630550475450425SusSus.w.1Sus wDus3255 102030405055Tons ofSteelAssume the United States is a large consumer of steel that is able to influence the world price. Its demand and supply schedules are respectively denotedby DU.S. and SU.S. in Figure 4.2. When trade occurs the overall (United States plus world) supply schedule of steel is denoted by SU.S.+W. If a specifictariff of $100 is imposed on imported steel, calculate the welfare effects listed below.Using the graph above to calculate the:1. Redistributive effectII. Protective effectIII. Domestic revenue effectIV. Terms of trade effectV. Consumption effect

I. Redistributive Effect:This effect measures the redistribution of consumer and producer surplus…

Answered: 630 550 475 450 425 Sus Sus.w.1 Sus w…

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter21: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 6DQ

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The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 34.6 and Table 34.7. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell? What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell? Sketch two supply and demand diagrams, one for each country, in the situation before trade. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade. If the Land of Submarines imposes an anti- dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country. Does your general answer change if the Land of Submarines imposes an import quota of 70?
Suppose that Congress imposes a tariff on importedautomobiles to protect the U.S. auto industry fromforeign competition. Assuming that the United Statesis a price taker in the world auto market, show thefollowing on a diagram: the change in the quantityof imports, the loss to U.S. consumers, the gainto U.S. manufacturers, government revenue, andthe deadweight loss associated with the tariff. Theloss to consumers can be decomposed into threepieces: a gain to domestic producers, revenue forthe government, and a deadweight loss. Use yourdiagram to identify these three pieces.
5. You have been asked to quantify the effects of removing a country's tariff on sugar. The ompute its value? nard part of the work is already done: Somebody has estimated how many pouncs Sugar would be produced, consumed, and imported by the country if there were no saber duty. You are given the information shown in the table. Estimated Situation without Tariff Situation with Import Tariff World price $0.10 per pound $0.10 per pound $0.02 per pound $0.12 per pound Tariff $0.10 per pound Domestic price Domestic consumption (billions of pounds per year) Domestic production (billions of pounds per year) Imports (billions of pounds per year) 22 20 8. 16 12 Calculate the following measures: a. The domestic consumers' gain from removing the tariff. b. The domestic producers' loss from removing the tariff. C. The government tariff revenue loss. d. The net effect on national well-being.
7. Country A has a tariff on imported TVs. But,the new government of Country A decided tocharge only half the tariffs against TVs fromcountry B, but keep the full tariff against TVsfrom countries C, D, and E. What would be theimpact on______O.A. The price of TVs in CountryAO.B.Quantity of domestic supply in Country AO.C. Quantity of imports in Country AO.D. Quantity of TVS exported by Country BO.E. Quantity of TVs exported by Countries C, D,and E
1he world price of wine is below the price that wouldprevail in Canada in the absence of trade.n Assuming that Canadian imports of wine arc asmall part of total world wine production, drawa graph for the Canadian market for wine underfree trade. (dentify consumer surplus, producersurplus, and total surplus in an appropriate table.h. Now suppose that an unusual shift of the GulfStream leads to an unseasonably cold summerin Europe, destroying much of the grape harvf"st thNP. What eff,..ct dnM thi~ "hock h:tvPonthe world price of wine? Using your graph andtable from part (a), show the effect on consumersurplus, producer surplus, and total surplusin Canada. Who arc the winners and losers?l" C':ln:'lci:'l M :t whnlP hPHf"r nr wnMOf" nff?
A Moving to another question will save this response. Question 13 Pheef A B D D What could this graph be used to illustrate? O a. The welfare benefits when a country imports a good. O b. How to apply the Big Mac index to the trade model. O c. The welfare effects of a tariff. O d. The welfare benefits when a country exports a good. A Moving to another question will save this response. S Q beef WORLD PRICE
Consider the arguments for restricting trade.a. Imagine that you are a lobbyist for timber, anestablished industry suffering from low-pricedforeign competition, and you are trying to getCongress to pass trade restrictions. Which twoor three of the five arguments discussed in thechapter do you think would be most persuasiveto the average member of Congress? Explain yourreasoning.b. Now assume you are an astute student ofeconomics (not a hard assumption, we hope).Although all the arguments for restricting tradehave their shortcomings, name the two or threearguments that seem to make the most economicsense to you. For each, describe the economicrationale for and against these arguments for traderestrictions.
Suppose the U.S. imposes a trade embargo onNorth Korea in order to exert political pressureon the government. Consider how the embargowill affect U.S. producers. Under what conditionswould they support the embargo? Why mightthey oppose it?
Graph 3 Price Pw+t Pw 0 g O b+d+f+h Od+f+h C O d+h a b 100 d 200 9 f h 500 700 Supply Refer to Graph 3 above depicting a particular country's steel market (output measured in tons). Pw is the world price for steel. Suppose this country levies a import tariff equal to t. The resulting "dead weight loss" from this tariff policy in this country is: Demand Quantity
2. Consider the following demand and supply functions for wine for Italy and Spain. D' 180 – 20P' DS 80 – 10PS SI -20 + 10P! -20 + 20PS a) Calulate (i) the equilibrium world price when both countries are OPEN to trade; (ii) quantity exported and imported by each country; (iii) The TOTAL welfare of the importing country.Give exact numbers. b) The importing country introduces a tariff of €2. Calculate (i) the new price in the importing country; (ii) the new free trade price; (iii) the Total welfare of the importing country; (iv) the effect on the welfare of the importing country in comparison with your previous answer. Give exact numbers.
Which of the following are potentially valid arguments for tariffs or export subsi- dies, and which are not? Explain your answers. a. “Dairy producer earning in Wales are at their lowest peak despite an overallrise in farm business incomes.” b. “ThemoreecologicallycertifiedfoodsEuropeanUnionrequires,thehighertheprice of these products will be on common market.” c. “US soybean exports to China and India don’t just mean increased wealth forfarmers – they mean increased wealth for everyone in the value chain.” d. “ThePETindustrycontinuedtosustainU.S.recyclingprograms;thisshowsthe strength of the PET recycling market in the face of significant global economicslowdown and a drop in virgin feedstock prices.” e. “The price of coal has been stable, but the production dropped 10.3 percent, and workers have been forced to look for other jobs.”
In 1932, U.S. manufacturers, which used to enjoy steady relationships with their foreign distributors and export nearly 60% of their output, realized that their exports had fallen to only 20% of total output. Which of the following is the most likely reason for this decrease in exports? O The low quality of U.S. products O war between the United States and Canada O Retaliatory tariffs by trading partners The signing of the General Agreement on Tariffs and Trade (GATT) in 1947 resulted in the adoption of several new trade policies. In the following table, indicate if each of the policies listed was a result of GATT. Then, complete the last column by identifying the means by which each GATT policy was implemented. Policy GATT Policy Implementation Promotion of protectionism Clear and public trade rules Promotion of lower trade barriers Yes v Institution of the WTO Promotion of trade transparency Settling trade disputes In the 1960s, multilateral negotiations called the Uruguay Round…

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