6. The world market for large passenger jet airplånes is all onBOPfirms: Boeing in the United States and Airbus in Europe.a. Explain why the market equilibrium might involve either a low price for airplanes or ahigh price for airplanes.b. From the perspective of the well-being of the United States (or Europe), why might ahigh-price equilibrium be desirable?c. What price outcome is desirable for Japan or Brazil? Why?d. If the outcome is the high-price equilibrium, does Japan or Brazil still gain fromimporting airplanes? Explain.7. A monopolistically competitive industry exists in both Pugelovia and the rest of theworld, but there has been no trade in this type of product. Trade in this type of productis now opened.a. Explain how opening trade affects domestic consumers of this type of product inPugelovia.b. Explain how opening trade affects domestic producers of this type of product inPugelovia.8. You are a consumer of a product that your country imports. There is an increase in demandin the rest of the world for this type of product. You are wondering if this change will be goodor bad for you (in your role as consumer of this product). Is it possible that your conclusiondepends on whether (a) the product is undifferentiated and has a perfectly competitive mar-ket (so the standard model of Chapters 2-5 applies) or (b) the product is differentiated andhas a monopolistically competitive market (so the model of this chapter applies)? Explain.9. The global market for household dishwashers is monopolistically competitive. It is ini-tially in a free-trade equilibrium, with 40 models offered, and a price of $600 for a typicaldishwasher. In your answer use a graph like that shown in Figure 6.5. There is pow Opermanent increase in global demand for dishwashers generally, so the global marketsize increases by about 15 percent. Show graphically the effect on the 8. Which of the following can lead to a reversal of the country's trade paltoshift in which a previously exported good becomes an imported good or a previouslyimported good becomes an exported good)? Consider each separately. Explain each.a. Growth in the country's total supply (endowment) of the factor that is initiallyscarce in the country.b. International diffusion of technology.c. Shifting tastes of the country's consumers.9. A free-trade equilibrium exists in which the United States exports machinery andimports clothing from the rest of the world. The goods are produced with two fac-tors: capital and labor. The trade pattern is the one predicted by the H-0 theory.An increase now occurs in the U.S. endowment of capital, its abundant factor.a. What is the effect on the shape and position of the U.S. production-possibilitycurve?b. What is the effect on the actual production quantities in the United States if theproduct price ratio is unchanged? Explain.c. What is the effect on the U.S. willingness to trade?d. Assuming that the U.S. growth does affect the international equilibrium priceratio, what is the direction of the change in this price ratio?e. Is it possible that U.S. national well-being declines as a result of the endowmentgrowth and the resulting change in the international price ratio? Explain.10. A free-trade equilibrium exists in a two-region, two-product world. The United Statesexports food and imports clothing. A long-term drought now occurs in East Asia.a. What is the effect on East Asia's willingness to trade?b. Assuming that each region is large enough to influence international prices.how does East Asia's drought affect the equilibrium international price ratio?c. Show on a graph and explain the effect of all this on the following in the UnitedStates: (1) quantities produced of food and clothing, (2) quantities consumed ofhing, (3) U.S. well-being.

Free trade is a trade policy that involves the removal of barriers from imports and exports of a…

Answered: 7. A monopolistically competitive…

7. A monopolistically competitive world, but there has been no tra is now opened. a. Explain how opening trade a Pugelovia. b. Explain how opening trade Pugelovia.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Exercise A.2. Point out the basic characteristics that define monopolistic competition and indicate the inefficiencies of this market structure.
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