Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 2, Problem 12PAA
To determine
To explain:
The impact on
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Based on Figure 48, choose the correct statement. Assume that Nation 2 imposes a
quota (30X) on imports of X (an agricultural commodity).
Figure 48 Partial equilibrium effects of an import quota
Py (S)
25
10
20 25 30
40
50 55 60 65 70
O 1)
Given the increase in demand from Dx to D'x, the price of X increases to
$2.5, and the quota is 20X.
2)
Given the increase in demand from Dx to D'x, the price of X increases to
$2.5, and the quota is 55X.
3)
Given the increase in demand from Dx to D'x, the price of X increases to $2,
and the quota is the same.
O 4) Given the increase in demand from Dx to D'x, the price of X increases to
$2.5, and the quota is the same.
In the world market, a pair of shoes from China is sold for $40 and that from Mexico is $50. U.S. made shoes are $70 a
pair. Initially U.S. does not belong to any free trade agreement and imposes an ad valorem tariff of 30%. Later, the U.S.
joins a free trade agreement with Mexico and remove all trade barriers including tariffs. The import demand function for
the U.S. is Q = 280 – 4P. (Hint: Draw the import demand curve of the world market as shown in the examples on the
textbook and lecture slides.)
13. How much will the U.S. government tariff revenue change (as a result of this free trade agreement?
а.
Increase by $144
O b.
Decrease by $720
C. Decrease by $800
O d. Decrease by $864
Brazil is one of the world’s largest exporters of beef and China is a major purchaser of that beef (an estimated 30% of China’s beef imports in 2016 came from Brazil). However, in March 2017, China, South Korea, the European Union, and Chile suspended imports of meat products from Brazil as a precautionary measure in response toallegations that meat inspectors and politicians had received bribes to overlook improper meat packing practices and allow sales of tainted food. How would the closing of export markets for a country’s beef products together with a fall in domestic sales of beef products and an increase in the domestic equilibrium quantity be reflected in supply-anddemand diagrams of that country’s foreign and domestic markets for beef in the short run?
Chapter 2 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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