Answer the following problems-

1. What is the difference between absolute advantage and comparative advantage?

2. Suppose the United States can produce an aircraft in 10,000 hours of labor and a shirt in 2 hours of labor. Suppose that China can produce the same aircraft with 40,000 hours of labor and a shirt with 4 hours of labor. Which of the following is correct?

a. The U.S. will export aircraft and import shirts from China.
b. China will export aircraft and import shirts from the U.S.
c. Both nations will export aircraft.
d. There are no gains from trade, so neither nation will trade with the other.

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

4. Who benefits and who suffers when international trade is permitted and exports flow out of a country?

5. What is a tariff and what are its economic effects?

6. List four arguments for trade restrictions.

7.

Refer to the graph above.

a. What is the equilibrium price of the good before trade?

b. After trade, how many units of the good will be imported?

c. How much did the consumer surplus grow with trade?

d. How much did the total surplus grow with trade?

8.

Referring to the graph above:

a. What was the consumer surplus before a tariff was imposed (list the letters that designate the CS)?

b. What was the producer surplus after the tariff was imposed?

c. What was the size of the tariff?

d. What do D and F represent?