Why does a country's increased specialization due to trade raise issues of fairness?
What will be an ideal response?
Comparative advantage based trade causes a nation to shift its production mix in order to produce relatively more of the export good. As discussed in previous chapters, this raise the return to the factor of production that is used intensively and lowers the return to the other factor(s). This in turn increases national income but also redistributes it. This means that there are both winners and losers, and thus there are issues as to fairness.
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The deadweight loss of a tariff
A) is a social loss because it promotes inefficient use of national resources. B) is a social loss because it reduces the revenue of the government. C) is not a social loss because it merely redistributes revenue from one sector to another. D) is not a social loss because it is paid for by rich corporations. E) is not a social loss because it aids domestic consumers.
In a graph of the production possibilities curve, the two axes of the graph indicate the:
A. Prices of the two products that a nation can produce B. Maximum quantities of the two resources that a nation possesses C. Price of the products on the vertical axis, and quantities on the horizontal D. Quantities of the two products that a nation can produce
If an increase in one variable causes a decrease in another variable, this is
A. a negative relationship. B. an independent relationship. C. a dependent relationship. D. a direct relationship.
The price system features
A. exchanges made in currency only. B. an exchange in which consumer is made better off and the producer is made worse off. C. exchanges made only on a barter basis. D. voluntary exchange that makes both the consumer and producer better off.