PRINCIPLES OF MICROECONOMICS (OER)
2nd Edition
ISBN: 9781947172340
Author: Timothy Taylor, Steven A. Greenlaw
Publisher: OpenStax
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Textbook Question
Chapter 20, Problem 21RQ
Name and define three policy tools for enacting protectionism.
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1. After the reopening of borders with mainland China following the COVID-19 lockdown, residents
living near the border now have the option to shop for food on either side. In Hong Kong, the cost
of food is at its listed price, while across the border in mainland China, the price is only half that
of Hong Kong's. A recent report indicates a decline in food sales in Hong Kong post-reopening.
**
Diagrams need not be to scale; Focus on accurately representing the relevant concepts
and relationships rather than the exact proportions.
(a) Using a diagram, explain why Hong Kong's food sales might have dropped after the border
reopening. Assume that consumers are indifferent between purchasing food in Hong Kong or
mainland China, and therefore, their indifference curves have a slope of one like below.
Additionally, consider that there are no transport costs and the daily food budget for consumers
is identical whether they shop in Hong Kong or mainland China. I
3.
14
(b) In response to the…
2. Health Food Company is a well-known global brand that specializes in healthy and organic food
products. One of their main products is organic chicken, which they source from small farmers
in the area. Health Food Company is the sole buyer of organic chicken in the market.
(a) In the context of the organic chicken industry, what type of market structure is Health Food
Company operating in?
(b) Using a diagram, explain how the identified market structure affects the input pricing and
output decisions of Health Food Company. Specifically, include the relevant curves and
any key points such as the profit-maximizing price and quantity. ()
(c) How can encouraging small chicken farmers to form bargaining associations help improve
their trade terms? Explain how this works by drawing on the graph in answer (b) to
illustrate your answer.
2. Suppose that a farmer has two ways to produce his crop. He can use a low-polluting
technology with the marginal cost curve MCL or a high polluting technology with the
marginal cost curve MCH. If the farmer uses the high-polluting technology, for each unit of
quantity produced, one unit of pollution is also produced. Pollution causes pollution
damages that are valued at $E per unit. The good produced can be sold in the market for $P
per unit.
P
1
MCH
0
Q₁
MCL
Q2
E
a.
b.
C.
If there are no restrictions on the firm's choices, which technology will the farmer use and
what quantity will he produce? Explain, referring to the area identified in the figure
Given your response in part a, is it socially efficient for there to be no restriction on
production? Explain, referring to the area identified in the figure
If the government restricts production to Q1, what technology would the farmer choose?
Would a socially efficient outcome be achieved? Explain, referring to the area identified in…
Chapter 20 Solutions
PRINCIPLES OF MICROECONOMICS (OER)
Ch. 20 - Explain how a tariff reduction causes an Increase...Ch. 20 - Explain how a subsidy on agricultural goods like...Ch. 20 - Explain how trade barriers save jobs in protected...Ch. 20 - Explain how trade barriers raise wages in...Ch. 20 - How does international trade affect working...Ch. 20 - Do the jobs for workers in low-income countries...Ch. 20 - How do trade barriers affect the average Income...Ch. 20 - How does the cost of saving jobs in protected...Ch. 20 - Explain how predatory pricing could be a...Ch. 20 - Why do low-income countries like Brazil, Egypt, or...
Ch. 20 - Explain the logic behind the race to the bottom...Ch. 20 - What are the conditions under which a country may...Ch. 20 - Why is the national security argument not...Ch. 20 - Assume a perfectly competitive market and the...Ch. 20 - What is the difference between a free trade...Ch. 20 - Why would countries promote protectionist laws,...Ch. 20 - What might account for the dramatic increase in...Ch. 20 - How does competition, whether domestic or foreign,...Ch. 20 - What are the gains from competition?Ch. 20 - Who does protectionism protect? From what does it...Ch. 20 - Name and define three policy tools for enacting...Ch. 20 - How does protectionism affect the price of the...Ch. 20 - Does international trade, taken as a whole,...Ch. 20 - Is international trade likely to have roughly the...Ch. 20 - How is international trade, taken as a whole,...Ch. 20 - Is international trade likely to have about the...Ch. 20 - What are main reasons for protecting infant...Ch. 20 - What is dumping? Why does prohibiting it often...Ch. 20 - What is the race to the bottom scenario?Ch. 20 - Do the rules of international trade require that...Ch. 20 - What is the national interest argument for...Ch. 20 - Name several of the international treaties where...Ch. 20 - What is the general trend of trade barriers over...Ch. 20 - If opening up to free trade would benefit a...Ch. 20 - Who gains and who loses from trade?Ch. 20 - Why is trade a good thing if some people lose?Ch. 20 - What are some ways that governments can help...Ch. 20 - Show graphically that for any tariff, there is an...Ch. 20 - From the Work It Out Effects of Trade Barriers,...Ch. 20 - If trade barriers hurt the average worker in an...Ch. 20 - Why do you think labor standards and working...Ch. 20 - How would direct subsidies to key industries be...Ch. 20 - How can governments identify good candidates for...Ch. 20 - Microeconomic theory argues that it is...Ch. 20 - How do you think Americans would feel if other...Ch. 20 - Is it legitimate to impose higher safety standards...Ch. 20 - Why might the unsafe consumer products argument be...Ch. 20 - Why might a tax on domestic consumption of...Ch. 20 - Why do you think that the GAIT rounds and, more...Ch. 20 - An economic union requires giving up some...Ch. 20 - What are some examples of innovative products that...Ch. 20 - In principle, the benefits of international trade...Ch. 20 - Economists sometimes say that protectionism is the...Ch. 20 - Trade has income distribution effects. For...Ch. 20 - Assume two countries, Thailand (T) and Japan (J),...Ch. 20 - You have just been put in charge of trade policy...Ch. 20 - The country of Pepperland exports steel to the...
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