(精品)princ-ch09-presentation(2010).ppt

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1、 2010 South-Western,a part of Cengage Learning,all rights reservedC H A P T E R2010 updateApplication:International TradeEconomicsP R I N C I P L E S O FP R I N C I P L E S O FN.Gregory MankiwPremium PowerPoint Slides by Ron Cronovich9In this chapter,look for the answers to these questions:What dete

2、rmines how much of a good a country will import or export?Who benefits from trade?Who does trade harm?Do the gains outweigh the losses?If policymakers restrict imports,who benefits?Who is harmed?Do the gains from restricting imports outweigh the losses?What are some common arguments for restricting

3、trade?Do they have merit?1APPLICATION:INTERNATIONAL TRADE2IntroductionRecall from Chapter 3:A country has a comparative advantage in a good if it produces the good at lower opportunity cost than other countries.Countries can gain from trade if each exports the goods in which it has a comparative adv

4、antage.Now we apply the tools of welfare economics to see where these gains come from and who gets them.APPLICATION:INTERNATIONAL TRADE3The World Price and Comparative AdvantagePW=the world price of a good,the price that prevails in world markets PD=domestic price without trade If PD PW,country does

5、 not have comparative advantage under free trade,country imports the goodAPPLICATION:INTERNATIONAL TRADE4The Small Economy AssumptionA small economy is a price taker in world markets:Its actions have no effect on PW.Not always true especially for the U.S.but simplifies the analysis without changing

6、its lessons.When a small economy engages in free trade,PW is the only relevant price:No seller would accept less than PW,sinceshe could sell the good for PW in world markets.No buyer would pay more than PW,since he could buy the good for PW in world markets.APPLICATION:INTERNATIONAL TRADE5A Country

7、That Exports SoybeansWithout trade,PD=$4 Q =500PW=$6 Under free trade,domestic consumers demand 300 domestic producers supply 750exports=450PQDS$6$4500300Soybeansexports750APPLICATION:INTERNATIONAL TRADE6A Country That Exports SoybeansWithout trade,CS=A+BPS=CTotal surplus=A+B+CWith trade,CS=APS=B+C+

8、DTotal surplus=A+B+C+DPQDS$6$4SoybeansexportsABDCgains from tradeA C T I V E L E A R N I N G A C T I V E L E A R N I N G 1 1 Analysis of trade7Without trade,PD=$3000,Q=400In world markets,PW=$1500 Under free trade,how many TVs will the country import or export?Identify CS,PS,and total surplus withou

9、t trade,and with trade.PQDS$1500200$3000400600Plasma TVsA C T I V E L E A R N I N G A C T I V E L E A R N I N G 1 1 Answers8Under free trade,domestic consumers demand 600 domestic producers supply 200imports=400PQDS$1500200$3000600Plasma TVsimportsA C T I V E L E A R N I N G A C T I V E L E A R N I

10、N G 1 1 Answers9Without trade,CS=APS=B+CTotal surplus=A+B+CWith trade,CS=A+B+DPS=CTotal surplus=A+B+C+DPQDS$1500$3000Plasma TVsABDCgains from tradeimportsAPPLICATION:INTERNATIONAL TRADE10total surplusproducer surplusconsumer surplusdirection of traderisesfallsrisesimportsPD PWrisesrisesfallsexportsP

11、D PWSummary:The Welfare Effects of TradeWhether a good is imported or exported,trade creates winners and losers.But the gains exceed the losses.APPLICATION:INTERNATIONAL TRADE11Other Benefits of International TradeConsumers enjoy increased variety of goods.Producers sell to a larger market,may achie

12、ve lower costs by producing on a larger scale.Competition from abroad may reduce market power of domestic firms,which would increase total welfare.Trade enhances the flow of ideas,facilitates the spread of technology around the world.APPLICATION:INTERNATIONAL TRADE12Then Why All the Opposition to Tr

13、ade?Recall one of the Ten Principles from Chapter 1:Trade can make everyone better off.The winners from trade could compensate the losers and still be better off.Yet,such compensation rarely occurs.The losses are often highly concentrated among a small group of people,who feel them acutely.The gains

14、 are often spread thinly over many people,who may not see how trade benefits them.Hence,the losers have more incentive to organize and lobby for restrictions on trade.APPLICATION:INTERNATIONAL TRADE13Tariff:An Example of a Trade RestrictionTariff:a tax on imports Example:Cotton shirtsPW=$20Tariff:T=

15、$10/shirtConsumers must pay$30 for an imported shirt.So,domestic producers can charge$30 per shirt.In general,the price facing domestic buyers&sellers equals(PW+T).APPLICATION:INTERNATIONAL TRADE14$30Analysis of a Tariff on Cotton ShirtsPW=$20Free trade:buyers demand 80sellers supply 25imports=55T=$

16、10/shirtprice rises to$30buyers demand 70sellers supply 40imports=30PQDS$2025Cotton shirts4070 80importsimportsAPPLICATION:INTERNATIONAL TRADE15$30Analysis of a Tariff on Cotton ShirtsFree tradeCS=A+B+C +D+E+FPS=GTotal surplus=A+B+C+D+E+F+GTariffCS=A+BPS=C+GRevenue=ETotal surplus=A+B+C+E+GPQDS$2025C

17、otton shirts40ABDEGFC70 80deadweight loss=D+FAPPLICATION:INTERNATIONAL TRADE16$30Analysis of a Tariff on Cotton ShirtsD=deadweight loss from the overproduction of shirtsF=deadweight loss from the under-consumption of shirtsPQDS$2025Cotton shirts40ABDEGFC70 80deadweight loss=D+FAPPLICATION:INTERNATIO

18、NAL TRADE17Import Quotas:Another Way to Restrict TradeAn import quota is a quantitative limit on imports of a good.Mostly has the same effects as a tariff:Raises price,reduces quantity of imports.Reduces buyers welfare.Increases sellers welfare.A tariff creates revenue for the govt.A quota creates p

19、rofits for the foreign producers of the imported goods,who can sell them at higher price.Or,govt could auction licenses to import to capture this profit as revenue.Usually it does not.APPLICATION:INTERNATIONAL TRADE18Arguments for Restricting Trade1.The jobs argumentTrade destroys jobs in industries

20、 that compete with imports.Economists response:Look at the data to see whether rising imports cause rising unemploymentAPPLICATION:INTERNATIONAL TRADE19U.S.Imports&Unemployment,Decade averages,1956-20050%2%4%6%8%10%12%14%16%1956-651966-751976-851986-951996-2005Imports(%of GDP)Unemployment(%of labor

21、force)APPLICATION:INTERNATIONAL TRADE20Arguments for Restricting Trade1.The jobs argumentTrade destroys jobs in the industries that compete against imports.Economists response:Total unemployment does not rise as imports rise,because job losses from imports are offset by job gains in export industrie

22、s.Even if all goods could be produced more cheaply abroad,the country need only have a comparative advantage to have a viable export industry and to gain from trade.APPLICATION:INTERNATIONAL TRADE21Arguments for Restricting Trade2.The national security argumentAn industry vital to national security

23、should be protected from foreign competition,to prevent dependence on imports that could be disrupted during wartime.Economists response:Fine,as long as we base policy on true security needs.But producers may exaggerate their own importance to national security to obtain protection from foreign comp

24、etition.APPLICATION:INTERNATIONAL TRADE22Arguments for Restricting Trade3.The infant-industry argumentA new industry argues for temporary protection until it is mature and can compete with foreign firms.Economists response:Difficult for govt to determine which industries will eventually be able to c

25、ompete and whether benefits of establishing these industries exceed cost to consumers of restricting imports.Besides,if a firm will be profitable in the long run,it should be willing to incur temporary losses.APPLICATION:INTERNATIONAL TRADE23Arguments for Restricting Trade4.The unfair-competition ar

26、gumentProducers argue their competitors in another country have an unfair advantage,e.g.due to govt subsidies.Economists response:Great!Then we can import extra-cheap products subsidized by the other countrys taxpayers.The gains to our consumers will exceed the losses to our producers.APPLICATION:IN

27、TERNATIONAL TRADE24Arguments for Restricting Trade5.The protection-as-bargaining-chip argumentExample:The U.S.can threaten to limit imports of French wine unless France lifts their quotas on American beef.Economists response:Suppose France refuses.Then the U.S.must choose between two bad options:A)R

28、estrict imports from France,which reduces welfare in the U.S.B)Dont restrict imports,which reduces U.S.credibility.APPLICATION:INTERNATIONAL TRADE25Trade AgreementsA country can liberalize trade with unilateral reductions in trade restrictionsmultilateral agreements with other nationsExamples of tra

29、de agreements:North American Free Trade Agreement(NAFTA),1993General Agreement on Tariffs and Trade(GATT),ongoingWorld Trade Organization(WTO),est.1995,enforces trade agreements,resolves disputesCHAPTER SUMMARYA country will export a good if the world price of the good is higher than the domestic pr

30、ice without trade.Trade raises producer surplus,reduces consumer surplus,and raises total surplus.A country will import a good if the world price is lower than the domestic price without trade.Trade lowers producer surplus but raises consumer and total surplus.A tariff benefits producers and generat

31、es revenue for the govt,but the losses to consumers exceed these gains.26CHAPTER SUMMARYCommon arguments for restricting trade include:protecting jobs,defending national security,helping infant industries,preventing unfair competition,and responding to foreign trade restrictions.Some of these arguments have merit in some cases,but economists believe free trade is usually the better policy.27