Econ Macro (book Only)
6th Edition
ISBN: 9781337408745
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 17, Problem 5P
To determine
The minimum level of quota to have an impact on the trade and determine the conditions when the net welfare loss from an import quota exceeds the net welfare loss from equivalent tariff.
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- Which of the choices describes how the effects of import tariffs and import quotas are different? The domestic cost of an import tariff is larger than the domestic cost of a comparable import quota. Import tariffs create deadweight loss, whereas import quotas do not create deadweight loss. Quotas do not affect the equilibrium price, whereas tariffs do not affect the equilibrium quantity. Some foreign producers receive some of the benefits generated by an import quota.arrow_forwardThis figure shows demand and supply for a product in country A, which is interested in engaging in international trade. The import price from country B is $3 and from country C is $4. Country A imposes a fixed tariff of $2 per unit of import. Answer the following questions based on these assumptions. Demand Supply O creation will be FJ O diversion will be FJ O creation will be TS O diversion will be TS Querits Based on information provided in the figure above, if country A decides to enter into a free trade agreement with country B, the amount of tradearrow_forwardRecently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 115 – 1/15Q Supply: P = 55 + 1/15Q Where P is Yuan per bushel of soybeans and Q is 10 million bushels per year. The world price for soybeans is ¥65/bushel. Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including the Domestic Demand curve, Domestic Supply curve, the World Price, and the Price with tariffs. 3. How many bushels of soybeans can the US export to China if there are no tariffs? How many bushels with the imposed tariff?arrow_forward
- Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 115 – 1/15Q Supply: P = 55 + 1/15Q Where P is Yuan per bushel of soybeans and Q is 10 million bushels per year. The world price for soybeans is ¥65/bushel. Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including the Domestic Demand curve, Domestic Supply curve, the World Price, and the Price with tariffs. 4. Who are the greatest benefactors of China’s tariff on US soybeans?arrow_forwardExplain the two distorting effects of the tariffarrow_forwardConsider a small (home) country with the following inverse demand of: P = 200 − 3QD and inverse supplyof: P = 20 + QS for a barrel of oil. The world demand is perfectly horizontal with a price of: P^X = 100.Solve the following for the home country:A) Calculate the equilibrium price and quantityB) Calculate the consumer surplus, producer surplus (note the shape), and total surplusNow, suppose the home country opens up to free trade.C) Calculate the quantity supplied, quantity demanded, export quantity, and priceD) Calculate the consumer surplus, producer surplus, and total surplusNow, suppose the home country is open to free trade and provides an export subsidy of $15 per barrel of oil.E) Calculate the equilibrium price and quantityF) Calculate the consumer surplus, producer surplus, tax revenue, and total surplusG) Explain how the three outcomes: no trade, free trade, and trade with an export tariff, affect the homecountry (consumers, producers, and overall welfare)H) What changes if…arrow_forward
- Consider a small country that exports good Z. Some of the total quantity of Z that is domestically produced is consumed by domestic consumers and the rest of it is exported. Then suppose that the government imposed a ban (a prohibition) on Z being exported. Show the effects of this export ban using a carefully labelled demand and supply diagram. On your diagram, shade-in the area that represent the deadweight loss caused by the export ban (please do not shade-in any other areas) and explain your reasoning.arrow_forwardYou are provided with the following information about the Canadian turkey market:1. The world price of turkey is $5.2. The Canadian turkey market is currently (before the new trade agreement) protected by a tariffrate quota (TRQ) of the following format:a) the in-quota tariff is $1 per unitb) the import quota volume is 100 unitsc) the over-quota tariff is $10 per unit.3. An excess demand (ED) (for imports) function for turkey has been estimated as? = 28 − 0.14?. Notes: Canada is a small importing country in the world market for turkeys. Answer the question below: The Canadian government is considering reducing the in-quota tariff to $0.50. Modify the diagram for this market, and solve for the Canadian turkey price and the volume of imports. Label all relevant functions, axes, etc.arrow_forwardUnder what conditions could an import quota and a tariff have exactly the same effect on price and bring the same gains and losses (given a tariff level that restricts imports just as much as the quota would)?arrow_forward
- Recently the U.S. government filed a complaint with the World Trade Organization (WTO) that the Spanish government was subsidizing exports of ripe olives, which are used as an ingredient in other products, such as olive oil. In the U.S., who benefits from the Spanish subsidy of ripe olives to the U.S.? U.S. government imposes a countervaliling duty (tariff) on imports of ripe olives, who benefits? O producrersof ripe olives; producers of olive oil O producers of olive oil; producers of ripe olives O producers of olive oil; producers of olive oil O producers of ripe olives; producers of ripe olives If thearrow_forwardThe figure below shows the domestic demand (Dd) and domestic supply (Sa) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of the quota, the maximum import quantity is QQ: Sa Sa+ Q. $800 $750 $715 World price New export price with quota Da 0.4 0.5 0.6 1.5 1.8 2.0 Quantity (Millions of Mopeds per year) If the government auctions the quota licenses, the importing nation will lose $29.75 million. O gain $21.5 million. O gain $31.5 million. lose $10 million.arrow_forwardraded Assignment | Read Chapter 5 Back to Assignment Attempts: ܀ Average: 14 2. Comparing tariff, quota, and subsidy Aa Aa Which of the following statements regarding the effects of a tariff, quota, and subsidy are correct? Check all that apply. A subsidy involves smaller sacrifices in national welfare than occur under an equivalent tariff or quota. The direct cost of the subsidy is borne by foreign producers. A subsidy yields the same result for domestic producers as does an equivalent tariff or quota, but at a higher Copyright Notices cost. Tariffs and quotas distort choices for domestic consumers and cause less efficient home production. Terms of Use Due Tuesday 11.03.15 at 11:00 PM Privacy Notice Grade it Now Security Notice Save & Continge Accessibilityarrow_forward
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