This figure shows demand and supply for a product in country A, which is interested in engaging in international trade. The import price from country B is $3 and from country C is $4. Country A imposes a fixed tariff of $2 per unit of import. Answer the following questions based on these assumptions. Demand Supply

This figure shows demand and supply for a product in country A, which is interested in engaging in international trade. The import price from country B is $3 and from country C is $4. Country A imposes a fixed tariff of $2 per unit of import. Answer the following questions based on these assumptions. Demand Supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

(a) Draw an offer curve for Guatemala that shows its offer of coffee for wheat. Include both an elastic and inelastic range in Guatemala’s offer curve. (b) Draw an offer curve for the United States that shows its offer of wheat for coffee. Show this US curve intersecting the Guatemalan offer curve in the inelastic range of the Guatemalan curve. Note the equilibrium terms of trade established. (c) Compare the equilibrium international price you found in question (b) to the autarky prices in Guatemala and in the United States. (You can find a country’s autarky price by drawing a line tangent to the offer curve at the origin.) Explain which country benefits the most from a more favorable movement in its terms of trade when it abandons its autarky position. (d) “The Guatemalan offer curve is likely to be less elastic than the US offer curve.” Justify this claim by explaining what factors determine the elasticity of an offer curve.
China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 11.5 – Q Supply: P = 5.5 + Q Price is in 10 Yuan (¥) per bushel of soybeans and the units for Quantity are 100 million bushels per year. This is to make graphing simpler. This does NOT mean that the price is 10 and quantity is 100. Rather it means that if the price was 40¥ and the quantity was 7,500,000,000 bushels, this would plot as 4 and 7.5 respectively. The world price for soybeans is ¥65/bushel (this would graph as a horizontal line at 6.5). Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including: Domestic Demand curve (D), Domestic Supply curve (S), the World Price (WP), and the Price with tariffs (PT), along with the quantities imported both with and without the tariff. Based on your graph, what…
4. A graphical comparison of tariffs and quotas Alagir and Ertil are small countries that protect their economic growth from rapidly advancing globalization by limiting the import of rugs to 20 million. To this end, each country imposes a different type of trade barrier when the world price (Pw) is $3,000. In Alagir, the government decides to impose a tariff of $2,000 per rug; in Ertil, the government implements a quota of 20 million rugs. Assume that Alagir and Ertil have identical domestic demand (Do) and supply (S) curves for rugs as shown on the following graph. Under these conditions, the price of rugs is $5,000 per rug in each country. PRICE (Dolars per rug) 10000 9000 8000 7000 8000 5000 4000 3000 2000 1000 D 0 P.. 10 D₂ * 20 D₁ XX ☆ XX 40 30 50 60 70 QUANTITY (Millions of rugs) S 80 90 100 (?)
The following graph shows the domestic demand for and supply of limes in Bangladesh. The world price (Pw) of limes is $800 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of limes and that there are no transportation or transaction costs associated with international trade in limes. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per ton) PRICE (Dollars per ton) 1120 1080 1040 1000 960 9:20 880 640 800 760 720 960 920 880 840 800 760 720 0 0 Domestic Demand 10 I 20 T I 10 20 Domestic Supply 70 60 50 30 40 QUANTITY (Tons of limes). 30 40 50 60 70 QUANTITY (Tons of limes) 80 A tariff set at this level would raise $ 80 90 100 PW 90 100 If Bangladesh is open to international trade in limes without any restrictions, it will…
The following graph shows the domestic supply of and demand for maize in Guatemala. The world price (Pr) of maize is $255 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 435 Domestic Demand Domestic Supply 415 305 375 355 X 335 315 295 275 Pu W 255 235 0 40 80 300 400 120 100 200 240 280 320 QUANTITY (Tons of maize) If Guatemala is open to international trade in maize without any restrictions, it will import. tons of maize. per ton will Suppose the Guatemalan government wants to reduce imports to exactly 80 tons of maize to help domestic producers. A tariff of S achieve this. A tariff set at this level would raise $ in revenue…
The following graph shows the domestic demand for and supply of maize in Kenya. The world price (Pw) of maize is $260 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per ton) 485 Domestic Demand Domestic Supply 460 435 410 385 360 335 P 310 285 260 PW 235 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of maize) (?) If Kenya is open to international trade in maize without any restrictions, it will import tons of maize. Suppose the Kenyan government wants to reduce imports to exactly 20 tons of maize to help domestic producers. A tariff of $ achieve this. A tariff…
The following graph shows the domestic supply of and demand for maize in Burundi. The world price (Pw) of maize is $270 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 450 Domestic Demand Domestic Supply 430 410 390 370 350 330 310 290 P 270 250 40 80 120 180 200 240 280 320 360 400 QUANTITY (Tons of maize) If Burundi is open to international trade in maize without any restrictions, it will import tons of maize. Suppose the Burundian government wants to reduce imports to exactly 160 tons of maize to help domestic producers. A tariff of per ton will achieve this. A tariff set at this level would raise $ in revenue for the…
Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where Sx is the supply curve and Dx is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government restricts imports of apples to 120,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of apples with a quota of 120,000 apples. PRICE (Dollars perton) 1000 900 800 700 000 500 400 300 200 -- 100 D 0 30 00 90 120 160 Sk 180 210 240 270 300 5x+Q -- Price with Quota Change in PS Quota Rents DWL
The following graph shows the domestic supply of and demand for maize in Panama. The world price (Pw) of maize is $250 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per ton) 475 450 425 400 375 350 325 300 275 250 225 Domestic Demand 0 10 20 Domestic Supply 30 40 50 60 70 QUANTITY (Tans of maize) PW A tariff set at this level would raise $ 80 90 100 If Panama is open to international trade in maize without any restrictions, it will import Suppose the Panamanian government wants to reduce imports to exactly 20 tons of maize to help domestic producers. A tariff of $ achieve this. tons of maize. in revenue for the…
4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Guatemala. The world price (Pw) of soybeans is $550 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. 830 Domestic Demand Domestic Supply 795 760 725 O 690 655 620 585 Pw 550 515 480 30 60 06 120 150 180 210 240 270 300 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)
The following graph shows the same domestic demand and supply curves for soybeans in Venezuela. Suppose that the Venezuelan government changes its international trade policy to allow the free trade of soybeans. The horizontal black line (PW) represents the world price of soybeans at $350 per ton. Assume that Venezuela's entry into the world market for soybeans has no effect on the world price and 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. Use the green point (triangle symbol) to shade consumer surplus, and then use the purple point (diamond symbol) to shade producer surplus. When Venezuela allows free trade of soybeans, the price of a ton soybeans in Venezuela will be $350. At this price, tons of soybean will be demanded in Venezuela, and tons will be supplied by domestic suppliers. Therefore,…
The following graph shows the domestic market for oil in the United States, where SDSD is the domestic supply curve, and DDDD is the domestic demand curve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the world price of oil. Under free trade, the United States faced a total supply schedule of SD+WSD+W, which shows the quantity of oil that both domestic and foreign producers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $240 per barrel of oil and a quantity of 9 million barrels. At this price, the United States imports 6 million barrels of oil. Suppose the U.S. government imposes a $60-per-barrel tariff on oil imports.