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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Consider the following variation of Table 11-1 for the U.S. semiconductor market
|
U.S. Tariff rates |
||
|
0% |
8% |
16% |
From Canada, before NAFTA |
$45 |
$W |
$52.2 |
From Asia, before NAFTA |
$40 |
$X |
$Y |
From Canada, after NAFTA |
$43 |
$Z |
$Z |
From Asia, after NAFTA |
$40 |
$X |
$Y |
From the United States |
$46 |
$46 |
$46 |
- Fill in the values for W, X, Y, and Z.
- Suppose that before NAFTA, the United States had a 16% tariff on imported semiconductors. Which country supplied the U.S. market? Is it the lowest-cost producer?
- After NAFTA, who supplies the U.S. market? Has either trade creation or diversion occurred because of NAFTA? Explain.
- Now suppose that before NAFTA, the United States had an 8% tariff on imported semiconductors. Then repeat parts (b) and (c).
- In addition to the assumptions made in (d), consider the effect of an increase in high-technology investment in Canada due to NAFTA, allowing Canadian firms to develop better technology. As a result, three years after the initiation of NAFTA, Canadian firms can begin to sell their products to the United States for $40. What happens to the U.S. trade pattern three years after NAFTA? Has either trade creation or diversion occurred because of NAFTA? Explain.
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Step 1: Define tariff
VIEW Step 2: Find the values of W , X , Y , Z
VIEW Step 3: Find which country supplied to US if US has 16% tariff before NAFTA
VIEW Step 4: Find after NAFTA, who supplies the U.S. market
VIEW Step 5: Explain trade when tariff is 8% in place of 16%
VIEW Step 6: Explain condition three years after NAFTA
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