Microeconomics: Principles & Policy
14th Edition
ISBN: 9781337794992
Author: William J. Baumol, Alan S. Blinder, John L. Solow
Publisher: Cengage Learning
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Question
Chapter 21, Problem 2TY
a)
To determine
To find: The price ratio of two commodities.
b)
To determine
To find: The commodity to be imported by each country.
c)
To determine
To find: The price range under which price will fall.
d)
To determine
To prove: The benefit arises due to free trade.
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Domestic producers of microprocessors send a lobbyist to the U.S. government to request that the government impose trade restrictions on imports of microprocessors. The lobbyist claims that the U.S. microprocessor industry is new and cannot currently compete with foreign firms. However, if trade restrictions were temporarily imposed on microprocessors, the domestic microprocessor industry could mature and adjust and would eventually be able to compete in the world market.
Which of the following justifications is the lobbyist using to support their argument in favor of the trade restriction on microprocessors?
National-security argument
Infant-industry argument
Unfair-competition argument
Jobs argument
Using-protection-as-a-bargaining-chip argument
There are two countries Home and Foreign.
Home has 1,200 units of labor available. It can produce two goods,
apples and bananas. The unit labor requirement in apple production
is 3, while in banana production it is 2.
Foreign has a labor force of 800. Foreign's unit labor requirement in
apple production is 5, while in banana production it is 1.
Suppose world relative demand takes the following form: Demand for
apples/demand for bananas = price of bananas/price of apples.
1.) Using the 3-point curved line drawing tool, draw the relative
demand curve on the graph to the right. Label the curve RD.
Now suppose that instead of 1,200 workers, Home had 2,400. The
relative supply curve (RS) would shift to the right (as shown by RS₁).
2.) Using the point drawing tool, indicate the new equilibrium relative
price of apples. Label this point EQ.
Carefully follow the instructions above and only draw the required
objects.
What can you say about the efficiency of world production and the
division of…
There are two countries Home and Foreign.
Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit
labor requirement in apple production is 3, while in banana production it is 2.
Foreign has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in
banana production it is 1.
Suppose world relative demand takes the following form: Demand for apples/demand for bananas
= price of bananas/price of apples
a-b. On the graph to the right:
1.) Using the 3-point curved line drawing tool, draw the relative demand curve. Label the curve
RD.
2) Using the point drawing tool, indicate the equilibrium relative price of apples. Label this point
EQ.
Carefully follow the instructions above and only draw the required objects.
2
Relative price of apples Pa/Pb
0
035
0.75
05
Relative quantity of apples
RS
Chapter 21 Solutions
Microeconomics: Principles & Policy
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