Assume that you have been hired by an International Organization to be consulted on various issues that the country Motherland faces. For this exercise, assume that Motherland is a small agricultural economy. The biggest trading partner of Motherland is the United States. Unlike Motherland, the United States is a large industrial country.
Assume Motherland imports electronics from the United States. The government of Motherland is considering to impose quotas on these electronics imports coming from the United States. Would you recommend it? Explain your answer. In your explanation, distinguish the effect on the consumers of electronics, the domestic producers of electronics and the government.Your explanation should not exceed 200 words.
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- An import Tariff does: Increase domestic consumption Decrease domestic production Decrease domestic prices Increase government revenuearrow_forwardPROBLEM (6) (Optimal tariff setting without the small country assumption) US demand and supply for wheat are Q = 120-p and Q = p respectively. The rest of the world ROW demand and supply for wheat are Q = 240 - 4p and Q = 2p respectively. Suppose the US is imposing $t (per unit) tariff for imports from the rest of the world. What should the tarifft be, in order to maximize Tariff Revenues?arrow_forwardA tariff lowers the price of the imported good below the world price. lowers the price of the exported good below the world price. raises the price of the imported good above the world price. keeps the price of the exported good the same as the world price.arrow_forward
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- Now, suppose that Island is a large exporting country with the following demand and supply functions and the free-trade world price is $5,000 per unit. D = 900,000 − 150P and S = 100,000 + 50P The Island government offers an export subsidy that increases the domestic market price to $5,500 and lowers the world price to $4,500. However, starting next month, the Island government will be removing the export subsidy in compliance with the latest international trade pact. A. What is the impact of the removal of the subsidy on domestic consumers? B. What is the change in producer surplus due to the movement to free trade? C. What is the net effect of moving to free trade on Island welfare?arrow_forwardExamine the welfare and trade impacts of a large-country import quota.arrow_forwardIf the president of the United States wishes to implement protectionist policies, which one of the following can be employed? Group of answer choices A) Lower export subsidies. B) Place high tariffs on imported goods. C) Agree to "most favored nation" clauses. D) Remove quotas on imported goods. E) Reduce required labelling regulations on imported goods.arrow_forward
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