Review Question Index Last revision: 08/24/2006 08:56 AM

Review Questions for Chapter 22 of Parkin's Microeconomics

1. What are the main exports and imports of the United States?
2. With which countries does the United States do most of its international trade?
3. What is comparative advantage?
4 Why does comparative advantage lead to gains from international trade?
5. Explain what the gains from trade are.
6. Explain why international trade brings gains to all countries.
7. Explain why all countries have a comparative advantage in something.
8. Explain why, when a country begins to trade, the price received for the good exported rises and the price paid for the good imported falls.
9. Explain why we import and export such large quantities of certain similar goods-such as cars.
10. What are the main ways in which we restrict international trade?
11. What are the GATT and the WTO? When was each established and what is its role?
12. What is NAFTA? When did it begin, and what have its effects to date been?
13. What are the effects of a tariff?
14. What are the effects of a quota?
15. What are the effects of a voluntary export restraint?
16. What is an infant industry? Explain why some people argue that an infant industry needs protection from international competition and also explain the main flaws in the argument.
17. What is dumping? Explain why dumping occurs.
18. Describe the main trends in tariffs.
19. What are the main arguments for trade restrictions? Explain the flaw in each argument.
20. Why do countries restrict international trade?
21. What is a voluntary export restraint and who gains from it?
22. Explain the effect of trade with low-wage countries on jobs in the United States.

Suggested answers (I recommend that you write down your own answer before looking at these.)