10 International Trade Policy

• It is legalized robbery to collect more taxes than is necessary.

• The burden of taxation should be shown to consumers and producers.

• Politicians have turned to economists to figure out what taxes will bring the least amount of squawk.
• In this chapter, we apply the models to taxation.
• When combined with the concept of elasticity, supply and demand become powerful tools.
• The burden of taxation and government intervention into markets will be looked at.

• The effects of taxation and government intervention can be seen by looking at how economists measure the benefits of the market to consumers and producers.
• Each curve tells us how much individu as are willing to pay or accept for a good.
• 2 units for $2 is what the supplier is willing to sell.

• The gray shaded region shows the loss of total surplus when the price is $1 higher than the equilibrium price.

• If the consumer pays less than what he's willing to pay, he ends up with a net gain--the value of the good to him minus the price he actually paid for the good.
• The net gain for the consumer is the distance between the demand curve and the price.
• The area under the curve is represented by the price that an individual pays.
• The consumer surplus is represented by the blue area.

• If a producer gets more than the price she would be willing to sell the good for, she also gets a net benefit.
• Above the supply curve, it is represented by the price the producer receives.
• The brown area is represented by the producer surplus.

• Market equilibrium makes the combination of consumer and producer surpluses large.
• For some reason, the equilibrium price is $6.
• Consumers will only demand 4 units of the good, and some suppliers can't sell all of the goods they want.
• The gray triangle is a representation of lost consumer and producer surplus.

• By allowing disequilibrium to equilibrium, what happens to the combination of producer trade, markets maximize the combination of consumer and producer surplus.

• The amount of surplus can be determined by calculating the area of the relevant triangle or rectangle.

• The consumer and producer surplus concepts don't take income distributed between them into account.

• Peo economists get around part of the problem by assuming that people have the same tastes with little income.
• If Mr. Rich likes gold and Mr. Poor dislikes bread, you can assume that Mr. Rich likes gold and Mr. Poor dislikes bread.
• This separates the issue of equity from the issue of not having enough money to buy bread.
• The toilets, not bread, will generate the most consumer conditions.
• They know that it is surplus in the real world.

"Hey, you need to give ferently, our measure of consumer surplus would change if income were distributed dif go up to Bil Gates and tel him."

• He might say $10 billion to some poor people, but let's consider an extreme example to show the problems choose to do it on their own.

• For this reason economists are careful to apply the pro Jim and two goods.
• Jules and Jim only like oranges and apples.
• Only apples will provide a consumer surplus if Jim has all the conditions.

• Economist oranges will provide a consumer surplus.
• When two individuals have different tastes, the way in reality, more genes may disagree on what are "reasonable" approximations of ally.
• Economic policy is an art, not a science.

• The lost surplus from a price above equilibrium price is 1.
• The area of lost surplus is 1/2 x 2 x 1 and the height of the triangle is 5.
• The area of the rect angle created by the origin and output is used to calculate the amount of surplus transferred from consumer to producer.

• To fix the ideas of consumer and producer surplus in your mind, consider a couple of real-world examples.
• Think about the water you drink.

• It has a low price because water is readily available.
• Since you would die from thirst if you didn't have water, you are getting an enormous amount of con sumer surplus from that water.
• A ballet dancer who loves the ballet so much he'd dance for free.
• He found that people were willing to pay to see him and that he could make $4,000 a performance.
• He is getting a surplus.

• Let's take 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 888-353-1299 You already know that taxes on suppliers change the supply curve.
• In most cases, equilibrium price increases and equi librium quantity decreases.

• The price paid to suppliers is lowered by the amount of the tax.
• The equilibrium quantity demanded falls because the price demanders pay for the tax rises.
• Taxes reduce or limit trade.
• The basic framework for understanding the burden of taxation is provided in Figure 7-2.

• The consumer and producer surplus is not gained by the government.
• The quantity sold declines with the tax.
• Consumers and producers who no longer buy or sell goods because of the tax are represented by the loss of welfare.

• There are other ways in which the deadweight loss from taxes shows up.
• Paris had a property tax that increased with the number of floors a building had.
• A three-story building was taxed more than a two-story building.
• People will build in a way to minimize what is counted as floors.
• The Mansard roof hides the top floor so that it looks like an attic.
• The roofs can be found in Paris.

• Distributional issues must be considered when government is considering what goods should be taxed.
• If the goal is to fund a program that doesn't determine what goods are to be taxed.
• The government should tax a good whose supply is more inelastic if the consumer and producer surplus is less than expected.
• The table demand is elastic.
• If the goal is to change behavior, review the conclusions that taxes will be most effective if demand and supply are elastic.

• The effect was not perfect.

• Danes repealed the tax on demand inelastic and consumers.
• A number of cities in the United States and Mexico have instituted a tax on sweetened drinks.
• The elasticity of demand is what determines the effectiveness of a tax.

• They wouldn't build without the tax.

• There are other costs of taxation.
• Resources must be devoted to government cost of revenue paid, lost surplus, and to administer the tax code by individuals to comply with it.

• Firms hire accountants and lawyers to take advantage of tax-code allowances.
• 5 percent or more of the total tax revenue paid to government is adminis tration costs.
• Like the tax itself, these costs increase the price at which producers are willing to sell their goods, reducing quantity sold and increasing welfare loss.

• Everyone wants to pass on taxes.
• The style of Paris roofs is one of the many things that make Paris distinct.
• The analysis is complicated by including aesthetic elements.

• The architectural view that form follows function is the basis of economic reasoning.

• The supply/demand framework gives an answer to the question.

• The excise taxes introduced in Chapter 5 are an example of who bears the burden of a tax.
• The excise tax can be paid by the consumer or the seller.
• The supplier paid the tax.

• This case shows where the supplier pays the tax.
• It reduces quantity supplied from 600 to 510.
• Suppliers can shift $5,000 of the total $10,000 per-unit tax onto consumers, leaving the suppliers with the remaining $5,000.

• This time, we consider the case in which the consumer pays the tax.

• The demand curve is not affected by the supply curve because the tax is paid by the consumer.
• The results of the tax are the same.
• The percentage of tax paid by the supplier and the consumer is not dependent on who pays the tax.
• The person with the least ability to change their behavior in response to the tax is not the one who bears the burden of the tax.

• The burden of a tax is determined by the elasticity of supply and demand.
• The blue shaded area shows the burden on the consumer, while the brown shaded area shows the burden on the supplier.

• The tax burden of suppliers and demanders can be stated without additional calculations if we know elasticities at the market equilibrium.
• The tax burden would be shared equally if the elasticities of supply and demand were calculated.
• 90 fewer boats were purchased by consumers after suppliers sold them.
• The tax burden would be divided equally if the elasticity of both supply and demand were the same.

• One will pay if they demand the tax.

• Less of the tax would be passed along to buyers if supply were more inelastic.

• The relative tax burdens were highly inelastic.
• The price would have gone up to $68,000.
• The supplier would have paid less tax than the consumer, and the consumer would have paid more tax than the supplier.
• There is a general rule about tax burdens and elasticities.

• If demand is more inelastic than supply, consumers will pay a higher percentage of the tax; if supply is more inelastic than demand, suppliers will pay a higher share.

• The price elasticity of supply is 4 and the price elasticity of demand is 1.
• The supplier will pay 20% of the tax and the consumer will pay 20%.

• The rule about the elasticities and the tax burden can lead to a sequence of taxation.
• The U.S. luxury tax on boats was a way to tax the wealthy.
• The wealthy found replacements for American-made boats; their demand was relatively elastic.
• They bought other luxury items or 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 800-381-0266 U.S. boat manufacturers couldn't easily make other products.
• Their ply was inelastic.
• There will be slight variations in the measured elasticities when they try to pass on the cost increase to consumers.

• The government cut the corporate income tax sense to lower corporate rates to some degree, as long as from 35 percent to 20 percent, and the restructuring limited companies' ability to avoid debate about who would actually benefit from the tax cut.

• The corporate tax cut did that.

• The effects of taxes are determined by the details.

• Employees, economists, and limits to those insights were not agreed upon by economists.
• Economists' shareholders would benefit from the tax because corporations don't pay tax.
• This was different by industry.
• In the opening of the chapter, I stated that taxes are hot consumers would get little of the tax cut because their potatoes were passed off to someone else as quickly as possible.
• The shareholders would ble.
• For the corporate income tax, this means that the tax get a significant portion, although in a number of indus will be paid by some combination of shareholders, em tries workers would benefit as wel, in part because the ployees, and consumers, with the burden paid by each

• One can't analyze paid tax, but whether the tax was paid at all.
• Corporations can avoid income taxes by moving to another country or structuring their business so that the impact of the tax cut is not felt in the economy.
• Other countries had to be taken into account at the time of the tax reform.
• Everyone would avoid the U.S. corporate tax benefit if the corporate tax rates were lowered.
• The gains relative to another are a bit pletely.
• In an economy that is growing, economists felt that it was less important.

• Most of the burden of the tax was on them because they had to lower their price almost as much as the tax.
• The luxury tax on boats was repealed three years after it was instituted.

• The person who bears the burden can be different from the person who pays, because the allocation of tax burden by relative elasticity means that it doesn't matter who actually pays the tax.
• If the tax of $10,000 had been paid by the consumer, your answer would have been different.
• The demand curve is affected by the amount of tax paid.
• Physically paying the tax is what you can see.

• After adjusting for supply and demand price changes, the percentage of tax paid by the supplier and consumer is independent of who actually pays the tax.

• Let's look at two policy questions in relation to what we know about tax incidence.

• 36 percent of federal government revenue is accounted for by the Social Security tax.

• Half of Social Security taxes are placed on the employee and the other half on the employer.
• The law places the tax on both, but it doesn't mean that the burden of the tax is shared between employees and employers.
• Labor supply is less elastic than labor demand.
• The Social Security tax burden is mostly on the employees, even though they only see their portion of the tax on their pay stub.

• Let's say that you are advising a person running for Congress who has come up with the idea to place the entire tax on the employer and eliminate the tax on the employee.
• It will have no effect according to our tax incidence analysis.
• Employers will have to pay more in wages to compensate for the tax.
• This example shows that the assessment of the tax can be different for different people.
• The burden will be paid by those with the most inelastic supply who are less able to pay the tax by substitution.

• It won't make a difference who pays the tax, but it may be a popular proposal because people look at statutory assessment.
• Workers will no longer see a Social Security tax on their pay stub if the candidate is elected.
• Politics doesn't often focus on surface appearance; economics tries to get under the surface, and always what makes sense economically.

• Sales taxes paid by retailers on the basis of their sales revenue is the second policy question.
• Consumers don't have the ability to change their buying habits because sales taxes are broadly defined.
• Consumers bear the greater burden of the tax when demand is inelastic.
• Most stores add the tax onto the bill after the initial sale is calculated to make you aware of the tax.
• It doesn't matter if the tax is assessed on the store or on you, it matters a lot.

• Let's first consider the two types of price controls mentioned in Chapter 5: price ceilings and price floors.

• It is an implicit tax on producers and consumers when both supply and demand areelastic.

• Taxes and price floors create deadweight loss.

• A price ceiling is similar to a tax on producers and a subsidy to consumers.

• Because of the price ceiling, it's not possible.

• That isn't a coin cidence.
• It's like the government puts a tax on suppliers and gives tax revenue to consumers when they sell the good.

• The price floors have the opposite effect on the distribution of consumer and producer surplus.
• Transfer consumer surplus to producers.

• Taxes do not cause shortages.
• As long as people pay taxes, they can choose how much they want to supply and consume.
• Taxes create a wedge between the price the consumers pay and the price the suppliers receive.

• The price consumers pay is the same as the price the suppli ers receive if the price ceiling is below equilibrium price.
• It is necessary to find a method of rationing that limits the demand or increases the supply in the case of price ceilings and price floors.

• We assumed that suppliers could choose how much or how little they wanted to supply.
• Black markets are where individuals buy or sell illegally.
• The government placed price controls on most consumer goods.
• The result was empty store shelves and shortages of all types.

• If consumers have the political power, there will be strong pressures to create price ceilings.
• If the suppliers have political power, there will be strong pressures to create price floors.

• People spend time and resources trying to transfer surplus from one group of people to another.
• Lobbying for Rent can help figure out ways to kidnap executives in developing and tran sitional economies.

• The possibility of kidnapping causes executives to hire bodyguards, which in turn causes kidnappers to think of ingenious ways to kidnap.
• enormous amounts of resources are spent on activities that benefit no one when one group tries to extract surplus from another group.

• Lobbying government has the same reasoning.
• Lobbying government to increase their own surplus is an incentive for individuals to spend resources.
• Others have an incentive to spend money.

• Rent seeking through government is significant, and that much of the transfer of surplus that occurs through government intervention creates an enormous waste of resources.
• They argue that the taxes and benefits of government programs do not help society much, but they cost resources.
• The economists say that the majority of the government's redistribution is from one group of the middle class to another.

• The incentives that consumers and producers have to lobby government to intervene in the market are what we need to understand the rent-seeking process a bit better.
• We will begin with suppliers.
• Political pressures to limit supply can be found in agricultural markets.

• All the goods are supplied at the ceiling price.
• An example is the military draft.

• W forces are paid according to the government's choice.

• The graph shows the effects of a draft.

• The quantity of soldiers demanded exceeds the quantity supplied.

• It would take an increase in the implicit tax to bring about equilibrium.
• The draft imposes an implicit tax on draftees that depends on the elasticity of supply and demand.
• If both don't show up on the books.

• If both are elastic, the pay will be given to those who consume defense, but only slightly.

• The draft suspect transfer from suppliers to consumers of national supply and demand is inelastic, in which case the defense.
• The shaded triangle to the right of the market equilibrium would cost a lot more than the welfare loss triangle.
• It requires large increases in taxes.
• They argue that draft is cheaper and requires less taxes than a represents the opportunities suppliers lose.

• The minimum reasoning is shown in the welfare loss triangle.
• It's true that with a draft the government loses money.
• The analysis assumes that the people drafted will be the ones who raised the wage to a market-clearing wage.
• The cost of being drafted is the lowest.
• It's not costless because the draft places a case.
• Individuals are selected by paying a lower-than draft.
• Individuals drafted are taxed by the Presley.

How much larger was Elvis when he was drafted?

• They would be better off if there was an increase induce more.

• As productivity increases, they do increase the quantity sold, but they also result in lower prices.

• They get less for each unit they sell if you demand Q0 Q1 Quantity more.
• The demand for agricultural goods is inelastic because food is a necessity.
• Since demand is inelastic, the price declines by a greater proportion than the rise in quantity sold, meaning that total revenue declines and the farmers are worse off.

• Farmers have an incentive to get the government to create a price floor so they can raise their revenue.
• They did that during the Great Depression.
• Farmers were instrumental in getting the government to establish the Farm Board, a federal agency whose job was to manage productivity of agricultural goods.
• When demand iselastic, the benefits of limiting competition are greatest for suppliers.

• Farmers have succeeded in getting the government to restrict the supply of agricultural goods.
• The nature of benefits and costs has been suggested as a reason for farm groups' success.
• The groups that are hurt by agricultural subsidies are large, but the negative effect on each individual in that group is relatively small.

• This example shows us how markets work and how politics of government intervention work.
• Suppliers have an incentive to pressure the government to limit the quantity supplied or to get together and look for other ways to do so.
• Suppliers have to gain by limiting supply if demand is inelastic.

• Sometimes sellers can get the government to limit quantity.

• Sometimes sellers can limit supply by force.
• A Professional Licensing placed threat is often effec tive.
• Such threats are common in some developing economies.
• There are opportunities for individuals to prevent others from entering the market.

• There is a problem of political economy.
• The central problem of political competition is to ensure that existing suppliers don't prevent others from entering the market, but government can also be used to prevent competition and protect to ensure that competition works.
• Government is part of the solution.

• Firms are not the only ones that can lobby the government.
• Consider con sumers.
• Consumers can face price increases if demand increases.
• Consumers will scream for price controls when the supply of a good is inelastic.

• In Chapter 5, if supply is inelastic, ings are imposed on apartments.
• There was an increase in demand for apartments in New York City during World War II.

• The city capped rents to keep apartments affordable.

• Controls like this are not costless.
• Rent control has resulted in an ongoing shortage of apartments.

• Surge Pricing develops with a price ceiling and whether a large or small surplus will develop with a price floor.

• The amount of excess supply depends on the elasticity of the case.
• A surplus can be created by a price floor above the market price.
• The elasticity of the curves affects the extent of the surplus.
• A large surplus is created by the price floor with inelastic curves.

• A large surplus is caused by the more elastic supply and demand.
• The larger the elastic supply and demand, the bigger the surplus or shortage created by price controls.

• It's a good idea to do the same exercise for price ceilings.

• In the long run, supply tends to be more elastic than it is in the short run, according to the elas ticity chapter.
• This means that price controls will cause small surpluses in the short run and large surpluses in the long run.

• Existing buildings will be converted into apartments in the long run.
• The number of apartments rented will increase in the long run.

• There is a political policy problem here.
• The rise in price brings in new competitors and increases output.
• The long-run incentives for com petitors to enter the market will be eliminated.

• Lower long-run elasticities result in smaller price increases when demand increases.

• The traditional economic policy focuses on getting the same results.
• If you want people to do less of a rational response to incentives, raise the price.
• Behavioral economiststions that involve emotion are not likely to work.

• They point out that at times people's emotional self is less likely to respond to incentives.
• "If we don't teach our young people how to when compared to the choices they would make deal with sex when they are half out of their minds, when not emotional, then they will act irrationally."

• Policy makers also include governments.

• They include parents as well.
• In two different states, emotions don't affect sexual decisions; they affect other high calm and excited states.

• He found that students in a sexually aroused state were twice as likely to answer "yes, yes, and whether a similar plan could be designed to get no" than they were when they were calm and collected.

• In the short run, demand and supply are inelastic, making it look as if the price ceiling won't cause problems.
• Why do price controls tend to last a long time?
• There are ongoing shortages or surpluses that cause fewer new apartments to be built.

• The rent-control laws in New York City were written to be effective when the vacancy rate was less than 5 percent.
• The rent controls stopped new apartments from being built.
• Rent stabilization programs have been implemented in New York City.
• Construction of rental properties has boomed, and only 1 percent of New York City housing is rent-controlled.
• Rents are not low.
• In Manhattan, you can expect to pay $2,500 to $3,000 a month for a studio or one-bedroom apartment, and most of the new apartments being built are high-end apartments with even higher rents.
• When students get jobs in New York City, most of their salary is gone once they pay their rent.

• Government and taxes are part of our life.
• Economic theory doesn't say that government should or shouldn't play a role in the economy.
• The decisions depend on the costs and benefits.
• Economic theory helps point out the costs and benefits.
• In the case of taxes, economists can show that the cost of taxation in terms of lost surplus is independent of who pays the tax.

• Economists suggest that the best policy is one of laissez-faire, an observation of government's role in the past, not economic theory.

• Many economists suggest a laissez-faire policy based on empirical observations of the past, not economic theory.
• Economic theory highlights some of the costs and benefits of various policies.

• Economists favor less government involvement than the general public.
• One reason for this is that economists are taught to look at the long-run effects of government actions.
• They've found that the effects aren't the intended effects and that programs often have long-run consequences that make the problems worse.
• Economists speak in the voice of reason, "Look at all the costs; look at all the bene fits."
• The elasticity concept and the supply/ demand framework are very useful in making those assessments.

• A subsidy to consumers is maximized by equilibrium.
• The producer and price floors have the same surplus.
• Consumer surplus is a tax on consumers and a subsidy to the net benefit a consumer gets from purchasing a producers.

• Rent-seeking activities aim to transfer surplus from one group to another.
• Taxes create a loss of consumer and producer surplus inelastic demand for their product will benefit deadweight loss, which graphically is repre from rent-seeking activities than producers facing sented by the welfare loss triangle.
• Consumers facing inelastic supply for a product benefit more from rent-seeking activities.

• The burden of the tax depends on the surplus with an effective price floor and greater relative elasticities of demand and supply.
• There is an effective price ceiling when there is a shortage.

• The general rule of political economy is that policies reflect small groups' interests, not theirs.

• As time progresses, the negative aspects of price controls get worse as price ceilings transfer producer surplus to consumers length of time considered rises because elasticity rises and therefore are equivalent to a tax on producers.

• The federal government could tax a good and 3.

• The elasticity of the U.S. labor is estimated by Prescott.
• What types of goods would you recommend?

• The amount of taxes collected to fund social of cigarettes is elastic if demand for cigarettes is inelastic.

• If the demand for a good is elastic.
• When supply is elastic, there is a restriction on output.

If the price elasticity of demand is 6 and the price elasticity of supply is 0.4, what percentage of a tax will the demander pay?

In which case would there be a shortage?

• Tell me your answer.

• The market is in 16.

When the market is in a surplus, what is producer surplus?

When demand and supply are elastic, what do you think will happen to the producer?

• Explain why your answer is correct.

• The following 20 are answered by using the graph below.
• Rent seeking is defined.

• You can give an example from the real world.

• Questions from alternative perspectives.
• The chapter equates taxation to robbery and the quotation from Calvin Coolidge at the beginning of taxes is typically levied in matching 6.2 percent shares.

• The two shares are treated as one tax by economists.
• Two cases could be considered as alternatives to taxation.

• The chapter talks about the effects of taxation on labor markets, workers' bargaining power matches that of the effects on producer and consumer surplus.

• Who is responsible for Social b.

• God sees all individuals as equal, and that one who is about to expire gets equal weight in the measure of does to the least of God's children.
• Economic analysis that focuses on consumer and who pays Social Security taxes is determined by the elasticity of the supply of labor.

• The president of Lebanon Valley College proposed that the prime minister of Great Britain, Margaret Thatcher, change her mind about giving 50 percent tuition the property tax to a poll tax, which is a tax at a set rate that every reduction for those graduating in the top 10 percent of individual must pay.

• Scholarship recipients were also b.
• What do you think about the consequences of equired to maintain a minimum grade point average?

Is there a tax system that led to this building?

• Economics professor Paul Heise recommended that the president institute the program.

• Due to state budget cuts, the University of California education system asked 7,600 applicants to defer their registration for two years after completing two years at a community college.
• The state fixed tuition costs.

• Explain the situation with supply and 4.
• Non- demand for college admissions is regarded as it is.

• There is excess demand for consumer interests over producer interests.

• Answers to Margin Questions 1.
• Since there will be no lost surplus at the equilib Supply with tax rium price, the combination of consumer and producer surplus will increase.

• The amount of tax affects the supply curve.

• Welfare loss is very small.

• If a person's demand is very elastic, he would get a 7.
• A small percentage of a tax is spent on research and development expenditures.

• A new product can be marketed if the consumer pays a percentage of the tax.
• If the firm price elasticity of supply divided by the sum of the price can get a patent on that new product, the firm will have an elasticities of demand and supply, or monopoly, and be able to restrict supply, transferring surplus from consumers to itself.

• Rent-seeking activities are designed to transfer surplus from one group to another.

• The tax is paid by the consumer.

• If there is a product for which there is a demand.
• If the entire amount of the tax were levied on employees, inelastic, increases in productivity would result in a drop in their before-tax income, because employers in price that would be proportionately greater than the rise would have to compensate their employees for the in equilibrium quantity.
• They would have to pay more taxes.

• It depends on elasticities.

• There is a demand for more than the quantity supplied.
• Because demand and supply are both inelastic, the short surpluses in the long run are not big because of price controls.
• There are forces from working in the welfare loss triangle.

• Market failure can be caused by the economic analysis of pol.

• Indi viduals are guided by an invisible hand to do what society wants them to do.

• A number of conditions must be met for the invisible hand to guide private actions.

• Externalities, public goods, and imperfect information are three sources of market failures.

• It is possible that the government could improve the outcome of a market failure.
• Since the politics of implementing the solution often lead to further problems, it is important to remember that even if a market failure exists, it is not clear that government action will improve the result.
• We will discuss government failures after discussing the three sources of market failures.

• Perfect competition is a benchmark for judging.
• There is a foundation for this benchmark in the real world.
• It's unfair and unhelp market self-interest to compare reality to a situation that Kenneth Arrow showed can't happen.

• No person can be that position in reality.

• The previous two guides the economy to a Pareto optimal position.
• The supply curve is not appropriate because there is a marginal cost to the suppliers.
• The marginal benefit to consumers is represented by horren, which is a Pareto optimal position.
• The marginal benefit to society would be represented by one person.
• In a sup world's revenues and all the other people are starv ply/demand equilibrium, not only would an individual be asing.
• If that rich person was made worse off by taking money from him and giving it to her, society would also be worse off.
• A perfectly starving poor would start in a Pareto competitive market equilibrium.

• A perfectly competitive equi argues that society has a variety of goals.
• Pareto optimality librium is not stable.
• It's usually in one of them, but it's only one.
• They argue that when economists take into account all of society's market is close to a competitive equilibrium, it is goals, not just Pareto optimality, when determining a in few people's interest to stop such.

• An important requirement for the invisible hand to guide markets in society's interest on a third party not taken into account is that market transactions have no side effects on anyone not involved in the transac by the decision maker.

• Positive or negative externalities can be found.

• Education is an example.
• It benefits everyone when you pursue a college education.
• Another example is innovation.
• Significant effects on society were not taken into account by the inventors of the personal computer.

• The standard supply/demand analysis with no externalities is shown in the effects of positive and negative externalities figure.
• The marginal social costs and benefits of producing and consuming steel are represented by the supply curve and demand curve.
• The private and social benefits are the same.

• When production results in negative externalities, Figure 8-1(b) shows what happens.
• People who aren't involved in production incur costs.
• The supply curve no longer represents the marginal private and mar ginal social costs of supplying the good.
• The mar ginal private cost is more expensive than the marginal social cost.

• Marginal low is how to maximize social welfare.

• The externality is represented by the distance between the two curves.

• The market solution results in a level of steel production that exceeds the level that equates the marginal social costs with the marginal social benefits.

• Education is an example.
• A person is working and taking a class at night.
• He or she will bring the knowledge from class to the co-workers.
• The co-workers will be learning from the class.
• They benefit from being outside of the initial decision to take the class.

• In the case of positive externalities, the market will not provide enough of what the market needs.

• The benefit that others receive at each quantity is known as the additional benefit.

• The marginal social benefit is greater than the marginal social cost.
• Too much light is provided by the mar ket.
• Some type of intervention to increase quantity may be necessary.

• Alternative Methods of Dealing with Externalities 1 can be used.

• Direct regulation and incentive policies are ways to deal with externalities.

• Common Resources and the Tragedy of the Commons are a problem in the United States and owned goods.
• Let's look at an example throughout the world.
• The tragedy says that the land is held in common.

• People are free to bring their sheep without taking into account the negative effects on the land.
• What are the likely externalities of their actions?

• The amount of grass for other sheep is not solved by the market.

• Some economists argue that if people don't have to pay for graz, they won't take into account the chance of getting a sheep.
• The problem is a lack of ownership and a lack of prop count.
• All goods were defined, the tragedy of killing the grass and the destruction of the land may be the result.
• The commons would disappear.
• The tragedy of the commons is an example of someone owning the sea.
• The owner would fish if he charged for fishing rights.
• When people catch fish, they reduce the number of the commons because the sea is a common resource and no one owns it.

• Elinor Ostrom is a political economist.

• The tragedy of the commons is an example of how different societies have used externalities.
• There are a variety of institutional arrangements to deal with the trag tive externality of catching fish.
• There is a negative effect on others, the social cost of catching a single answer is greater than the private cost, and the answer fish is greater than the private cost.
• The cultural mores of the society need to be reflected in overfishing.

• Let's look at an example.
• Ms. Thrifty uses 10 gal ons of gasoline a day, while Mr. Big uses 20 gallons a day.
• We want to reduce total daily gas consump tion by 10 percent.
• Both individuals might have to reduce their consumption.
• Each consumer would have to reduce their consumption by 1.5 gallons or 10 percent in order for the regulatory strategies to work.

• Direct regulation doesn't take into account the costs of reducing consumption among individuals.
• It is said that it is very costly to reduce consumption.
• It would be more efficient to have Ms. Thrifty false.

• The policy would get Ms. Thrifty to do most of the reduction.

• Ms. Thrifty would do the larger policies if there were two types of incentive policies.

• One is to tax consumption and the other is to issue certificates to indi viduals who reduce consumption and allow them to trade those certificates with others.

• The government imposes a tax on gaso line consumption of 50 cents per gallon.
• Ms. Thrifty will likely respond to the tax by reducing her gasoline consumption by 2.75 gallons.
• She pays only a small amount of tax.
• Mr. Big will likely reduce his gasoline consumption by 0.25 gallon since he finds it very costly.
• He pays $9.88 in tax but does not do much for the environment.

• The tax cuts consumption the most.

• They have been made to internalize the externality by the tax.
• There is a significant element of fairness about the solution.
• The person who conserves the most pays the least tax.

• The tax incentive solution will solve the problem of steel production.

• The extra cost imposed on society is not taken into account by the deci sion maker.
• The social cost of supplying the good is what the suppliers face with this tax.
• The invisible hand guides the traders to equate the marginal social cost to the marginal social benefit and the equilibrium is socially optimal with the tax.

• There is a major difference between the regulatory solution and the program.
• If individuals choose to reduce consumption by more than the required amount, they will be given a market able certificate that they can sell to someone who has chosen to reduce consumption by less than the required amount.
• The person who has not personally reduced consumption by the required amount will have met the program's requirements if they buy that certificate.
• The program would work with Mr. Big and Ms. Thrifty.

• Mr. Big finds it very expensive to reduce consumption.

• It's easy for thrifty.
• Mr. Big will buy certificates from Ms. Thrifty if she can sell them to him for a high price.

• As was the case in the tax incentive program, Ms. Thrifty takes on most of the work, but gets a financial benefit from it.

• Incorporating the incentive into a price and letting individuals choose how to respond lets those who find it least costly to adjust.

• Governments are looking at incentive policies to solve lems.
• Sin taxes are an example of the tax incentive approach.
• The marketable certificate approach is used for permits for pollution and CO2 emissions.
• There are more examples discussed in the news.

• Making the reduction volun tary is a third alternative method of dealing with externalities.
• In the example of Mr. Big and Ms. Thrifty, how might a voluntary program work?
• This seems to be a fairly efficient solution.

• The voluntary solution wouldn't be as efficient.

• It could be argued that people are better off if they do something voluntarily.
• One could argue that even though Ms. Thrifty has a high cost of reduction, she still has a high benefit from reducing her consumption.

• There are two reasons to help.

• The voluntary policy of free riders will undermine the social consciousness of a small number of people, according to economists.

• Voluntary programs will fail during times of war.

• During World War II, successful voluntary programs were used to finance the war effort.
• The results of voluntary programs for long-term social problems that involve individuals changing their actions haven't been positive.

• If a policy isn't optimal, resources are wasted because the savings from reducing expenditures on a program will be more valuable than the gains from the policy.

• Let's look at an example of this case.
• The marginal benefit of a program is more than the marginal cost.
• We could expand the program by decreasing some other program or activity whose marginal benefit doesn't exceed its marginal cost, with a net gain in benefits to society.

• Spending too much on a nonbeneficial program is just as inefficient as spending too little on a beneficial program.

• The economists' view of most problems is based on the concept of optimality.

• Some environmentalists want to rid the world of pollution, while others want to keep pollution.
• Since it's costly, most economists want to reduce pollution to the point where the marginal cost of one would want to take into account those costs.
• Society should reduce pollution only to the point where the marginal cost of reducing pollution benefits.

• The marginal benefit of reducing pollution is the same as the marginal cost.
• Society would be worse off if pollution was reduced below that level.

• There is no such thing as a pure public good, but many of the goods that government provides have public-good aspects to them.
• National defense is the closest example of a pure public good.
• A single person cannot protect himself or herself from a foreign invasion without also protecting his or her neighbors.
• For one person, many others are also protected.
• Private businesses don't supply goods to governments unless they transform the good into a mostly private good.

• What is considered a public good depends on technology.

Over time, as drivers figure out ways the best way to handle road congestion to leave a bit earlier or a bit later to avoid is through a method called dynamic the super-high tolls, and as more drivers pricing--charging higher prices for the carpool and split the cost--the

• You will likely be able to if the program is successful and the technology has been in other places.
• Changes in prices are tracked by a computer that predicts the future of roads.

• The times of the day may cost more.
• In Washington, D.C., the cost of crossing bridges can be as high as $30 or$40.
• In late 2017, deciding ing was put in the express lanes.
• It will become a job to find the right combination of speed and price every few minutes to keep average tolls.

• Pricing technology isn't the only thing that costs as much as $44 to drive 10 miles on it.
• These high tolls are changing.
• We will likely eliminate the congestion, but drew a lot of complaints that self-driving cars will only be available to the rich, and that normal people can't use an app that requires them to just put in their driving.

• Once a road was built, the nonexclusive public-good aspect of roads became dominant, and government became the provider of most roads.
• With the use of computer technology, road use can be monitored.
• It is once again possible to charge for roads.
• We may see more private roads in the future.
• Private roads are being built in many states and countries.

• One of the reasons that pure public goods are so interesting is that the supply/demand model can be changed to compare the efficient quantity of a private good with the efficient quantity of a public good.
• The key to understanding the difference is to know that once a pure public good is supplied to all, it is not a private good.
• If the price of an apple is 50 cents, the efficient purchase rule is for individuals to buy apples until the mar ginal benefit of the last apple consumed is equal to 50 cents.
• The individual is the focus of the analysis.
• The marginal benefit of the last apple sold in the market is equal to 50 cents if the equilibrium price is 50 cents.
• The benefit is paid for by one individual and they enjoy it.

• Consider a public good.
• 50 cents to one individual and 25 cents to another is the marginal benefit of an additional missile.
• 75 cents of total social benefit is provided by the value of one missile.

• The focus is on the group with a public good.
• Only one person gets the benefit of private goods.

• The supply and demand curves can be translated into the above reasoning.
• The marginal benefit of a good to society is represented by the market demand curve.

• The total amount of a private good is divided among many buyers.
• The market demand curve for a private good is summed vertically.

• The full benefit of the total output is received by everyone and the quantity of good supplied is not split up.

• An example of a public good can be found in Figure 8-4.
• To arrive at the market demand curve for the public good, we vertically add the price that each indi vidual is willing to pay for each unit since both receive a benefit when the good is supplied.
• At quantity 1 we add $0.60 to $0.50.
• The marginal benefit of providing the first missile is $1.10.
• The market demand curve for missiles is generated by the willingness of individuals A and B to pay for quantities 2 and 3.
• Even though the benefit of a public good is small to each person, the total benefit is large.
• If each person valued the missile at 50 cents, the benefit would be $165 million.

• It is easy to add demand curves in textbooks, but not in practice.

• It wasn't worth the price if they didn't buy it.
• Individuals don't purchase public goods since they are free of charge.
• How much people will pay must be guessed by the government.
• Individuals have an incentive to hide their willingness to pay for a public good if it is financed by a tax on the citizens who benefit from it.
• The citizen wants to benefit from the public good without having to pay for it.
• People have an incentive to exaggerate their willingness to pay if they think they will not be taxed.
• People have an incentive to be free riders.

• The public-/private-good differentiation is not clear-cut since many goods are public and private in nature.

• Radio signals were previously classified as public goods because it was technologically impossible to exclude people, but when satellite broadcasting was developed, it became easier to exclude people.

• It is better to divide goods by their degree of publicness and privateness, which means by their degree of rivalry in consumption, and their degree of excludability in pricing, according to economist Paul Romer.

• True private goods, such as an apple, which are both rival in consumption and 100 percent excludable, are in the upper left corner.
• Basic research and development, which are nonrival in consump tion and 0 percent excludable, are in the lower-right corner.
• There are goods in other positions in the box.
• The government's political decisions affect how they are supplied.

• Music is an example of a debate about how to provide a good.
• After listening to a song, that song is still available to others to hear, but is excludable for those not owning FLAC files or concert tickets.
• In 2000 music sharing services, such as Napster, developed that allowed people to share music for free.
• The music industry believes that sharing copyrighted works is against the law.
• They went to court and forced it to shut down.
• Eventually, other music-sharing services developed that paid copyright holders a portion of their revenues, arriving at a new institutional equilibrium, which will likely remain until technology once again changes.

• imperfect information is the cause of market failure.

• The model assumes that people have good information about what they are buying.
• It is reasonable for them to expect that buying a good will make them better off.
• Someone will convince you that they are selling a diamond, but you will find out later that it is just glass.
• Someone will convince you that her used car is a cherry.
• It won't run no matter what you do to it, because it is a lemon.

• Real-world markets can involve deception, cheating, and inaccurate information.

• Car dealers often know about defects in the cars they sell but don't always tell consumers.
• Consumers who want health insurance do not reveal their health problems to the insurance company.

• Information that is not perfect can be a cause of the transaction.
• Market failure can be caused by imperfect information.

• Markets where there is a lack of information may not work well.
• The used-car example should be considered more carefully to make the point.
• Buyers and owners of used cars don't know anything.
• If sellers are profit maximizers, they will reveal as little as possible about the cars' defects; they will reveal as much as they can about the cars' good qualities.

• There are only two types of used cars that can be purchased: "lemons" that are worth $4,000 and "cherries" that are worth $8,000.

• The market initially had lemons and cherries.
• The buyers can't distinguish between lemons and cherries.
• Indi viduals, knowing that they have a 50 percent chance of buying a lemon, may offer around $6,000.
• People with cherries will be hesitant to sell and people with lemons will be eager to sell.

• The sellers of cherries have left the market.
• In the end only lemons will be offered for sale, and buyers will only offer $4,000 with the expectation that cars will be lemons.
• The market for good used cars has disappeared because of the result.

• Only lemons with the most problems remain in the market.
• Medical insurance is an example.
• Insurance providers need to make money.
• They set rates that reflect the costs of providing health care.
• People have better information about their health than the insurance providers.
• Health insurers want a diverse group to spread out the costs, but they face a greater demand among those with the worst health problems.
• How would you rate medical care?
• If you are in good health, you can reduce the insurance rates if you purchase more health insurance.

• Insurance means that people change their behavior to benefit the insurer.
• People with insurance tend to be less careful because the consequences of not being careful are reduced.
• People with more medical problems choose to be insured, but once insured they will be less careful.

• Informational problems can be partially solved by signaling.

• The lemon problem can be solved with used cars.
• The signal that a car is a lemon would be stronger if the price was lowered.
• A seller warranty can be used to offset the false signal.
• Many used cars have warranties.
• The warranty shows the buyer that the car isn't a lemon.

• It is more difficult to offset a false signal in other cases.
• Consider the plight of an unemed worker.
• The person may be an excellent worker who is willing to work for a low wage because she really needs the job.
• The firm may think that she isn't a very good worker if she offers to work for a low wage.
• She may not be able to offer to work at a low wage if she knows that the firm thinks that way.
• She remains unemployed even though there is a wage at which she would like to work and at which the firm would like to hire her.

• The problem can be partially solved by screening.
• signaling is an action taken by the informed party, screen ing is an action taken by the uneducated party.
• Take the example of a car.
• The person buying the car could ask the seller's permission to take the car to the mechanic.
• The car is likely a lemon if the seller says no.
• If a company isn't going to contact the job applicants, they should be asked to refer them.

• Government licensing of individuals in the mar ket, requiring those with licenses to reveal full information about the good being sold is an example of regulation.

• Full disclosure of information is required by many government laws.
• The Federal Trade Commission, the Consumer Product Safety Commission, the Occupational Safety and Health Administration, the Food and 178 Microeconomics, and state licensing boards are all examples of regulatory solu tions designed to partially offset informational market failures.

• The regulatory solutions have problems of their own.
• The commission's regulations can slow down the economic process and prevent trades that people want to make.
• The FDA is an example.
• It restricts what drugs can be sold until there is more information about the drugs' effects.
• The FDA testing and approval process can take up to 10 years to complete and can raise the price of drugs.
• Some people are breaking the law by buying drugs before they are approved.

• The lack of a market is a problem economists lean away from.

• Let the market deal with the problem, that's what they propose as an alternative way to deal with informational problems.
• Information is an economic product.

• Left on their own, markets provide the information that people need and are willing to pay for.
• The buyer can hire a mechanic to test the car with sophisticated diagnostic techniques and determine if it is a cherry or a lemon.
• If the car is a lemon, firms can offer guarantees that buyers can either return the car or have it fixed.
• There are many different market solutions.
• People might rely on government instead of markets if the government regulates information.

• The informational problem can be seen as a problem of government regulation, not a problem of the market.

• Medical licensing is an informational problem that con trasts the market approach with the regulatory approach.

• Medical licenses were not required in the early 1800s so anyone could become a doctor.
• It is illegal to practice medicine without a license.
• Informational problems can be used to justify the licensing of doctors.
• All doctors are required to have at least a minimum of tency.

• Laws were established to restrict supply by a small number of economists, who proposed that licensure laws be eliminated, leaving the medical field unlicensed.

• Dentists, lawyers, college professors, cosmetologists, and other professional groups are also covered by the arguments presented here.

• The public would not believe that course.
• Opponents of licensure pointed out that it's not clear how to create skilled surgeons and how licensure can prevent butchery.

• Would you send your child to a board-certified surgeon to become a child?
• For manual dexterity, the honest answer tests could be given.

• Being around hospi nation, they have access to information about various heart technicians, who would work as part of a team, and they've seen them doing heart surgery.

• "Manual dexterity" is likely to be the answer according to informational alternative advocates.
• If restrictive licensing were to be ended, does the existing system of li better since people with better manual dexterity would be censure to ensure that everyone who becomes a surgeon doing the work.

• The strongest critics of licensure agree that the infor mational argument for government intervention is strong in the case of doctors.
• The question is whether licensure is the right form of government intervention.
• Scientific studies have shown that laetril is not an effective cancer treatment.

• Friedman argues that the government wouldn't follow that path because it would lose money if more information was given to the doctors.

• They can increase their incomes by increasing the price.

• Critics say the informational alternative would be better.

• The doctors' background would have to be made public.

• The data would allow people to make better decisions about their medical care.
• They would be complicated like all informed decisions.
• For instance, doctors who only take patients with minor problems can show high "success rates," while doctors who are actually more skilled but who take on problem patients may have to proscribe more extensive information so people can see why their success rates shouldn't be compared to those of the doctors who The supporters of the informational alternative argue that it's better than the current situation.

• Current licensure laws do not provide this information to the public.
• All a patient knows is that a doctor has passed the medical board exams, which are only a few questions.
• A doctor is a doctor for life after he or she is licensed.
• The current licensing procedure doesn't provide much useful data to the public.
• Both sides have arguments.
• The ability to assess the information provided is a key issue in the debate.
• Supporters of licensing argue that people don't have that ability, while supporters of the informational alternative argue that they do.

• Externalities, public goods, and informa tional problems give you a good idea of how markets can fail.
• All real-world markets fail in some way.
• The point was to give you a sense of the way in which markets fail, as well as the fact that many economists support markets and oppose regulation anyway.
• To point out a market failure is not necessarily to call for government intervention.

• Government does not have an incentive to correct the problem.
• Government reflects politics and people's interests in trying to get more for themselves.
• The general good is often overshadowed by political pressures to benefit one group or another.

• Governments do not have enough information to deal with the problem.

• It is difficult to regulate.

• Global warming is a fourth play.
• There is a lack of a clear cost/benefit enormous and a recent expert consensus analysis for various policy alternatives and estimate of the cost of global warming in the uncertainty of the success of various terms of lost income was a 1 percent technologies.
• Cost estimates of various decline in global economic activity, which policies to become largely free of fossil for the United States comes out to about $200 billion, or $610 per person per year.

• We can expect to see three types of no price on emitting carbon dioxide gas into the atmo policies implemented, the lowest-cost/ highest-benefit sphere even though emissions impose a cost on society.

• The policy problems of dealing with climate change are energy efficient lightbulbs.
• There is a major free rider problem.
• Because on new buildings and reduced power, there is no world government that can force countries to use electronic devices; and because the politically high-profile comply with any global effort to address carbon emissions, policies instituted in a state or country basis, rather than any policy has to be voluntary.
• President Trump's pulling the problem but that sounds good in a sound bite, and the United States out of the Paris Accord was seen by many as those policies that do not make much sense in an eco free riding by the United States.
• Climate change and certain firms are not bad for all areas.
• Some countries have graphic areas that make sense within a political area.

• Increased corn-based production will likely extend the growing season in northern countries because of global warming, and carbon dioxide emissions from the production of corn-based fuel are almost as pleasant because of the cold.
• The costs of global great as the reduction in carbon dioxide emissions result warming are highly concentrated in low-lying coastal areas and the programs areas.
• Farmers have political support because of the diversity of costs and benefits.

• The biggest expected benefits to a certain portion of renewable fuels are in the future, while many remain.

• Unintended dealing with problems can only work in the long run.

• The Power of Traditional Economic Models eliminates the incentives that would have brought about a long-run solution to short-run problems.

• Fine-tuning is not allowed by the bureaucratic nature of government intervention.

• The Interstate Commerce Commission existed years after its regulatory job was eliminated.

• Government intervention leads to more government intervention.
• Government can enter into areas where intervention is harmful by opening the door in one area.
• If the intervention will lead to more government action in cases where it won't do good, it might be best not to intervene.

• The above list is just an introduction to failures in the government.
• Exploring them would take us away from economics and politics.
• Government failures must be taken into account before any policy recommendation is made.

• Policy conclusions cannot be drawn from the models of positive economics because they are within the art of economics.

• In this textbook, I can help you discover the information and the nuances of the debates for and against the government.

• An externality is the effect of a decision on a third produce too little of the good for too great a party that is not taken into account by the decision price.

• Positive externalities help third parties.
• Economists prefer incentive-based programs parties.

• The markets for goods with negative externalities based program is to tax the producer of a good that produce too much of the good for too low a price.

• If one is a consumer, voluntary solutions are hard to maintain.
• The markets for free riders to enjoy the benefits of others' goods are eliminated because of this.
• Market failures are known as volunteer efforts.

• An optimal policy is one in which the marginal cost adverse selection problems and moral hazard of a policy equals its marginal benefit.

• Public goods are not exclusive.
• Licensure and full disclosure are two ways to measure the benefits of public goods.

• The market value of a public good can be occurs because: (1) governments don't have an incen calculated by summing the value that each individual tive to correct the problem, and (2) governments don't have places on every quantity.
• This is summing enough information to deal with the problem.

• The demand is represented by the curves.
• There are no restrictions on fishing.

• Demonstrating graphically what the catch is going to be is a must.
• A price will be sold or a market incentive program.

• There is a shortage of gas.

• If you're willing to pay $5,000 for a used car that will reduce their gas consumption by 5 percent, then you should buy it.
• If you divide gas consumers into two groups, you can estimate the chance of one group getting a cherry group that is inelastic.

• There are three examples of signaling in the real world.

• Low-premium 8 is offered by automobile insurance companies.
• The effects of change contracts with low deductibles were studied by Don and Thomas.

• Garbage collected fell by 14 percent.

• Garbage collected fell by 37 percent.

• The weight of recycling went up.

• Insurance companies charge lower rates.

• Most colleges require an advanced degree to teach.

• Sally hates the color red and she doesn't like Ben's red shirt.
• Graph the individual demand curves and the market cost on Sally, it involves an externality.

• Burning fossil fuels contributes to climate change.

• Questions from Alternative Perspectives 1.
• The book title is "Market Failure versus 4."

• Does the author spend most of their time?
• Chapter discussing market failure rather than govern asymmetric information might occur in a business or consumer transaction.

• Economics is 5.

• Water should only be made available to people who need it.
• Evaluate the statement.

• Economics is defined as the study of a.

• The Food and Drug Administration should be raised to $1 per gallon.

• Raymond is arguing 6.
• Financial analysts don't have to be licensed.

• 5 percent of the permit to shoot an elephant is accounted for by a gene.

• People with this gene are more likely to have it.

• Provide two arguments.
• If an air-quality law is passed that requires 3.75 per for and one against, it will require people to undergo testing of cent of all cars sold to emit zero pollution.

Is there a way in which this law might 8?

• The total would be reduced by a high tax on oil.

What failures did he discuss?

Where do you think the majority of dairy farmers stand?

• The consumer has a right to know.

• Answers to Margin Questions 1.
• An externality is the result of a decision not being taken.
• It is difficult for the government to make a decision.
• The private cost doesn't reflect the purchases of individuals in markets when there is external quantity of a public good.
• The market may not work because they don't reveal the value of public goods.

• Individuals face incentives to overstate the value.
• The existence of a positive externality doesn't mean they place on public goods if they don't have to pay.

• The market isn't giving a sufficient share of the cost.

• The medical insur can be as inefficient as an oversupply due to adverse selection.

• Since efficiency doesn't take into account who pays average medical rates would decline, there may be a trade-off between fairness and selection.
• If a tax on gasoline was effi, it would be possible to offer lower-cost insurance to people who drive older, less fuel efficient cars, but because the poor tend to drive older, less fuel efficient cars, they will end up paying more of the tax.

• There could be a tax of 8.
• If an informational alternative to licensing doctors were seen as both fair and efficient because consumers choose introduced, existing doctors would suffer a significant to reduce their gas use based on the new price, so the monetary loss, and students who would likely go on to solution is efficient.
• The solution has an element of fair medical school in existing institutions since those causing the pollution are the potential incomes when they entered practice.

• The tax incentive approach to deal with externalities is through an entire medical school schedule, but will be fair in the following sense: Individuals whose actions ing to learn a specialty that required far less education and result in more pollution pay more.
• People who do well and do things that result in less pollution pay less.
• Some consumers would get more for less.

• An economist wouldn't necessarily believe our initial positions.
• People should allow the market to deal with the pollution in less-populated states.
• Pollution involves externalities.
• If you want to work farther to pay a higher tax than other people, you have to handle the others differently.

• Voluntary actions that are not in people's self-interest into the costs, try to build price incentives into whatever may not work in large groups because individuals program is designed, and make the marginal private cost rely on others to volunteer.
• The marginal social cost is equal to a poten.

• If one believes that the person who faces the least cost of government intervention will cause worse problems, then one can accept all three explanations for market failure.

• There are four alternative methods of price support.

• Politicians face real-world pressures when designing agricultural policy.

• Trade follows the flag.
• The lowest price is followed by trade.
• If a dealer in a colony wanted to buy Union Jacks, he would need to save sixpence.

• Define the sources of growth.
• A lot of economists talk about comparative advantage in the U.S. We look at the future of the U.S. economy.

• Discuss the relationship between exchange rates and the U.S. economy.
• Exchange rates have a role to play in equalizing play in the theory of comparative trade flows.

• Both can be made better off by trade.
• The principle of comparative advantage was introduced in Chapter 2.
• It is important enough to warrant an in-depth review.
• The story of I.T., an imagi nary international trader, who convinces two countries to enter into trades by giving both countries some of the advantages of trade, is a good example of this principle.

• Here's the situation with the gains from trade.
• The opportunity cost to produce a ton of food in Saudi Arabia was 10 barrels of oil, while the opportunity cost to produce a ton of food in the US was 1/6 of a barrel of oil.
• The United States produced 60 barrels of oil and 400 tons of food, while Saudi Arabia produced 400 barrels of oil and 60 tons of food.

• Potential gains from trade are given in the tables.

• If the United States devotes all of its resources to food, it can produce more food than Saudi Arabia.
• Saudi Arabia has a comparative advantage in the production of oil, while the United States has a comparative advantage in the production of food.
• Below each table, the information is presented graphically.
• These are the countries' production possibilities.
• Each country's curve has a row on that country's table.

• The two countries have production possibility curves.
• The points on the curve correspond to the com binations of numbers in the table.

• You will have more food and oil.
• It's an offer you can't refuse.

• You will get more food and oil.
• It's an offer you can't refuse.

• Both countries would be foolish to not accept it.

• I.T.
• arranged the trade.

• This hypothetical example exaggerates the gains a trader makes.
• The person arranging the trade has to compete with other traders and offer a better deal than the one presented here.
• The person who first sees a trading opportunity makes a lot of money.
• Smaller fortunes are made by the second and third persons who recognize the opportunity.
• The chance of making a fortune is gone once the insight is generally recognized.
• The instantaneous fortunes are not made without new insights, but traders still make their normal returns.

• The benefits of trade go to the producers and consumers, not to the traders, but the long run can be years and even decades.

• There are high gains of trade to be made when countries avail themselves of comparative advantage.
• It is not clear who gets these gains.
• The principle of comparative advantage does not determine how the gains of trade will be divided among the countries involved.

• There are no laws regarding how real-world gains from trade will be apportioned, but economists have developed some insights into how those gains will be divided.
• The trader gets how much.

• The trader gets less competition.

• Entry into trade is unimpaired most of the time.
• The trader will pass the larger gains of trade to the smaller countries.
• If the product is unique and cannot countries, the trader's big gains proportion of the gain is in markets that are newly opened.

• This insight is important to trading companies.
• The economies of scale get a bigger gain from trade.

• People from trading companies go around selling goods to countries.
• As the United States lifted sanctions on Iran, many of the same people were waiting to set up deals with Cuba.

• The reason is that there are more opportunities for smaller countries when it comes to trade.

• The United States begins trade with a small country in Africa.
• Prices of all types of goods will fall, because of Enormous new consumption possibilities.
• Before international trade began, cars were more expensive in Malian than fish were.
• With international trade, the price of cars in the country falls.
• The U.S. price of fish doesn't change much because the economy is so large.
• The fish are a drop in the bucket.

• The United States doesn't get much of the gains of trade because the price ratio of cars to fish doesn't change much.
• Most of the gains come from trade.

• The gains-from-trade argument has an important catch.
• Competition among traders is what holds the argument together.
• That means that U.S. residents pay the same price for a car as Malians.
• International traders in small countries keep large shares of the gains from trade for themselves.
• The United States and Saudi Arabia did not get a large share of the benefits.
• It was I.T.
• The larger country's international traders get more of the gains from trade than the smaller country's traders.

• Goods that exhibit economies of scale are the ones that gain the most from trade.

• Trade can increase production.
• The average cost of production of a good can be lowered if there are economies of scale.
• The price of good in the producing country can be lowered by an increase in production.
• What circumstances would a small country not get more from trade than it gets from its trading partner?

• Gains from trade are often hidden.

• One reason for the difference is that lay people don't recognize the gains of trade and don't notice the loss of jobs caused by the trade adjustments as countries shift production to take advantage of trade.
• The price of a shirt today is far less than it was a decade or two ago, in terms of the number of hours you have to work to buy it.
• Trade is one of the reasons for that.
• Not many people take it for granted.
• Much of our current lifestyle in the United States can be done by trade.

• A second reason for the difference between the lay view of trade and the economists' view is that the lay public believes that if we allow free trade, eventually we will lose all U.S.
• This belief is related to comparative advantage.
• One country has a comparative advantage in one set of goods, the other country has a comparative advantage in another set.

• The lay public does have a point.
• The model assumes that a country's imports and exports are the same.

• U.S. imports and exports are not the same.
• The United States pays for the excess of imports over exports with IOUs.
• People in other countries finance the U.S. trade deficit by buying U.S.
• The other countries will stop financing the U.S. trade deficit once they decide that they don't want to.

• The services that traders provide are included in trade.
• The gains the trader makes can account for the seeming differences in countries' comparative advantages.

• One could make the model fit reality if one thought of the United States as having a comparative advantage in producing IOUs that other people will accept.

• The students wear $200 sneakers.
• The sneak ers cost about $8 to make.
• The benefits of trade go to the trader, not the producer or consumer.
• Some of the difference is not profit.
• Someone has to convince you that you need those "with-it" sneakers, because the trader has other costs.
• Some of the benefits of the trade accrue to U.S. advertising firms, which can pay more to creative people who think up crazy ads.

• The United States has a large advantage in facilitating trade, and many trade companies are U.S. based.
• Many of the goods and services that support trade from their home country are bought by these companies.
• Goods manufactured in China, India, and other Asian countries are creating demand for advertising, management, and distribution and are therefore creating jobs and income in the United States.
• That's one of the reasons for the increase in service jobs in the U.S. Lay people don't associate these jobs with trade.

• Most economists see international trade differently because of distributional issues.
• The effects of trade on the distribution of income is something that most lay people are concerned about.
• Trade tends to benefit society as a whole, but the benefits are often highly unevenly distributed.
• Four reasons economists and lay people trade can hurt a lot in the short run.
• During the period of globalization, those producers whose goods are both tradable are when trade is opened among countries.
• Gains are often hidden.

• The opportunity cost is relative.

• Trade is more than manufactured benefit since they can get goods at lower international prices.

• Many people in the United States have been affected by globalization.
• Distributional effects of trade.

• The same was true for those with less skilled jobs.
• Blue-collar America has been hard hit by globalization.
• Immigrants who were willing to work at physically difficult jobs for lower wages than Americans were willing to work for have added to the problems facing these groups.
• The downward pressure on wages in those sectors is caused by this immigration.

• People with intellectual property rights who suddenly had billions more people to whom to sell their products were on the high end of the income distribution.
• They were billionaires instead of being multimillionaires.
• Demand for the services of those in high-tech and managerial jobs increased greatly because their work could not be duplicated in low wage countries.
• Finance and high-level management were in these categories.

• The share of manufacturing jobs in the US has fallen from 25 percent in the 1970s to 8 percent today.
• The income going to that sector went up a lot.
• The financial sector accounted for most of the profits in the U.S. economy after accounting for 4% of the economy in the 1980s.
• Even though manufacturing wages were falling, the salaries in the financial sector went up.
• The international traders and those associated with them thrived as a result of globalization.
• The gains from trade increased.
• U.S. international traders benefited from every switch of business from the United States to China.

• They are not radables.
• Wages grew in these sectors just as they did in the financial sector.
• Employment in the government, education, and health indus tries rose significantly.
• If wages fell, workers in the tradable sector would lose their jobs, but workers in the nontradable sectors would be able to raise their wages and keep their jobs.

• People in the nontradable sectors earned more and bought more manufactured and tradable agricultural goods such as televisions, tablets, automobiles, shirts, shoes, and grapes, at lower and lower prices.
• Lower prices and higher wages were retained by the workers in these sectors.

• Manufacturing wages in the United States, adjusted for inflation, have not risen for 40 years; lower-paid individuals in these sectors have been able to keep up their consumption only by borrowing and increasing their workload.
• Global ization has played a major role in increasing the income disparity in the United States.

• Those who work in nontradable and trade-organization sectors have been created and those who work in sectors facing brutal global competi tion have not.
• Distributional effects of globalization are the root of much of the lay public's concern.
• It's true that trade may have helped the United States, but that's not much comfort to those whose pay has fallen or who have lost a job because of foreign competition.

• It is true that economists' comparative advantage model doesn't focus on the distributional effects within the United States.
• Aggregate effects of trade are the focus.
• Billions of people in developing countries who have been pulled out of poverty by trade are counterbalanced by the many U.S. workers who have been hurt by trade.
• People who earn less than a U.S. worker can often feed their families in developing countries.
• Global income equality comes about through trade.

• Increased world economic growth is a result of trade.
• Increased income and wealth abroad creates additional demand for U.S. goods.
• Two billion consumers with increasing incomes offer new growth opportunities for U.S. firms.
• When a country gets a smaller amount of trade, the absolute amount it gets can increase.

• The debate about outsourcing and what jobs are created in the benefits present a challenge for policy makers.

• It is important to remember that comparative advantage is not solely dependent on wages.
• The United States has a comparative advantage in a variety of goods and services because of many other factors.

• The U.S. workforce can be paid more and still be competitive because of our educational system and experience in production.

• The United States has a relatively corrupt government that is needed for effective production.
• Firms based in the U.S. have a major comparative advantage.

• The United States has the best infrastructure in the world.
• The infrastructure includes road systems, telecommunications networks, and power grids.

• Americans learn English from birth.
• Chinese and Indian citizens need to learn it.
• It's not as productive to work in one's second language as it is in one's first.

• The United States is the largest consumer in the world.
• The United States will maintain a comparative advantage in producing geographically tied consumption goods, such as gourmet dining, because production that supports many aspects of consumption cannot be easily transferred graphically.

• The United States has rich farmland, a pleasant and varied climate, and beautiful scenery for tourism.
• It has comparative advantages in a number of areas.

• The United States is a cultural leader.
• People all over the world want to watch U.S. movies and have U.S. goods.
• The United States will have a comparative advantage if that is the case.

• It costs money to change production.
• For a small cost differential, companies will not move production to another country.
• The dif ference has to be large, it has to be expected to continue for a long time, and it must be large enough to offset the risk of unknown.
• The United States has an advantage over other places for production because of the situation.

• U.S. companies and individuals hold a large number of intellectual property rights, which require other countries to pay them if they use their patented goods or methods.

• A portion of the purchase price is used to make a payment to the U.S. when someone buys the Windows operating system for his or her computer.

• America's culture of embracing new ideas and questioning authority will likely continue to generate new intellectual property rights.

• The United States has a lot of students from developing countries who come to the country to study.

• They help maintain U.S. comparative advantages in a number of fields.

• The United States' competitiveness in a variety of types of production for the coming decades will be maintained by these other sources of comparative advantage.

• The discussion of the sources of U.S. comparative advantage should have made you feel better about the future of the U.S. That doesn't mean there aren't real issues of concern.
• The concern that the comparative advantage story doesn't capture what is going on with trade and out sourcing has some real foundations, and deserves to be considered seriously.

• The economic environment of the early 1800s was quite different from today's.
• Britain produced wool and Portugal produced wine.
• Britain's climate was less favorable to growing grapes than Portugal's but more favorable to raising sheep.
• It was unlikely that the climates of the countries could change, and that labor skills in the countries did not play a key role in their comparative advantages.

• The theory of comparative advantage was applied to a wide range of goods that were not due to climate.
• Land, specific resources, capital, types of labor, and technology are some of the sources of comparative advantage for some countries.
• Extending the analysis to other sources of comparative advantage makes sense, but it is important to keep in mind that only some of the advantages are inherent.
• The comparative advantages that depend on capital, technology, or education can change.
• We would expect them to change.

• One price is likely to be fleeting.
• In cases where sources of comparative advantage are not inherent, economic forces will push to eliminate that advantage.
• There will be pressure for equal market in a competitive market.
• Firms can reduce costs by factors if they are priced equally.

• Technology can change seemingly inherent comparative advantages.
• Consider oil.
• Saudi Arabia's comparative advantage in oil has been reduced by technological developments in the United States.
• The development of cost-effective fuel cells might leave Saudi Arabia with a comparative advantage in oil but not necessarily with a comparative advantage in producing energy.

• In the case of comparative advantage, production will shift to the country with equivalent institutional structures.
• The law of one price in action is that the same good, including equivalent labor, must be sold for the same price.
• The United States is outsourcing.
• There are skills needed in the technology sector that can be used elsewhere.
• Information technol ogy professionals with three to five years of experience earn about $85,000 in the United States and only $30,000 in India, which is why those jobs are moving abroad.
• Transferable comparative advantages of U.S. production will continue to erode until costs of production in different countries begin to erode.

• Production and jobs will be moved abroad as they erode.

• Let's look at the position historically to better understand it.
• The United States had a favorable position from the 1920s until the late 1940s because of the two world wars.
• During the two world wars, the entrepreneurial spirit of the U.S. population, U.S. institutions, and the flow of technology and capital into the United States gave the United States a big boost.
• The United States had a cost advantage in producing a large majority of goods after World War II, just as China has a cost advantage in producing a large majority of goods today.

• The balance of trade is not sustainable because of the cost advantages.
• In the absence of specific policy by governments or large private flows of capital to pay for imports, eventually that will happen.
• The trade balance that favored the United of capital after World War II will eventually correct itself.

• The U.S. government transferred funds to Europe in order to aid it in rebuilding its economy.

• Capital flows that sustain trade imbalances eventually stop, and when they do, adjust ments in sources of comparative advantages must take place so that the trade surplus countries become less competitive.
• There are a number of ways in which this adjustment can occur.
• The next section is likely to have two adjustments.

• We will likely hear calls for trade restrictions in the coming decade because neither of these is 198 Microeconomics # International Economic Policy Issues.

• In a later chapter, I will discuss how trade restriction policies can make things worse.
• The U.S. wage advantage can only be maintained if the total cost of production of a good in the United States is less than the total cost of production in other countries.

• The degree to which production shifts because of lower wages abroad depends on the U.S. comparative advantages listed above.
• Some of them will support higher U.S. wages.
• Even with higher U.S. wages, the United States will keep much production in the country.

• We can expect a narrowing of the wage gap between the United States and China and India in the coming decades.
• The only realistic strategy for the United States is to adapt to this new situation because of the strong market forces.
• Its best strategy is to maintain existing comparative advantages by investing in education and infrastructure, while continuing to provide an environment for innovation so that it develops comparative advantages in new industries.

• Transferrable sources of comparative advantage aren't the only way to eliminate trade imbalances.
• Exchange rates are not the only ones.

• The foreign exchange market is called the foreign exchange market.
• The exchange rates that newspapers report on a daily basis are determined by the market and can be seen in the table below.

• The price of foreign currencies in dollars is reported in the second column.
• The rates are easy in the third column.

• The price for 1 U.S. dol ar is 24.98 Argentinean pesos.

• People buy and sell goods and assets in other countries.
• An American who wants to buy stock in a company that trades on the EU stock exchange needs to buy euros with dollars.
• He will need to buy 150 euros for the stock.
• He will need to pay $180 to buy 150 euros with an exchange rate of $1.20 for 1 euro.
• He can't buy the stock until that happens.

• Let's look at a graphical analysis of the foreign exchange market.
• You have an upward-sloping supply curve and a downward-sloping demand curve in the graphical analysis of foreign exchange rates.

• You have to specify which currency you are using because you are talking about the prices of currencies.

• The supply and demand for euros are presented in Figure 9-2.
• The quantity of euros goes on the horizontal axis while the dollar price of euros goes on the vertical axis.
• The demand for the other currency is equal to the supply of the other currency.
• To demand one currency, you need to supply another.
• I assume there are only two supply another currency.

• The demand for dollars is equivalent to the demand for euros.
• Europeans who want to buy U.S. goods or assets need dollars, so they supply euros to buy dollars.
• Let's look at an example.
• A European wants to buy a jacket made in the United States.
• The U.S. producer wants dollars, but she has euros.
• She or the U.S. pro ducer needs to exchange euros for dollars to buy the jacket.

• The price of a dollar to a European has fallen.
• A good that costs $100 in Europe now costs 83 euros.
• Europeans buy more U.S. goods and dollars because they are cheaper.

• Americans want to buy European goods or assets.
• The lower the dollar price of euros, the more U.S. citizens want to buy it.

• When the quantity supplied is equal to the quantity demanded, the market is in equilibrium.
• equilibrium occurs at a dollar price of $1.20 for 1 euro.

• If forces shift the supply and demand for euros, people will want to hold their assets in dol ar-denominated assets.

• Americans lose faith in the euro and buy less of it.

• The euro has lost value because one euro buys fewer dol ars.

• When the dollar price of euros goes from $1.20 to $1.10, the euro goes down in value.
• The dollar is appreciated in value because it can be exchanged for more euros.

• The demand for a country's domestic goods is influenced by the exchange rate.

• The domestic and international supply of tradable goods can be seen on the same graph.
• Foreign countries are willing to sell as much as is demanded at a single price.
• If domestic producers want to sell any goods, they must match the world price.

• As quantity supplied rises, suppliers have to charge higher prices to cover higher costs of production, which is determined by the wage and productivity of workers in the United States.
• The comparative advantages of U.S. producers are reflected in the supply curve.
• International trade depends on the exchange rate.

• The cost of production increases relative to the cost of world production when output increases.
• The world supply intersects the domestic supply.

• imports will be offset by exports.

• A country has a trade deficit.
• Deficits are not sustainable.

• A decrease in the domestic economy's exchange rates can eliminate the trade deficit.

• Exchange rate adjustment can eliminate a U.S. trade deficit with China.

• Exchange rates affect a trade balance.
• As the exchange rate changes, the price of a country's goods to people in other countries changes.
• If the dollar depreciates, U.S. citizens will pay more dollars for each good they buy from China, which increases the price of foreign goods.
• The world supply curve will shift due to a depreciation of the domestic country's currency.
• U.S. producers will compete for an appreciation.
• The world supply world supply curve will be affected by an appreciation.

• The exchange rate adjustment can bring two countries' advantages into alignment.
• The story economists tel about comparative advantages is based on the assumption that exchange rates will adjust to bring trade into balance.
• The story assumes that the trade deficit is zero because of comparative advantages.

• If the supply and demand for currencies only applied to tradable goods, trade among countries would be in balance, and countries would have equal sectors of comparative advantages in producing goods.
• The demand for a country's currency reflects not only the demand for produced goods but also the demand for its assets.

• The value of a country's currency will be high when the demand for assets is high.
• The world price of produced goods will be low and the domestic country will have a comparative advantage compared to other countries.
• Over the past 30 years, that has been the case in the United States, and is one of the reasons manufacturing production has been so bad.

• The curse is due to the fact that the country that has a comparative 2 has a weighted combination of goods in an economy.
• The position is that of consis tent with significant imports and exports of particular goods, as long as the aggregate balances out.
• The trade balance is captured by the graph.

• International Economic Policy Issues advantage in resources finds that the demand for its resources pushes its exchange rate.
• A higher exchange rate leads to the shifting of the world supply curve and reduces the comparative advantage of other goods.

• The resource curse reduces employment because a decline in employment in other goods is not offset by an increase in employment in the resource sector.
• The production of the resource doesn't require a lot of workers.
• When the Netherlands discovered offshore oil, it was called the Dutch disease.

• Natural resources are not always the cause of the resource curse.
• When one sector of an economy gains there is a large increase in global demand for that sector's goods.
• Other sectors must lose their comparative advantage or there will be a trade deficit when one sector gains a comparative advantage.

• During the rise in globalization in the United States, this happened.
• Globalization increased the demand for people who provide logisti cal support.
• On average, these jobs were an enormous boon to the U.S. economy.
• The low-wage U.S. workers in other tradable goods industries lost their comparative advantage because of the increase in demand.
• While total income in the United States rose, income and employment in the low wage manufacturing sector fell, causing hardship and unemployment in these sectors.

• Changing comparative advantages and international trade have become more and more important for the United States.
• With other countries' economies growing, the U.S. economy will inevitably become more interdependent with them.
• The lives of most Americans will be improved by the international trade.
• The path for US citizens in the sector will be very difficult.

• According to the principle of comparative advantage, economists and lay people differ in their views on trade as long as the relative opportunity costs are the same.

• The United States has comparative advantages when it comes to international trade.

• Language is one of the things that smaller countries tend to have.

• The comparative advantages are based on factors.
• Gains from trade go to countries that don't change.
• They are not subject to economies of scale.

• An appreciation of a currency will shift the world that can change relatively easily.
• The law of one price supply of a good can eliminate comparative advantages.

• The depreciation of a country's currency makes the United States less competitive in trade.

• The curse of the resource occurs when the prices of natural resources are discovered.
• The value of the resource can be raised in the same way as any other good by using the supply and demand model.
• A domestic country's currency makes other sectors of the dollar less competitive.
• Buy more foreign currency is a variation of the resource curse.
• When a single dollar buys less foreign tion in the United States, a depreciation of the one reason for a greater inequality of income distribution occurs.

Will a country do better exporting?

• There are 60 workers at Widgetland.
• Each worker can make up to 4 different things.
• Each resident in Widgetland consumes 2 things.

• Each can produce up to 50 and up to 12 wadgets.
• The residents of Wadgetland consume 1 and 8 Widgets.

• Iowa and Nebraska do not trade.
• Corn and wheat are produced in each state.

• The amount of wheat and corn is the same.

• There are two countries, Busytown and b.

• The meals are made in the United States.

• The United States will likely maintain at least three sources of comparative advantage over the next decade.

• Each country has production possibility curves.

Would the US want to raise or lower 9?

• Offer the two countries a deal they can't refuse.

• Questions from Alternative Perspectives 1.
• Evaluate the statement: Comparative advantage 4.
• Portugal has an advantage in both comparative advantage and trade based on the production of cloth and wine in 1817.
• The production 2 has a comparative advantage for England.

• According to him, an English and trade.
• It was difficult for England to specialize in the beliefs of their trading partners when faced with political economist practices.

• King Solomon.

• Light manufacturing, such as clothing, worships the gods of her own people.

• Adam Smith said, "Servants, 3."
• Most of the jobs that have been lost in the U.S. economy have been in the manufacturing sector.

How does outsourcing affect the bargaining power?

• It is, but not b.
• Will it affect the level of the U.S.?

In the current Chinese situation, what would the price be without the international trader?

• The law was suggested in question 4.

• International economic policy issues are answered to margin questions.
• There is no basis for 6.
• There are two likely adjustments that will reduce the trade deficit.

• A rise in Chinese wages relative to U.S. wages is the percentage of gains from trade that goes to a country.

• An increase in demand for dollars is the same as an increase in traded dollars.
• If trade led to no change in prices in a small coun, an increase in the supply of euros, then that small country would not get any gains from trade.

• The following diagram shows a case in which a small country gets a small per terms of dollars.

• Smaller country would end up with less trade gains.

• It is vulnerable to international trade because of the quantity of euros.
• These goods can be produced by foreign pro ducers at a lower cost.
• One dollar can buy more euros.

• It takes less dollars to buy in the education, health care, and government sectors.

• Since the price of imports globalization, there would be no imports.

• Transferable comparative advantage is an advantage that is not tied to domestic goods, so consumers will be indifferent if they buy foreign affected goods.
• There are 10 countries where prices are higher.
• The discovery of the resource will lead to an increase in demand and an outflow of capital and technology that will lead to an appreciation in prices.
• The currency will be comparative with this transfer.
• The high-price countries have an advantage over the low-price countries in terms of domestic goods being more expensive to foreigners.