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- (22) How would the creation of an import quota affect the market for a good? Imported supply increases Domestic supply decreases Market price increases Consumer surplus increases Producer surplus decreases7. (Figure: The Domestic Market for Sugar) Use Figure: The Domestic Market for Sugar. Assume that PA is the domestic equilibrium price without trade and that PW is the world price. Before international trade, consumer surplus is equal to the area: Price of sugar (per ton) Pw PA a. A. b. A + B. c. A + B + C. d. A + B + D. A B C 3E D Qo QA Domestic supply Domestic demand Qs Quantity of sugar (per ton) I3. (15%) Import tariff on a manufactured good in a country X equals 10 % while tariff on raw materials is 2%. In price of the final good, value of imported raw materials makes up 50%. Calculate the effective rate of protection for domestic manufacturing in the country.
- 00 7 F. PRICE (Dollars per ton) 4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Honduras. The world price (Pw) of soybeans is $530 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 2. Domestic Demand Domestic Supply 770 740 710 680 650 620 06 P, 530 MacBook Pro Search or type URL 4. 51 9.96 25 (Table) Referring to the table, we see that France may now consume wine and cheese. Country and Product Before Specialization After Specialization After Trade 45 France 09 Checse England Wine Cheese O more; less 20 O less; the same amount of O less; more O more; the same amount of Unit 7- Chapter 1...xlsx O Unit 7- Chapter 1..xlsx O Topic 2 (2).docx Topic 2 (1).docx Show all 11:07 PM search 73°F 4202/8/21 delete 10 92 num lock -> 7. home enter T shift end alt ctrl5. Suppose a capital abundant country, such as Germany, is entering a free trade agreement with a resource- rich country such as Norway. (YOU DO NOT NEED TO USE A DIAGRAM FOR THIS QUESTION) (a) Explain the pattern of trade, as predicted by Heckscher Óhlin Theorem, between these two nations if they have the same technology and same taste. (b) Explain what happens to price of exports and imports in each country in the post-trade environment. (c) Does trade between these two countries create winners and losers? Explain your answer by discussing what happens to real wages and real returns to resources in these nations. (d) Does the concept of "magnification effect" as predicted by Stolper- Samuelson Theorem apply to your answer in part (c)? Why?
- (Figure: Market for Engines) If there is international trade in the market and the world price of an engine is $800, what do areas a and b represent in the figure below?1. (T/F) The trade tariffs imposed on Chinese product unambiguously increased U.S. producer surplus and consumer surplus, while total U.S. welfare decreased. 2. (T/F) Over the past two years, the prices of new cars and used cars showed significant growth. The price increases in new and used cars were both caused by the decrease in supply due to the semiconductor shortage. 3. (T/F) Charles dislikes Red Vines Licorice®. His indifference curves are positively-sloped lines or curves with positive vertical intercepts with Red Vines Licorice on the horizontal axis and other snacks on the vertical axis. 4. (T/F) CPI (Consumer Price Index) measures the cost for a fixed amount of products in the same basket. One criticism is that it ignores the substitution effect and could overestimate the actual price increase.2
- 6. The arguments for restricting trade Suppose there is a policy debate over whether the United States should impose trade restrictions on imported tires: The president of the United States argues that the government should impose a tariff on tires because they are a necessary input into the production of various weapons. Free trade would make the United States overly dependent on foreign countries for the supply of tires. In case of a war, the United States might not be able to make or purchase enough tires and, therefore, would not be able to make enough weapons to defend itself. Which of the following justifications is the president using to argue for the trade restriction on tires? Jobs and income argument Infant-industry argument OUsing-protection-as-a-bargaining-chip argument O Unfair-competition argument National-defense argumentTable of Contents Section 5- International Trade Dropbox Question 7 Dropbox Question 7 Dropbox Question 7 1. Make the case in favor of international trade based on comparative advantage. 2. Who are the winners and who are the losers when tariffs or quotas are implemented? 3. Make the case for restricting international trade. Explain your answers thoroughly Submit Dropbox Question 7 Download Reflect in ePortfolio Print1. Wheat and the welfare consequences of trade:a. [Basic static analysis of trade] Construct a simple model of the (wholesale) market for wheatglobally, and in Australia. Provide a brief but clear explanation to accompany yourdiagrams, and reflect on what access to international trade means for Australian farmers,food manufacturers (e.g. bakeries) and food consumers (i.e. households). b. [Extended dynamic analysis] The market for wheat is affected by the recent unrest inUkraine (“Ukraine war could send...”, 2022). Wheat prices are reported to have increased55 per cent even before the invasion, just based on fears of sanctions and disruptedsupply, as Russia and Ukraine account for a large portion of global wheat supply. Russiais also a key supplier of fertilisers used by Australian farmers. How can we expect this toaffect Australian wheat producers? What flow-on effects might we expect to see in thewider Australian economy? 2. Petrol and the welfare consequences of taxes:a. [Basic…
