PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 16.A, Problem 2P
(a)
To determine
Effects of world price in quantity demanded and supplied and exports and imports
(b)
To determine
Identify the
(c)
To determine
Effects of voluntary export restriction in the profit of foreign car producers.
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Students have asked these similar questions
Suppose Home’s demand and supply functions for wheat are
D=110-2P and S=20+20P
and Foreign’s demand and supply functions for wheat are
D*=80-2P and S*=40+2P
a. Derive Home’s import demand and Foreign’s supply schedule and prices of wheat in absence of trade.
b. Now, Home and Foreign opens up to trade. Find the equilibrium under free trade. What is the world price of wheat and what is the volume of trade?
c. Suppose Home imposes a specific tariff of 0.5 on wheat imports. Determine the effect of tariff on the price of wheat in each country, the quantity supplied and demanded in each country and volume of trade.
d. Determine the effect of tariff on the welfare of Home consumers, Home government and Home import-competing producers.
E1
Kazakhstan is a “small” country that cannot affect world prices. Their demand for coffee is given by D : QD = 400–10P and their supply of coffee is given by S : QS = 50 + 5P. The world price of coffee is $10.
a) If Kazakhstan engage in free trade, determine whether Kazakhstan imports or exports coffee, and in what quantity. Suppose Kazakhstan imposes an import quota on coffee of 50 units.
b) Determine the price of coffee in Kazakhstan.
c) Determine the size (numerically) of the quota rents.
d) Determine the overall effect on welfare in Kazakhstan (again, with a numerical value) of the quota, relative to free trade. [Hint: it might be VERY helpful to draw an accurate graph, or use a graphing program to help you identify and calculate the relevant areas you are looking for]
The demand for cameras in a certain country is given by D = 8000 - 30P, where P is the price
of a camera. Supply by domestic camera producers is S 4000 + 10P. Suppose that world
price of a camera is $150. If this country decides to trade, which of the following is true?
3000 cameras will be exported
Domestic production of cameras will decrease by 500
Domestic production of cameras will increase by 500
2000 cameras will be imported
Chapter 16 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Consider two countries, home and foreign and a single good, Y. Assume that home country imports good Y from foreign country. The import demand curve for good Y in home country is given by: MD = 170 – 2PY and the export supply curve for good Y in Foreign country is given by: EX = PY – 40. Free Trade Price: $70 30 Units of Good Y are traded under free trade If a tariff of $15 is imposed by the home country on each unit of good Y imported, Foreign exporters receive a price of $60. If a tariff of $15 is imposed by the home country on each unit of Good Y imported, Home consumers pay $75 If a tariff of $15 is imposed by the home country the number of goods traded is 20. a) If home country imposes a specific tariff of $15 per unit of good Y imported, what is the tariff revenue? Show your work. b) Assume that instead of a specific tariff, an import quota will be used on good Y. What is the amount of the quota that will have identical effects (in terms of amount of good Y imports and the…arrow_forwardWhich of the following describe technical barrier to trade? Select all that apply. Government controls imposed on the flow of capital into or out of the country ☐ Two prospective trading partners being very distant from one another O Trading partners struggling to made trade deals because of the inability to communicate seamlessly and effectively ☐ Imposition by a country of a numerical limit on how much sugar can be imported under a low tariff ☐ Agricultural subsidies provided by the U.S. government to corn farmers Two countries agreeing to eliminate all tariffs on goods traded between themarrow_forwardIf Indonesia (which is a small country) imposes an import tariff on textile imports, we can conclude that:(a) The world price of textile rises, and Indonesia imports less.(b) The world price of textile stays constant, and Indonesia imports less.(c) The world price of textile falls, and Indonesia imports less.(d) The world price of textile stays constant, and Indonesia imports the same as before. Explain why.arrow_forward
- Assume a simple world in which the U.S. exports soft drinks and beer to France and imports wine from France. If the U.S. imposes large tariffs on the French wine, explain the likely impact on the values of the U.S. beverage firms, U.S. wine producers, the French beverage firms, and the French wine producers.arrow_forwardExplain why high tariffs have a negative impact on a country's economy.arrow_forwardPrice $36 $30 $26 I I Home market S D 20 40 80 100 Quantity Price 40 World market I 80 X* + t ·X* Imports The graphs show the case for a tariff imposed by a large country. According to these graphs, if the world price of the product is given as $30 and a $10 tariff is imposed, then the new price after the tariff is $36. So the terms-of-trade gain is 40 80 10 160arrow_forward
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