Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 32, Problem 4PA
To determine
The impact of reduction in the trade barriers.
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Students have asked these similar questions
Small Island Developing States (SIDS), particularly our Caribbean islands, are normally accused by our economists of being import dependent. Why then are we always hesitant to impose Tariffs on imports to solve our Balance of Payments problems? Why would it be slow to work on our appetites? Discuss this issue in relation to the concept of Elasticity of Demand.
Also, why is the Government always imposing more and more sin taxes on alcohol and cigarettes? Is the Government so concerned about our sins when we consume these demerit goods?
Economists generally agree that trade restrictions are detrimental to trade and reduce government efficiency. Why then do
governments restrict trade? Arguments for restricting trade include to promote national defense, to impose sanctions on other
countries, to protect domestic infant industries, to create or preserve domestic jobs, to ensure fair competition, and to retaliate for
unfair trade policies of other governments
Match each action to the correct argument for trade intervention
Limits on trade with certain
countries
import duties on products
from a foreign country
Subsidies for industries
considered vital to national
security
Subsidies for emerging
industries
Counterpan on imports
Argument for
Intervention
To provide for national
defense
To impose sanctions
To protect infant industries
To ensure fair competition
To provide retaliation
Action
Counterban on imports
Limits on trade with certain
countries
import duties on products
from a foreign country
Subsidies for emerging…
Which of the following is NOT a law that impacted U.S. tariffs?
A.
Food, Drug, and Cosmetic Act
B.
Smoot-Hawley Act
C.
McKinley Act
D.
Fordney-McCumber Act
Chapter 32 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Should the Trade Embargo on Cuba Be Lifted? Three years after Fidel Castro took power in Cuba and installed a Communist regime, the U.S. government initiated a trade embargo against the nation. The embargo was intended to put economic pressure on the Cuban government. Today the embargo is still in effect— one of the longest trade embargos in modern history. Opponents on each side of the issue debate its effectiveness. Who is right? As you read the selections, ask yourself: Should the trade embargo on Cuba be lifted or remain in place? PRO A HALF-CENTURY OF FAILURE For almost half a century, the U.S. government has tried to isolate Cuba economically in an effort to undermine the [Communist] regime [of Fidel Castro] and deprive it of resources. Since 1960, Americans have been barred from trading with, investing in, or traveling to Cuba. . . . As a foreign policy tool, the embargo actually enhances Castro’s standing by giving him a handy excuse for the failures of his…arrow_forwardPlease help.arrow_forwardA small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country’s government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $11 per T-shirt and domestic production rises to 15 million T-shirts per year. On average, each worker in the T-shirt industry produces 20,000 T-shirts. What would be the loss in consumer surplus for each job created (as a result of the quota)? SHOW ALL YOUR WORK. Find the decrease in consumer surplus. Find the increase in quantity supplied (change in production). Find the number of jobs created. Find the loss in consumer surplus per job created.arrow_forward
- Which scenario describes the operation of a tariff? Angola opens up trade with the world corn market and decides to maintain its previous market price. Consumers in Turkey, who pay $4 per cup of tea, demand that the government open up trade with the world market because they know the world price is $2 per cup. Ireland taxes the import of potatoes in order to keep domestic farmers in business. Norway becomes an exporter of fireworks after it opens up trade with the world market and realizes its market price is lower than the world price. Which is NOT an effect of a tariff? deadweight loss a domestic market price above world market price Activate Windows Go to Settings ho activate Win increased demand decreased importsarrow_forwardA small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T- shirt and domestic production rises to 15 million T-shirts per year. The quota on T- shirts causes domestic consumers to A) gain $7 million. B) lose $7 million. C) lose $70 million. D) lose $77 millionarrow_forwardThe book states “The pain caused by the movement toward a free trade regime is a short-term phenomenon, while the gains from trade once the transition has been made are both significant and enduring”. Unions in developed nations often oppose imports from low-wage countries because of the negative impacts that occur to the workers. I personally do not believe that such competition is unfair. The union’s argument is in the best interest of the people they represent, and not the country as a whole. If imports are stopped from low-waged countries, it would force developed countries to use and produce local goods and jobs. With more jobs and the use of more local goods, this gives an advantage to the union workers, but leaves our country at a disadvantage. Some disadvantages include the price of goods increasing, other countries not wanting to work with us, we will lose out on products that we can’t make, and it’s ultimately not in the best interest for economic growth in the long run.…arrow_forward
- Explain why high tariffs have a negative impact on a country's economy.arrow_forwardIn reference to tariffs, What is the reason that U.S. imposes tariffs? why the U.S. imposes tariffs on imports?arrow_forwardWould the U.S. government gain any advantage from using tariffs or quotas to restrict imports?arrow_forward
- For each of the following statements, indicate whether it is true or false for a country that opens up to trade. Statement True False The greater the elasticity of domestic demand for the good it exports, the greater the rise in consumer surplus from trade. Consumers can still benefit from imports even if domestic demand is perfectly inelastic. Domestic producers of an imported good can benefit if domestic supply is perfectly inelastic.arrow_forwardSome people argue for protectionism by pointing out that other countries with whom we trade engage in “unfair trade practices,” and that we should retaliate with our own protectionist measures. One such policy is the policy of some countries to subsidize exporting industries. India, for example, subsidizes its steel industry. Obviously, U.S. steel producers are hurt by this policy and would like to restrict imported steel from India. Is this a good reason to place tariffs on Indian steel? Why or why not?arrow_forwardArgentina and Brazil are considering the potential gains of trade. There is only one factor of production: labor. There are only two goods being produced in either economy: coffee and wine. Argentina can employ 10,000 hours of labor per month. Producing 1 lb. of coffee requires 2 hours of labor, and producing 1 bottle of wine requires 4 hours of labor, in Argentina. Similarly, Brazil can employ 10,000 hours of labor per month. Producing 1 lb. of coffee requires 1 hour of labor, and producing 1 bottle of wine requires 5 hours of labor, in Brazil. A). Which country has an absolute advantage in the production of coffee? B). Which country has an absolute advantage in the production of wine? C). Draw the Production Possibilities Frontier for the two countries.arrow_forward
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