Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 26, Problem 13RQ
To determine
A beneficial trade barrier to the exporter.
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Suppose that one country (Country A) subsidizes its exports and the other country (Country B) imposes a "countervailing" tariff that offsets its effect, so that in the end relative prices in the second
country are unchanged. What happens to the terms of trade? What about welfare in the two countries?
O A. From Country A's perspective, world relative supply will increase and world relative demand will increase. This will improve its terms of trade. The countervailing tariff exacerbates this effect
so Country A will definitely gain and Country B definitely loses.
O B. From Country A's perspective, world relative supply will decrease and world relative demand will increase. This will improve its terms of trade. The countervailing tariff exacerbates this
effect so Country A will definitely gain and Country B definitely loses.
C. From Country A's perspective, world relative supply will decrease and world relative demand will increase. This will worsen its terms of trade. The countervailing…
When a small country imposes a tariff on an imported good, domestic consumers bear
of the statutory burden
and
of the economic burden of the tariff.
O 100%; 0%
50%;
50%
100%; 100%
0%; 100%
Ma3.
Suppose that Canada possesses the following industry (inverse) supply and demand curves for clothing (where quantity measured in pounds): ps= 5 + 20q pd= 130-5q. Now suppose that the world export supply curve is perfectly elastic and given by p = $65.
Given the above, Canada will import__________ of clothing. Now suppose that Canada imposes a tariff of $10 per pound. Assume that all tariff revenue is rebated to consumers. In Canada, the new tariff-inclusive import price will be and there will be____________ a deadweight loss of______________
(a) 11.25 lbs; $70 per pound; $12.5.
(b) 11.25 lbs; $65 per pound; $4.25.
(c) 11.25 lbs; $60 per pound; $0.
(d) 10 lbs; $75 per pound; $12.5.
(e) 10 lbs; $65 per pound; $4.25
Chapter 26 Solutions
Microeconomics
Ch. 26.2 - Prob. 1QQCh. 26.2 - Prob. 2QQCh. 26.2 - Prob. 3QQCh. 26.2 - Prob. 4QQCh. 26 - Prob. 1DQCh. 26 - Prob. 2DQCh. 26 - Prob. 3DQCh. 26 - Prob. 4DQCh. 26 - Prob. 5DQCh. 26 - Prob. 6DQ
Ch. 26 - Prob. 7DQCh. 26 - Prob. 8DQCh. 26 - Prob. 9DQCh. 26 - Prob. 10DQCh. 26 - Prob. 11DQCh. 26 - Prob. 12DQCh. 26 - Prob. 13DQCh. 26 - Prob. 14DQCh. 26 - Prob. 1RQCh. 26 - Prob. 2RQCh. 26 - Prob. 3RQCh. 26 - Prob. 4RQCh. 26 - Prob. 5RQCh. 26 - Prob. 6RQCh. 26 - Prob. 7RQCh. 26 - Prob. 8RQCh. 26 - Prob. 9RQCh. 26 - Prob. 10RQCh. 26 - Prob. 11RQCh. 26 - Prob. 12RQCh. 26 - Prob. 13RQCh. 26 - Prob. 1PCh. 26 - Prob. 2PCh. 26 - Prob. 3PCh. 26 - Prob. 4P
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- 16 of 38 Suppose that the domestic demand for sugar is given by P-27-2Qd and the domestic supply is given by P=2+3Qs. The world price is $11 and the government decided to impose an import tariff of $3 per unit. This decision of the government will reduce the quantity imported of sugar O A. from 10 units to 5 units. O B. from 5 units to 2.5 units. O C. from 41 units to 22 units. O D. from 15 units to 10 units. Unsurearrow_forwardPrice (dollars per shirt) 44 40 36 32 28 24 20 16 12 O 8 O 32 million The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. 24 million S In the figure above, with the tariff the United States imports 8 million D O 16 million 16 24 32 40 48 56 64 Quantity (millions of shirts per year) million shirts per year.arrow_forwardHow many units will the domestic firms produce without trade? How many units will the domestic firms produce without a tariff if the foreign producer can sell the product at a $4 price? How many units will the foreign firms produce / sell if a government tariff of $2.00 is imposed on foreign goods? What will be the total government revenues if a tariff of $2.00 is imposed on foreign goods? What will be the total deadweight losses if a tariff of $2.00 is imposed on foreign goods?arrow_forward
- Price P1 D 01 Quantity The graph above shows domestic supply and demand with trade in a SMALL country. With trade, this country can purchase at the world price, Pw. Suppose that this country imposes a $5 per unit tariff on this good. Which of the following is true? O There will not be deadweight losses due to this tariff, since it is a small country. The domestic price will rise by $5. O Consumers will be better off. Producers will not increase domestic production.arrow_forwardGovernments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier? O a requirement that imports meet health and safety requirements restrictions on imports for national security reasons 4 O a requirement that the employees of domestic firms that engage in foreign trade pay income taxes O a requirement that the U.S. government buy military uniforms only from US, manufacturersarrow_forwardConsider a world with two countries - USA and Foreign and a competitive market of sugar in both countries. Foreign is more effecient in the production of sugar and in a free trade equilibrium, US would import part of its consumption of sugar. Describe graphically such trading equilibrium of sugar. What would be the effect on the sugar price in USA and on the welfare (measured by consumer surplus, pro- ducer surplus and tari§ revenue) of US when US imposes an import tariffs on sugar? Argue using a graph taking into consideration that US is a large sugar importing country.arrow_forward
- The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Quantity Supplied (Domestic) Price 12 $5 10 4 7 3 4 2 1 1 Multiple Choice Quantity Demanded With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers would be O (Domestic) 2 4 7 11 16 1 unit and 15 units, respectively. 4 units and 7 units, respectively. 7 units and 0 units, respectively. 4 units and 6 units, respectively.arrow_forwardIf a tariff levied by a small country causes the welfare of the country to fall, why would such a country ever use a tariff? Because the revenue from the tariff is larger than the dead weight loss from the tariff. O Because the producers who gain from the tariff are much more numerous than the consumers who lose. O Because it always improves the country's terms of trade. Because the many consumers who lose from the tariff each lose so little that they do not bother to object.arrow_forward5. You have been asked to quantify the effects of removing a country's tariff on sugar. The hard part of the work is already done: Somebody has estimated how many pounds of sugar would be produced, consumed, and imported by the country if there were no sugar duty. You are given the information shown in the table. Situation with Import Tariff Estimated Situation without Tariff World price Tariff $0.10 per pound $0.02 per pound $0.12 per pound $0.10 per pound Domestic price Domestic consumption (billions of pounds per year) Domestic production (billions of pounds per year) Imports (billions of pounds per year) $0.10 per pound 20 22 8 6 12 16 Calculate the following measures: a. The domestic consumers' gain from removing the tariff. b. The domestic producers' loss from removing the tariff. c. The government tariff revenue loss. d. The net effect on national well-being.arrow_forward
- Suppose Mexico wants to protect its domestic automobile industry from U.S. and Japanese competition.How will a tariff on imported cars help it to accomplish this task? How does the tariff affect domesticproducer and consumer surplus?arrow_forwardThe graphs below show domestic supply and demand curves for a good in two countries, with prices measured in the same currency. If these are the only two countries in the world and if they open to free international trade, O. Demanders of the good in Country A will benefit from trade. O. Suppliers of the good in Country A will benefit from trade. O. The welfare of Country A as a whole will fall. O. The quantity of the good demanded in Country B will become larger. O. The price of the good in both countries will be the one labeled PB.arrow_forwardConsider the effects of an import tariff in a small country using the graph below for this question. Domestic Supply Py + t Pw Domestic Demand 50 75 100 125 150 Which area on the graph corresponds to wasted resources due to the tariff? O a. W O b. X O c. Y O d. Z Consider the effects of an import tariff in a small country using the graph below. P. Domestic Supply Py +t Pw Domestic Demand 40 45 75 95 105 Q What are imports with the tariff? O 30 units O 45 units O 50 units O 65 unitsarrow_forward
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