AP Micro 9 by Savannah Julius

Quizlet

8juliuss — 2017-11-29 14:43:58 UTC

https://quizlet.com/_43492x

Frequent Errors

8juliuss — 2017-11-29 14:44:10 UTC

https://docs.google.com/document/d/1j_fykP_vKq9wn4cIQLxKnLrOW1PguGKGjRvfVrEsKMU/edit

Equilibrium Without Trade

8juliuss — 2017-11-29 14:45:24 UTC

no exports or imports
total surplus is maximized at equilibrium for domestic price/quantity

World Price and Comparative Advantage

8juliuss — 2017-11-29 14:46:19 UTC

comparative advantage: ability to produce a good at a lower opportunity cost than another producer

- if world price > domestic price... EXPORT
- if world price < domestic price... IMPORT

Gains and Losses of an Exporting Country

8juliuss — 2017-11-29 14:48:28 UTC

domestic sellers better off because selling at a higher price
-- gains of winners exceed losses of losers

8juliuss — 2017-11-29 15:14:06 UTC

Before Exporting
CS: AB
PS: C
TS: ABC

After Exporting
CS: A
PS: BCD
TS: ABCD

D = gain from trade

Gains and Losses of an Importing Country

8juliuss — 2017-11-29 15:15:10 UTC

domestic buyers better off because buying at lower price
-- gains of winners > losses of losers

8juliuss — 2017-11-29 15:17:03 UTC

Before Importing
CS: A
PS: BC
TS: ABC

After Importing
CS: ABD
PS: C
TS: ABCD

D = gain from trade

Effects of a Tariff

8juliuss — 2017-11-29 15:17:45 UTC

reduce quantity demanded domestically

*government revenue*

8juliuss — 2017-11-29 15:20:34 UTC

Before Tariff
CS: ABCDEF
PS: G
gov rev: none
TS: ABCDEFG

After Tariff
CS: AB
PS: CG
gov rev: E
TS: ABCEG

DF = deadweight loss

Effects of Import Quota

8juliuss — 2017-11-29 15:22:03 UTC

*money to license holders*

8juliuss — 2017-11-29 15:23:20 UTC

Before Quota
CS: ABCDEF
PS: G
gov rev: none
license: none
DW: none

After Quota
CS: AB
PS: CG
gov rev: none
license: E
DW: DF

DF = deeadweight loss
E = license holder surplus

Trade increases the variety of goods and competition

8juliuss — 2017-11-29 15:24:44 UTC

lowers costs through economies of scale

Jobs

8juliuss — 2017-11-29 15:25:24 UTC

trading with other countries destroys domestic employment

National Security

8juliuss — 2017-11-29 15:25:40 UTC

advancement in a certain industry is vital for national security so there is no need to trade

Infant-Industry

8juliuss — 2017-11-29 15:26:03 UTC

trade restrictions are needed to help an industry get started or to help adjust to new conditions

Unfair Competition

8juliuss — 2017-11-29 15:26:29 UTC

only trade if all countries play by the same rules

Protection as a bargain chip

8juliuss — 2017-11-29 15:26:47 UTC

the threat of trade restriction from the domestic country could help remove a trade restriction imposed by a foreign country