Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 10, Problem 4IP
To determine
Cost of implementing the
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23. What happens to the relative price of
a good as a result of trade if there is an
increasing return to scale in the industry
producing the good. Is it still converging to a
price between domestic and foreign price of
the good? Draw a graph to answer.
Suppose there are 2 countries that have the following supply and demand equations
in autarky
Country A
Demand: Q = 80 - 4P
Supply: Q = 2P - 4
Country B
Demand: Q = 32 - 2P
Supply: Q = 8P - 8
a) Given the information above which country would be the importer? (Enter A, B)
b)What would be the Free Trade Price?
c)What would be the Free Trade quantity traded?
d) If the importing country imposes a tariff equal to $2 per unit, what would be the
new price in the importing country?
Under what conditions could an import quota and a tariff have have exactly the same effect on price and bring the same gain and losses ( given a tariff level that restricts imports just as much as the quota would)?
Chapter 10 Solutions
Microeconomics
Ch. 10.1 - Prob. 1QCh. 10.1 - Prob. 2QCh. 10.1 - Prob. 3QCh. 10.1 - Prob. 4QCh. 10.1 - Prob. 5QCh. 10.1 - Prob. 6QCh. 10.1 - Prob. 7QCh. 10.1 - Prob. 8QCh. 10.1 - Prob. 9QCh. 10.1 - Prob. 10Q
Ch. 10 - Prob. 1QECh. 10 - Prob. 2QECh. 10 - Prob. 3QECh. 10 - Prob. 4QECh. 10 - Prob. 5QECh. 10 - Prob. 6QECh. 10 - Prob. 7QECh. 10 - Prob. 8QECh. 10 - Prob. 9QECh. 10 - Prob. 10QECh. 10 - Prob. 11QECh. 10 - Prob. 12QECh. 10 - Prob. 13QECh. 10 - Prob. 1QAPCh. 10 - Prob. 2QAPCh. 10 - Prob. 3QAPCh. 10 - Prob. 4QAPCh. 10 - Prob. 5QAPCh. 10 - Prob. 1IPCh. 10 - Prob. 2IPCh. 10 - Prob. 3IPCh. 10 - Prob. 4IPCh. 10 - Prob. 5IPCh. 10 - Prob. 6IPCh. 10 - Prob. 7IPCh. 10 - Prob. 8IP
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- Suppose that the world price of bananas is 18 U.S. cents a pound and that when Australia does not trade bananas internationally, their equilibrium price in Australia is 12 U.S. cents a pound. If Australia opens up to international trade, does it export or import bananas? Explain how the price of bananas in Australia changes. How does the quantity of bananas consume in Australia change? How does the quantity of bananas grown in Australia change?arrow_forwardExport Subsidy. Suppose the home country exports cloth and imports food. Show the impact of an export subsidy by the home country using the relative demand and relative supply curves for cloth. What is the impact on the home country's terms of trade? Make sure you label your graph and explain your reasoning.arrow_forwardCountry X has 100 units of labour and country Y has 200 units of labour. Both countries produce computers and televisions. The unit labour requirements are given in the table below: Computers Televisions Country X 50 Country Y 100 Assume that free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to televisions will be Select one: a. 0.02 (or 1/50) O b. 0.013 (or 1/75) c. 0.01 (or 1/100) d. impossible to determine without knowing the relative price of computers in terms of televisionsarrow_forward
- “Imports destroy jobs; exports create them. The average American is hurt by imports and helped by exports.” Do you agree or disagree with this statement? Explain.arrow_forwardOnly typed answerarrow_forwardif u.s. quotas on imported goods were eliminated: a) the supply of sugar in the U.S. would shift to the left and the prices would rise b) the world price of sugar would rise c) the demand for sugar in the U.S. would shift to the left and prices would fall. d) the supply of sugar in the U.S. would shift to the right and sugar prices would fall e) None of the answers are correct.arrow_forward
- Example 9.5 describes the effects of the sugar quota. The supply equation is Qs = - 7.48 + 0.84P, and the demand equation is Qp = 26.7 - 0.23P, where the price is in cents and quantities are in billions of pounds. The world price is 12 cents per pound. In 2005, imports were limited to 5.3 billion pounds, which pushed the domestic price to 27 cents per pound. a. What would be the new U.S. domestic price? (Round your response to two decimal places.)arrow_forwardI asked this question in an earlier assignment; It was a bonus question about price floors and tariffs. I’m curious if your answers have changed. Would tariffs on imported wine be a price floor?arrow_forwardSteel Industry Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel. Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph. 1. Because this country exports steel, the world price is represented by P1 or P2. Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad. 2. With this export subsidy, the price paid by domestic consumers is $???? per ton, and the price received by domestic producers is $???? per ton. 3. The quantity of steel consumed by domestic consumers INCREASES or REMAINS UNCHANGED or DECREASES, the quantity of steel produced by domestic producers INCREASES or REMAINS UNCHANGED or DECREASES, and the quantity of steel exported INCREASES or REMAINS UNCHANGED or DECREASES. 4. TRUE or FALSE:…arrow_forward
- Consider that the current world price for copper ore is $5.20 per pound. Suppose the domestic market for copper ore in Chile is described by the following demand and supply equations, respectively: P = 8.80 -0.015Q and P = 0.8 +0.025Q, where P is the price per pound, measured in dollars, and Q is the quantity measured in thousands of pounds per month. Similarly, suppose that the domestic market for copper ore in Japan is described by the following demand and supply equations: P = 6.80 -0.02Q and P = 0.8 +0.04Q, where P is the price per pound, measured in dollars, and Q is the quantity measured in thousands of pounds per month. (Question 7 of 8) After receiving requests from lobbyists and domestic producers, the government of the importing country imposes a tariff of $0.30 in the market for copper ore. As a result of the government's policy, what is the change in the government's revenue in the importing country? (report your answer at 2 decimal places)arrow_forwardDefine tariff .arrow_forwardThe following graph shows the market for wheat in the European Union (EU). The world price of wheat is $4.00 per bushel, so Sworld represents the world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the farmers by imposing a variable levy of $4.00 per bushel to limit the import of wheat. On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $4.00 levy. Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position. PRICE (Dollars per bushel) 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0 DEU SEU SWorld 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 WHEAT (Bushels) Before the levy After the levy Support Price SWorld New Fill in the following table by entering the quantities for production, consumption, and imports of wheat in the EU…arrow_forward
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