EBK ECONOMICS
20th Edition
ISBN: 9780077660710
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 38, Problem 9RQ
To determine
The change in the price of domestic product with the international good.
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Figure: Trade 1
Price
$200
175
150
Domestic
Supply
500 7501,000:1,300
1,150
World Supply + Tariff
World Supply
Domestic
Demand
Quantity
If the world price for the good in this figure is higher than the domestic price, a move to free international trade means that
the domestic economy will become:
O either a net importer or a net exporter of the good, but it is impossible to say which.
O a net importer of the good.
neither a net importer nor a net exporter of the good.
a net exporter of the good.
Price (dollars per shirt)
44
40
36
32
28
24
20
16
12
O
8
O 32 million
The figure shows the market for shirts in the United States, where D is the domestic demand curve
and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a
tariff on imported shirts, $4 per shirt.
24 million
S
In the figure above, with the tariff the United States imports
8 million
D
O 16 million
16 24 32 40 48 56 64
Quantity (millions of shirts per year)
million shirts per year.
American apparel makers complain to Congress about competition from China. Congress decides to impose either a tariff or a quota on apparel imports from China. Which policy would Chinese apparel manufacturers prefer? LO26.4 a. Tariff. b. Quota.
Chapter 38 Solutions
EBK ECONOMICS
Ch. 38.2 - Prob. 1QQCh. 38.2 - Prob. 2QQCh. 38.2 - Prob. 3QQCh. 38.2 - Prob. 4QQCh. 38 - Prob. 1DQCh. 38 - Prob. 2DQCh. 38 - Prob. 3DQCh. 38 - Prob. 4DQCh. 38 - Prob. 5DQCh. 38 - Prob. 6DQ
Ch. 38 - Prob. 7DQCh. 38 - Prob. 8DQCh. 38 - Prob. 9DQCh. 38 - Prob. 10DQCh. 38 - Prob. 11DQCh. 38 - Prob. 12DQCh. 38 - Prob. 13DQCh. 38 - Prob. 14DQCh. 38 - Prob. 1RQCh. 38 - Prob. 2RQCh. 38 - Prob. 3RQCh. 38 - Prob. 4RQCh. 38 - Prob. 5RQCh. 38 - Prob. 6RQCh. 38 - Prob. 7RQCh. 38 - Prob. 8RQCh. 38 - Prob. 9RQCh. 38 - Prob. 10RQCh. 38 - Prob. 11RQCh. 38 - Prob. 12RQCh. 38 - Prob. 13RQCh. 38 - Prob. 1PCh. 38 - Prob. 2PCh. 38 - Prob. 3PCh. 38 - Prob. 4P
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- 5. Suppose that the comparative-cost ratios of two products- baby formula and tuna fish-are as follows in the hypotheti- cal nations of Canswicki and Tunata: Canswicki: 1 can baby formula = 2 cans tuna fish 1 can baby formula = 4 cans tuna fish Tunata: In what product should each nation specialize? Explain why terms of trade of 1 can baby formula = would be acceptable to both nations. 25 cans tuna fisharrow_forwardIn Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles? LO26.2 a. Country A. b. Country Barrow_forwardEXHIBIT C NIGERIA ETHIOPIA Good Good Good Good Y X ✗ Y 120 0 60 0 80 10 40 20 40 20 20 40 0 30 0 60 Considering the data in Exhibit C, which of the following terms of trade would both countries agree to? O 0.5X = IY 3X=1Y 4.5X = IY 5X=1Yarrow_forward
- If the world price of shoes is $50/pair, how many pairs of shoes will be produced in the U.S.? How many pairs will be consumed? What is the level (quantity) of exports or imports? Suppose the government places a $25/pair tariff on shoes. What are the new levels of U.S. production, consumption, imports or exports, and price paid for shoes by Americans?arrow_forwardWhich of the following statements about foreign trade is correct? Choose an answer: O 1. A good is imported if the world market price for this good is higher than the domestic opportunity costs of producing this good. O 2. A good is exported if the world market price for this good is lower than the domestic opportunity costs of producing this good. 3. The levying of a domestic duty rate on an imported good increases the producer surplus and reduces the domestic consumer surplus. O 4. If a country has an absolute advantage in one good, it also has a comparative advantage in that good. O 5. A particularly productive country can have a comparative advantage in all goods.arrow_forwardAssume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 5 cans tuna fish Tunata: 1 can baby formula ≡ 7 cans tuna fish a. In what product should each nation specialize? Canswicki should produce _____- , and Tunata should produce _____ b. Would the following terms of trade be acceptable to both nations? i. 1 can baby formula ≡ 4 cans tuna fish: yes or no ii. 1 can baby formula ≡ 8 cans tuna fish: yes or no iii. 1 can baby formula ≡ 5.5 cans tuna fish: yes or noarrow_forward
- A small country is facing the following domestic supply curve of a product: S = 200 + 20P, as well as the following domestic demand curve of a product: D = 400 - 20P. It can import it at a world price of 10 per unit. In addition, each unit of production yields a marginal social benefit of 10. The effect on welfare of an import tariff of 6 per unit is $. O -420 O 500 O -480 O 420 O 320 -500 O :180 O -320 480 O 180arrow_forwardA "static" gain resulting from the formation of the European Union or the U.S.-Mexico-Canada Trade Agreement would be O expanded size of the market due to trade, resulting in economies of large-scale production and decreasing unit cost. outward shifts in a country's production possibilities frontier made possible by the discovery of new technologies. O facing lower priced, zero-tariff imports from members, consumers increase their demand for these goods, and new trade will be created O increased saving and investment resulting in capital accumulation and economic growth.arrow_forward3. The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade, the optimal product mix for China is alternative B and for the United States is alternative U. LO20.2 a. Are comparative-cost conditions such that the two countries should specialize? If so, what product should each produce? b. What is the total gain in apparel and chemical output that would result from such specialization? c. What are the limits of the terms of trade? Suppose that the actual terms of trade are 1 unit of apparel for 1 unit of chemicals and 4 units of apparel for 6 units of chemicals. What are the gains from specialization and trade for each nation? China Production Possibilities Product A D F Apparel (in thousands) 30 24 18 12 Chemicals (in tons) 12 18 24 30 U.S. Production Possibilities Product R T. V Apparel (in thousands) hemicals (in tons) 10 8. 4 4 8. 12 16 20 p. 579arrow_forward
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