Suppose now that the United States trades with China but neither country can affect the world price of jackets. Initially, the United States does not use any trade barriers (neither tariffs nor quotas) on jackets imported from China. Assume that China has a comparative advantage in producing jackets and charges the world price of $8 per jacket. On the graph, use the grey line (star symbol) to indicate the world price of jackets. At the world price of $8 per jacket, U.S. consumers will demand and the U.S. will import million jackets from China. million jackets, U.S. manufacturers will supply million jackets,
Suppose now that the United States trades with China but neither country can affect the world price of jackets. Initially, the United States does not use any trade barriers (neither tariffs nor quotas) on jackets imported from China. Assume that China has a comparative advantage in producing jackets and charges the world price of $8 per jacket. On the graph, use the grey line (star symbol) to indicate the world price of jackets. At the world price of $8 per jacket, U.S. consumers will demand and the U.S. will import million jackets from China. million jackets, U.S. manufacturers will supply million jackets,
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
Chapter4: Supply And Demand: An Initial Look
Section: Chapter Questions
Problem 3TY
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Question
![5. Import quotas
The following graph shows the U.S. domestic market for jackets.
Use this graph to answer the questions that follow.
PRICE (Dollars)
20
18
16
14
12
10
8
CD
6
4
2
0
0
4
8
Domestic Supply
Domestic Demand
12
16 20
24 28
QUANTITY (Millions of jackets)
With no trade, the equilibrium price of a jacket is $
supplied equal
million jackets.
32 36 40
Domestic Demand
Domestic Supply
Price,
(World)
Price (Quota)
(?)
At this price, both the domestic quantity demanded and the domestic quantity](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F39d223ce-8c4a-480a-b315-93c373df78bd%2F19f49e20-d1a4-43a7-833b-803dd801cedd%2Fcqjsx89_processed.png&w=3840&q=75)
Transcribed Image Text:5. Import quotas
The following graph shows the U.S. domestic market for jackets.
Use this graph to answer the questions that follow.
PRICE (Dollars)
20
18
16
14
12
10
8
CD
6
4
2
0
0
4
8
Domestic Supply
Domestic Demand
12
16 20
24 28
QUANTITY (Millions of jackets)
With no trade, the equilibrium price of a jacket is $
supplied equal
million jackets.
32 36 40
Domestic Demand
Domestic Supply
Price,
(World)
Price (Quota)
(?)
At this price, both the domestic quantity demanded and the domestic quantity
![Suppose now that the United States trades with China but neither country can affect the world price of jackets. Initially, the United States does not
use any trade barriers (neither tariffs nor quotas) on jackets imported from China. Assume that China has a comparative advantage in producing
jackets and charges the world price of $8 per jacket.
On the graph, use the grey line (star symbol) to indicate the world price of jackets.
At the world price of $8 per jacket, U.S. consumers will demand
and the U.S. will import
million jackets from China.
million jackets, U.S. manufacturers will supply
Suppose now that the United States imposes a quota on imports of jackets from China, which limits imports of Chinese jackets to 0 million. (Hint: The
original domestic supply curve represents domestic production only.)
On the previous graph, use the purple line (diamond symbol) to indicate the new U.S. price under the quota.
Under the quota, the price of jackets is $
demand
million jackets.
per jacket, U.S. producers supply
Compared to conditions under free trade, U.S. manufacturers sell
jacket quota, while U.S. consumers buy
jackets and pay
jackets and receive
million jackets,
million jackets, and U.S. consumers
price after the imposition of the
price after the imposition of the jacket quota.
Supporters of the jacket quota over free trade argue that the trade restriction will save jobs in the United States. What are the potential pitfalls of
such an argument? Check all that apply.
The costs to domestic jacket consumers may outweigh the benefits of jobs saved in the jacket industry.
China may retaliate, imposing restrictions on exports from the United States, thereby generating unemployment in U.S. export
industries.
Trade restrictions simply reshuffle jobs by increasing employment in the protected industry and reducing employment in other industries.
Consumers will likely divert large amounts of scarce resources toward lobbying for the removal of the quota.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F39d223ce-8c4a-480a-b315-93c373df78bd%2F19f49e20-d1a4-43a7-833b-803dd801cedd%2Fbtutdtm_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose now that the United States trades with China but neither country can affect the world price of jackets. Initially, the United States does not
use any trade barriers (neither tariffs nor quotas) on jackets imported from China. Assume that China has a comparative advantage in producing
jackets and charges the world price of $8 per jacket.
On the graph, use the grey line (star symbol) to indicate the world price of jackets.
At the world price of $8 per jacket, U.S. consumers will demand
and the U.S. will import
million jackets from China.
million jackets, U.S. manufacturers will supply
Suppose now that the United States imposes a quota on imports of jackets from China, which limits imports of Chinese jackets to 0 million. (Hint: The
original domestic supply curve represents domestic production only.)
On the previous graph, use the purple line (diamond symbol) to indicate the new U.S. price under the quota.
Under the quota, the price of jackets is $
demand
million jackets.
per jacket, U.S. producers supply
Compared to conditions under free trade, U.S. manufacturers sell
jacket quota, while U.S. consumers buy
jackets and pay
jackets and receive
million jackets,
million jackets, and U.S. consumers
price after the imposition of the
price after the imposition of the jacket quota.
Supporters of the jacket quota over free trade argue that the trade restriction will save jobs in the United States. What are the potential pitfalls of
such an argument? Check all that apply.
The costs to domestic jacket consumers may outweigh the benefits of jobs saved in the jacket industry.
China may retaliate, imposing restrictions on exports from the United States, thereby generating unemployment in U.S. export
industries.
Trade restrictions simply reshuffle jobs by increasing employment in the protected industry and reducing employment in other industries.
Consumers will likely divert large amounts of scarce resources toward lobbying for the removal of the quota.
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