1. In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade.
Consider the following scenario:
Without free trade, Robby has market power as a local producer. Once free trade is implemented in the local economy, Robby is no longer able to raise its prices above competitive levels.
The previous scenario represents which of the following benefits of free trade?
a. Increased variety of goods
b. Enhanced flow of ideas
c. Increased competition
d. Lower costs through economies of scale
2. Suppose there is a policy debate over the United States imposing trade restrictions on imported semiconductors:
Domestic producers of semiconductors send a lobbyist to the U.S. government to request that the government impose trade restrictions on imports of semiconductors. The lobbyist claims that the U.S. semiconductor industry is new and cannot currently compete with foreign competitors. However, if trade restrictions were temporarily imposed on semiconductors, the domestic semiconductor industry could mature and adjust and would eventually be able to compete in the world market.
Which of the following justifications is the lobbyist using to argue for the trade restriction on semiconductors?
1. Jobs argument.
2. National-security argument.
3. Infant-industry argument.
4. Unfair-Competition argument.
5. Using-Protection-as-a-bargaining-chip argument.