Please determine whether the following statements are TRUE or FALES. Then put T for TRUE or F for FALES in the bracket at the end of each statement.1. ( T )2. ( F )3. ( F )4. ( T )5. ( F )6. ( T )7. ( T )8. ( F )VI. Translate the following into English1. Trade is often the ‘engine’ of growth. However oversimpl ified this metaphor may be, it does serve to underline the importance of foreign trade in the process of growth. A healthy expansion of exports may not always be sufficient condition for rapid and sustained growth, but a strong positive association between the two is clearly undeniable. Trade expansion contributes to economic growth in many ways. Among them are the benefits of specialization; the favorable effects of international competition on domestic economic efficiency; the increased capacity to pay for the imports required in development and more generally the stimulus to investment.2. International trade is the exchange of goods and services produced in one country for goods and services produced in another country. In addition to visible trade, which involves the import and export of goods and merchandise, there is also invisible trade, which involves the exchange of services between nations. Nations such as Greece and Norway have large maritime fleets and provide transportation service. This is a kind of invisible trade. Invisible trade can be as important to some nations as the export of raw materials or commodities is to others. In both cases, the nations earn the money to buy necessities.3. There exist different ways of conducting international business. Exclusive sale means the sellergives the overseas client the exclusive right of selling a particular product in a designated area within a specified period of time. In this kind of business transaction, the product is bought by the exclusive seller and therefore he should sell the product by himself, assuming sole responsibilities for his profit and loss. Exclusive sale is different from agency where only commission is involved. And difference exists between general contract and exclusive sales because the exclusive seller enjoys exclusive right in a particular area.4. There is no country in the world that can produce all the products it needs. Thus countries join in international division of labor for effective production and reproduction. Sometimes a country can buy goods and services from abroad on a barter basis. Barter means doing business by exchanging goods of one sort for goods of another sort without using money. Barter trade itself is not enough to meat a country’s import needs. But as a form of international trade, it is still attractive in developing countries where foreign exchange is in short supply and inflow of foreign funds is far from sufficient to meet their obligations in external trade.Unit 2 General Procedures of Export and Import TransactionI. Answer the following questions(Omited)II. Filling the blanks with the suitable words in the text:1.meeting/satisfying;2.agent, foreign/overseas;mission;4.own;5.setting;6.patent;7.profits;8.outlets; 9.joint, venture; 10.subsidiaryIII. J udge the following statement, mark True (T) or False(F)1F 2. T 3. F 4. F 5.F 6.F 7.T 8.F 9.F 10. TIV. Explain the meaning of the words or phrases below as requested1. Offer: An offer is a proposal made by sellers to buyers in order to enter into the contract.2. Withdrawal: It means an offer by the offerer has been withdrawn before it is reached to the offeree in order to prevent its entry into force.3. Enquiry: An enquiry is a request for business information, such as price lists, catalogue, samples, and details of the goods or trade terms. It can be made either by the importer or the exporter.4. Acceptance: Acceptance is a statement made by other conduct of the offerees indicating unconditional consent to an offer.5. Shipping agent: Shipping agent(船代）is a ship owner's representative whose job is to find the ships to carry.V. Compose a letter of enquiry with the following particulars:KeysMessrs. Arthur Grey & Son,19 Cheapside,London, E.C.2Dear Sirs,We have obtained your name and address from China Council for Promotion of International Trade and learned that you are one of the leading exporters of Ice Box in your district.We are now interested in 100 sets of the said article and should be pleased if you would let us know whether you can supply us with the quantity and quality we desire. Please quote us your best price on CIF Guangzhou basis. When offering, please state clearly terms of payment, time of delivery, packing conditions together with illustrated catalogue for our consideration.We are looking forward to your early reply.Yours faithfully,VI. Please make your offer according to the following particulars:KeyDear Sirs,Thank you for your letter of 5th May. We are glad to learn of the inquiries you have had from your customers for our raincoats. Our "D.D." range is particularly suitable for warm climates, and during the past years we have supplied this range to dealers in several tropical countries, from many of whom we have already had repeated orders. This range is popular not only because it is light in weight, but also because the material used has been specially treated to prevent excessive condensation on the inside surface.For the quantities you mention we are pleased to quote as follows:"D.D." Raincoats100 men's medium @ US$14.50 US$ 1,450100 men's small 14.0 1,400100 women's medium 13.2 1,320100 women's small 12.7 1,270US$ 5,440Payment: by irrevocable L/C at sightShipment: Shipment will be effected within three or four weeks after receiving the L/C.This offer is subject to our final confirmation. We feel you may be interested in our other products and enclose some pamphlets for your reference.We are awaiting your early orders.Yours sincerely, VII. Write a counter-offer according to the following particulars:Keys:Dear Sirs,We thank you for your quotation May 10 for 1,000 sets of Hair IceBox. We find your price as well as delivery date satisfactory, however, we would give our suggestions of an alternation of your payment terms.Our past purchase of other household electrical appliances from you has been paid as a rule by confirmed, irrevocable letter of credit at sight. On the basis, it has indeed cost us a great deal. From the moment to open credit till the time our buyers pay us, the tie-up of our funds lasts about four months. Under the present circumstances, this question is particular taxing owing to the tight money condition and unprecedentedly high bank interests.In view of our long business relations and our amicable cooperation prospects, we suggest that you accept either “cash against documents on arrival of goods” or “drawing on us at 60 day’s sight”.Your first priority to the consideration of the above request and an early favorable reply will be highly appreciated.Yours sincerely,VIII. Case Study[Answer]:A 公司与B公司的第一封信函可视为发盘，在该发盘中A公司对包装做出了要求。
国际贸易双语教案问题答案Pugel_14_SG_AKEY (5)
CHAPTER 5 WHO GAINS AND WHO LOSES FROM TRADE?Objectives of the ChapterIn this chapter, we see how trade patterns predicted by the Heckscher-Ohlin model may lead to changes in income distribution. International trade divides society into gainers from trade and losers from trade as a result of changes in relative commodity prices. The Stolper-Samuelson theorem explains that in the short run, factors employed to produce the rising-price good gain, while factors employed to produce the falling-price good lose. In the long run, when factors are mobile between industries, the factor used intensively in producing the rising-price good gains whether or not it is actually employed in that industry. Similarly, the factor used intensively in producing the falling-price good loses.The factor price equalization theorem uses both the Heckscher-Ohlin model and the Stolper-Samuelson theorem. It assumes that the more abundant factor works more in the export industry, while the scarcer factor is bound to work more in the import-competing industry; furthermore, it assumes that factors producing the rising-price good have rising incomes in the long run. As a result, scarce (expensive) labor in one country sees its wage fall, while abundant (cheap) labor in another country sees its wage rise. Consequently, wages in the two countries converge.After studying Chapter 5 you should know1. how income distribution relates to international trade through the Stolper-Samuelson theorem.2. the assumptions and conclusions of the factor-price equalization theorem.3. the Leontief Paradox and other empirical evidence on Heckscher-Ohlin.Important ConceptsFactor price equalization theorem: Under certain assumptions, free trade will equalize not onlycommodity prices between countries but also factor prices, so thatall laborers will earn the same real wage rate and all units of landwill earn the same real rental return in both countries, regardlessof the factor supplies or the demand patterns in the two countries. Factor specialization:The degree of concentration of a factor in the production of acommodity or group of commodities.Neutral factor: A factor that accounts for the same share of the value of output inall commodity lines.Magnification effect:The principle that a factor’s price c hanges by a greater percentagethan the change in the commodity price that caused it.Stolper-Samuelson theorem: Under certain assumptions, a change in product pricesunambiguously raises the return to the factor used intensively inthe rising-price industry and lowers the return to the factor usedintensively in the falling-price industry, regardless of which goodsthe owners of the factors prefer to consume.Warm-up QuestionsTrue or False? Explain.1. T / F The Leontief Paradox may be resolved by using more disaggregated definitions offactors of production.2. T / F The Stolper-Samuelson theorem says that trade will cause the owners of the abundantfactor to receive lower real incomes, while the owners of the scarce factor receive higherreal incomes.3. T / F Nobel prizes are not given to dead economists.4. T / F Factor prices will not be equalized by trade if technologies are not the same in allcountries.5. T / F Unskilled workers in the United States should be more opposed to free trade than skilledworkers in the United States.Multiple Choice1. Studies of U.S. trade and its effects on employment of U.S. labor show that, on average,A. trade has no effect on total employment.B. replacing imports (e.g., through protection from foreign competition) saves (or creates) morejobs than an equivalent expansion of exports.C. expanding exports creates more jobs than an equivalent amount of import substitution.D. foreign competition has clearly raised the unemployment rate.2. After trade opens up, in the short run,A. all groups tied to the declining sectors lose.B. only factors used more intensively in the declining sectors lose.C. only factors used less intensively in the declining sectors lose.D. only the most abundant factor in the country loses.3. Mexico is an unskilled-labor abundant country, while the United States is a skilled-laborabundant country. With the opening of trade, you would expect that, in the long run, wages forunskilled workersA. decline in both countries.B. decline in the United States and rise in Mexico.C. rise in the United States and decline in Mexico.D. rise in both countries.4. Which of the following statements is false?A. Consumption patterns do not matter for welfare gains or losses of neutral factors.B. Consumption patterns do affect the size of the gains or losses to all factors.C. Consumption patterns do not affect the direction of gains or losses for the most specializedfactors.D. Consumption patterns do not matter for the welfare gains or losses of a nation as a whole.5. Factor price equalization will not hold ifA. factors are immobile between sectors of the economy.B. factors have different productivities in different countries.C. countries put up barriers to free trade.D. all of the above.Problems1. Recall our hypothetical trade model: Leinster is a labor-abundant country and Saxony is aland-abundant country; telephones are labor-intensive goods and bread is a land-intensive good.Assume that free trade prevails between the two countries.a. What happens to wages earned by workers in Leinster in the short run? In the long run?b. What happens to wages earned by workers in Saxony in the short run? In the long run?c. According to the factor-price equalization theorem, will labor wages in Leinster equal landrents in Leinster, or will Leinster wages equal Saxony wages?2. Given the implications of trade models for factor prices, how would you explain an observationthat, in 2006, the hourly compensation for manufacturing workers in Canada was $25.74 while in Portugal it was only $7.65?3. Consider an economy producing capital-intensive computers and land-intensive wheat. Labor isemployed to produce both goods. If free trade raises the price of computers relative to wheat,who would gain and who would lose under each of the following scenarios?a. Factors are perfectly immobile between the two sectors.b. Factors are perfectly mobile between the two sectors.4. You are given the following cost data for France, where they have nothing but capital and laborand make nothing but bread and wine.a. Is bread-making more capital-intensive than wine-making or vice versa? Explain.b. Suppose trade opens and the price of wine rises while the price of bread falls. If capital andlabor were completely immobile between bread-making and wine-making, who in Francewould gain from the shift in prices? Who would lose? (Consider the four groups of breadcapitalists, bread laborers, wine capitalists, and wine laborers.)c. Which group of consumers will rejoice with the winemakers in the situation presented inQuestion 4b? Which group of consumers will commiserate with the breadmakers?5. Suppose that a new isolationist government in Leinster decides to shut off the country’s importsof land-intensive bread, preferring to produce food rather than making labor-intensive telephones for export. After trade is shut off, bread becomes 14 percent more expensive relative totelephones (i.e., telephones become 14 percent cheaper relative to bread).a. Over the long run, how much, and in what direction, will isolation change Leinsterianlaborers’ real wage incomes?b. Over the long run, how much, and in what direction, will isolation change Leinsterianlandlords’ real rental income?Discussion Topics1. What do you think would happen to factor prices internationally if an energy crisis tripled thecost of shipping goods around the globe?2. Policymakers today are concerned about retraining unemployed workers. Try to make a case forsuch programs as a means of increasing public support for free trade.。
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CHAPTER 9NONTARIFF BARRIERS TO IMPORTSObjectives of the ChapterThis chapter notes the numerous other ways to restrict foreign trade without using a tariff. Nontariff barriers (NTBs) have gained importance since World War II as a result of continuous multilateral negotiations to cut tariffs. Many of these barriers reduce imports to a fixed amount by either setting an import quota or coercing the exporting country to limit its exported quantity. Other barriers restrict the quantity of imports through discrimination by quality or content.Import tariffs, import quotas, and voluntary export restraints (VERs) all have the same effects on the home country’s producers and consumers:the producers win and the consumers lose. The major difference in economic impact comes in who receives the profits from higher-priced imports. In the case of a tariff, the government collects the revenue in the form of the import tax. In the case of a quota, the government may auction rights to import the limited quota amount (in which case the quota looks just like a tariff), or the government may use some alternative form of license distribution such as favoritism (in which case the cronies who receive the licenses get the windfall). With a VER, the windfall goes to the agents in the exporting country who get the privilege of selling expensive imports to the country. After studying Chapter 9 you should know1. the rationale behind imposing nontariff trade barriers.2. the import quota and reasons for using it.3. how a tariff and a quota can be equivalent.4. the ways to allocate import licenses.5. the comparisons between import quotas and VERs.6. other costs that arise from erecting import barriers, such as foreign retaliation.Important ConceptsDomestic content requirements: Directs that a product made or assembled in a country must have acertain amount of “domestic value,” in the form of local factors ofproduction that are used in (or locally made components that are partof) the finished product.Fixed favoritism: A way of allocating import licenses in which the government simplyassigns fixed shares to firms, often based on the shares of importsthe firms had before the quota was imposed.Import license: A legal right to import goods subject to quotas or other nontariffbarriers. Import licenses can be allocated by governments usingcompetitive auction, fixed favoritism, or resource-using applicationprocedures.Import quota: A limit on total quantity of imports allowed into a country each year.Import quotas are the most common nontariff trade barrier.MFN: Most favored nation status. An agreement between two nations tolevy tariffs on each other at rates as low as those levied on any othercountry. If one of these nations reduces tariffs on a third country, allof that nation’s MFN partne rs must also receive that lower tariff rate. Section 301: Part of the U.S. Trade Act of 1974. It gives the President power toimpose import barriers against goods from a country using “unfairtrade practices” to limit imports from the U.S. and other countr ies. VERs: Voluntary export restraints. Nontariff barriers to trade that areequivalent to quotas. Exporting countries are coerced by theimporting country into allocating a limited quota of exports. VERsare not legislated and can be imposed with or without formalinternational negotiations. International trade in textiles and clothingis subject to numerous VERs.Warm-up QuestionsTrue or False? Explain.1. T / F Quotas give government officials greater administrative flexibility than tariffs do.2. T / F As long as quota licenses are auctioned, the welfare effects of a quota are equivalent tothe welfare effects of a tariff.3. T / F If a government has a small tax base, it might prefer tariffs to quotas.4. T / F A VER is worse than a quota for the country that imposes it.5. T / F There is very little that is voluntary about a Voluntary Export Restraint.Multiple Choice1. Which of the following is most correct?A. Import quotas usually create monopoly rents.B. A quota system is more efficient than a tariff system.C. An import quota is more suitable for emergency application by government officials than acomparable tariff.D. Under competitive conditions, an import quota allows import-competing producers to reapmore profits than a tariff.2. Quotas are often preferred to tariffs becauseA. quotas are a richer source of government revenues.B. tariff changes are strictly controlled by international trade agreements.C. quotas do not hinder competition in the domestic market.D. quotas create a less fertile environment for corrupt government officials.3. Under a VER regime, the tariff equivalent revenue accrues to theA. importing-country government.B. importing-country consumers.C. exporting country.D. import-competing industries.4. A domestic monopolist facing import competitionA. prefers a tariff to its equivalent quota.B. prefers a quota to its equivalent tariff.C. is indifferent between a tariff and an equivalent quota.D. loves free trade.5. Which is the most efficient method of allocating import licenses?A. Competitive auctions.B. Fixed favoritism toward domestic importers.C. Resource-using application procedures.D. Fixed favoritism toward foreign exporters.Problems1. Leinster bakers have petitioned their government officials for protection against competitionfrom imported Saxon bread. You have been hired by the government to discuss the optionsavailable. The Minister of Trade wants to know about the ease of implementation and the welfare effects of the following:a. An import quota of 40 million loaves.b. A VER of 40 million loaves.2.In response to information received from a “mole” (spy) in Leinster’s Ministry of Trade, the Prime Minister of Saxony wants a retaliatory reduction in imports of telephones. He is especially interested in tariffs and quotas. Keep in mind that Saxony is a “small country” in the following: a. Illustrate how a tariff and a quota can have equivalent effects on the price and quantity ofimported telephones.b. Describe two different ways that the quota licenses can be allocated, and explain who wouldget the quota rents in each case.3.The Bureau of National Statistics in Leinster has calculated that Gross Domestic Product is, in real terms, 200 million telephones. (We don’t yet have a currency, so all values must bemeasured in units of goods.) Using your answers from Problem 1 in Chapter 8, calculate a Harry G. Johnson figure for the cost to Leinster of protecting its domestic bread market.4. The diagram below depicts an import quota of 100,000 cameras imposed by a small country. The quota raises the domestic price from the free trade level of $100 to a level of $150.Figure 9.4(thousands)P r i c e (d o l l a r s p e r c a m e r a )Using the information in this diagram, quantify the following:a. The revenue gained by the government by auctioning import licenses at $50 per camera.b. The value of the increase in producer surplus associated with the imposition of the quota.c. The value of the decrease in consumer surplus associated with the imposition of the quota.d. The net effect of the quota on the country’s welfare.5. You are given the following data comparing the effects of free trade, a U.S. import quota, and aVoluntary Export Restraint on the American market for compact discs (CDs):a. Quantify the welfare gains for the United States from the import quota and from the VER,both relative to free trade. Which of the two import-reducing policies is better for the UnitedStates?b. Quantify the welfare gains for countries that export CDs to the United States resulting fromthe import quota and the VER, both relative to free trade. Which of the two trade-reducingpolicies is better for those exporting countries?Discussion Topics1. Do you think replacing all import quotas with Voluntary Export Restraints would improve orworsen relations between the United States and other countries?2. Some people think that the United States’ “free trade” stance is hypocritical. Do you agree withthem?。