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Derive and graph Foreign's export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.
Determine the effect of the tariff on the welfare of each of the following groups: (1) Home import-competing producers; (2) Home consumers.
India and Mexico both followed import-substitution policies after World War II. Why do you think this difference may have emerged?
Under what circumstances would the existence of the initial high costs justify infant industry protection?
What policies do these countries seem to have in common? Does their experience lend support for the infant industry argument or help to argue against it?
Why shouldn't we restrict imports of goods that are produced with badly paid labor? Why is or isn't this argument valid?
uppose that demand and supply are exactly as described in problem 3. Calculate the effects on the government's objective of a tariff of 5 per unit.
Why does the production subsidy produce a greater gain in welfare than the tariff? What would the optimal production subsidy be?
What would be the effect on the real income distribution within the economy if there were a substantial tariff levied on manufactured goods?
Why are they so common, especially in agriculture, among the industrialized countries such as the United States and the members of the European Union?
The United States simultaneously limits imports of ethanol for fuel. What is the effective rate of protection on the process of turning corn into ethanol?
What would be the effective rate of protection on bicycles in China if China places a 50 percent tariff on bicycles, which have a world price of $200?
We have focused on the case of trade involving only two countries. What could we say about the pattern of production and trade in this case?
Japanese labor productivity is roughly the same as that of the United States in the manufacturing sector. What is wrong with this argument?
What can you say about the efficiency of world production and the division of the gains from trade between Home and Foreign in this case?
Graph the relative demand curve along with the relative supply curve. What is the equilibrium relative price of apples?
What is the opportunity cost of apples in terms of bananas? In the absence of trade, what would the price of apples in terms of bananas be? Why?
Discuss trade among East Asian nations. More than that, East Asian countries do an increasing share of their trade with each other. Explain why?
Evaluate this view in terms of the external economy model.
What about welfare in the two countries? Suppose, on the other hand, that Country Y retaliates with an export subsidy of its own. Contrast the result.
China was the first to open up. Now that India is also opening up to world trade, how would you expect this to affect the welfare of China?
Create a standard trade model for the U.S. and Indian economies that shows how relative price declines in exportable services.
Counterpart to immobile factors on supply side would be lack of substitution. Show that an improvement in the terms of trade benefits this economy as well.
Illustrate the gains from trade between the two countries using the standard trade model, assuming first that tastes for the goods are same in both countries?
In the discussion of empirical results on the Heckscher-Ohlin model. Explain how this would affect the concept of factor-price equalization.