47. Suppose that Home is a large country. Continue to assume that the free-trade world price is $100 per ton and that the Home government provides the domestic producer with an export subsidy in the amount of $40 per ton. Because of the export subsidy, the local price increases to $120 while the foreign market price declines to $80 per ton. Home price 120 100 80 D 15 20 40 45 Quantity What is the government expenditure? a. 600 b. 800 с. 1200

47. Suppose that Home is a large country. Continue to assume that the free-trade world price is $100 per ton and that the Home government provides the domestic producer with an export subsidy in the amount of $40 per ton. Because of the export subsidy, the local price increases to $120 while the foreign market price declines to $80 per ton. Home price 120 100 80 D 15 20 40 45 Quantity What is the government expenditure? a. 600 b. 800 с. 1200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the market for surfboards seen in the graph, in autarky, this country imports country imports units. Price ($) 800 OC 500 400 300 0;80 0:60 50; 80 50; 60 S Price with tariff Price with free trade D 0 20 30 50 70 80 Quantity units, while with free trade the
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1. Assume a Ricardian trade world where there is only one factor of production. We divide the world into two regions, the East and the West. We assume full employment. Output per unit of labor East Corn (tons) Wine (barrels) Labor available 4 6 1.8 million West 2 5 3 million The East consumes 4,800,000 barrels of wine whether it is in autarky (no trade) or engaging in free trade. When trade occurs, the two regions completely specialize and trade according to their comparative advantage. The terms of trade are 1 corn = 2 wine. When the two regions move from no trade to free trade: (a) what will be the gains of trade for the East (in terms of corn)? (b) how much wine and corn will the West consume. (c) explain carefully how the West gains from trade.
3. Trade creation and trade diversion Suppose that with free trade, the cost to the United States of importing a calculator from Mexico is $12.00, and the cost of importing a calculator from China is $10.00. A calculator produced in the United States costs $16.00. Suppose further that before NAFTA, the United States maintained a tariff of 25% against all calculator imports. Then, under NAFTA, all tariffs between Mexico and the United States are removed, while the tariff against imports from China remains in effect. Assume that the tariff does not affect the world price of calculators. In the following table, indicate which country the United States imported calculators from before NAFTA. Then indicate which country the United States imported calculators from under NAFTA. Check all that apply. (Note: Leave the row blank if the United States doesn't import from either country.) Scenario Before NAFTA Under NAFTA Stakeholder United States Imports from... Mexico China In the following…
The US exports $10 billion worth of inorganic chemicals to Germany and imports inorganic chemicals from Germany for the same dollar amount. Japan imports $1 billion of garments from Indonesia, but does not export any to Indonesia. The measure of intra-industry trade between Germany and the US first, and between Japan and Indonesia second are respectively... a. 0.5 and 0.5 b. 1 and 0 c. -1 and 1 d. 0 and 1
4. Suppose that Egypt and the EU can only trade in cotton and wheat. Egyptian economy is smaller than that of the EU. The opportunity cost of 1 yard of cotton is 1.2 kg of wheat in Egypt. The world price of 1 yard of cotton is 1.1 kg of wheat. If there are no obstacles to trade, all markets are perfectly competitive and transportation is costless, then most likely in the long run. a. Egypt will import both cotton and wheat. b. Egypt will export both cotton and wheat. c. Egypt will export cotton and import wheat. d. Egypt will export wheat and import cotton. 5. For a fixed exchange rate system, if the home demand for the foreign currency increases, then a. The exchange rate is forced to change for sure. b. None of the statements is true c. The supply of the foreign currency by home central bank or treasury department would increase, so that the fixed. d. the supply of the foreign currency by foreign countries would automatically increase, so that the exchange rate
If protective import−restricting tariffs are imposed by a country, in the majority of cases that nation's producers end up A. receiving a lower profit for the domestic good than they otherwise would. B. producing less of the good than they otherwise would. C. receiving a lower price for the good than they otherwise would. D. receiving a higher price for the good than they otherwise would.
A country that produces paper is a price taker in the world paper market. The world price is pw: Suppose that the industry is not polluting. onor The domestic supply curve, S, is upward sloping, but the home country can nti import as much as it wants at the world price, pw. In the free-trade equilibrium, e1, the equilibrium quantity is Q, and the equilibrium price is the world price, pw- With a ban on imports, the equilibrium is e2, quantity falls to Q2, and price rises to P2 P2 How do we know that winners from trade can compensate losers and still have enough left over to benefit themselves? mes The winners from trade can compensate the losers and still have enough left over to benefit themselves because, with free trade, O A. consumer surplus increases by more than producer surplus decreases. Q2 Q1 Q, Tons per year O B. consumer surplus increases by more than deadweight loss increases. O C. producer surplus increases by more than consumer surplus decreases. O D. producer surplus…
Most economists international trade because Select the correct answer below: oppose; it hurts domestic producers and special interest groups oppose; they believe that other countries engage in unfair competition through dumping and other predatory pricing O support; the gains from trade exceed the costs and can be redistributed to make everyone better off O support; it lowers prices for consumers and that is more significant than the cost of lost jobs in domestic production
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2. Winners and losers from free trade Consider the imaginary economy of Meekerton and the market for meekies, a hypothetical good. Without international trade the domestic price of meekies is $38. Suppose that the world price of meekies is $36. Assume that if it were to enter the international market for meekies, Meekerton is too small to influence the world price. If Meekerton decides to participate in free trade, then it will Given current economic conditions in Meekerton, complete the following table by indicating whether each of the statements is true or false. Statement meekies. Meekertonian producers were worse off without free trade than they are with it. Meekertonian consumers were better off without free trade than they are with it. True False True True or False: When a nation is too small to affect world prices, allowing free trade will sometimes decrease total surplus in that country, regardless of whether it imports or exports as a result of international trade. False