Growth and Tariffs

1. Suppose the USA produces robots and pizza using its two factors of production: labor and capital. Robots require relatively more capital and pizza requires relatively more labor. Draw the PPF (Robots on the Y-axis). Further, suppose a new oven is invented that can cook twice as many pizzas in the same amount of time. The oven does not help make robots. Draw on the existing PPF.

2. Define the terms of trade. What does "a country's terms of trade have improved" mean?

3. List an existing tariff (the product/industry, the imposing country, and the targeted country, if there is one).

4. True or False: A tariff creates deadweight loss.