econmic assignment5

This assignment is worth 50 points.

Bold your answers, or use a color to make them stand out from the questions.

1. ( 5 points) What is the difference between absolute advantage and comparative advantage?

2. ( 5 points) If you were the economic advisor to a poor underdeveloped country, with limited natural resources, and a growing population, what sort of international trade policy would you promote, i.e., would you promote open international trade, or restricted international trade, and why?

3. a. (3 points) Who benefits when international trade is permitted and imports flow into the country?

b. (3 points) If exports increase, who benefits?

4. a. (3 points) How does a tariff affect the quantity of imports?

b. (3 points) Who benefits, when a tariff is imposed on a good or service?

5. ( 5 points) Make an argument for imposing a tariff, or quota on a good.

6.

Referring to the graph above:

a. (5points) Was the local price for the good above or below the world market price before international trade was permitted?

b. (5 points) When domestic markets opened to international trade, what happened to domestic production?

c. (5points) What happened to local production after the tariff was imposed?

7. ( 5 points) Make an argument for not imposing a tariff or quota.

8. ( 3 points) What is the General Agreement on Tariffs and Trade (GATT)?