A country called Criton is running a referendum on its international trade policy. After careful calculation, economists of the nation determine that the optimal average tariff should be 5%. As always, voters have different preferences. Eighteen percent of the country are in the service sector, who are not exposed to any international competition, but benefit from cheaper foreign goods from lower tariffs, so for them the ideal tariff is 0. Twenty-five percent of the country works in the manufacturing sector, who believe the tariff should be moderate at 20%. The remaining people believe the country should be independent and produce everything own their own, so they want a 1000% tariff. According to the median voter theorem, what is most likely to be the elected outcome? Briefly explain why

A country called Criton is running a referendum on its international trade policy. After careful calculation, economists of the nation determine that the optimal average tariff should be 5%. As always, voters have different preferences. Eighteen percent of the country are in the service sector, who are not exposed to any international competition, but benefit from cheaper foreign goods from lower tariffs, so for them the ideal tariff is 0. Twenty-five percent of the country works in the manufacturing sector, who believe the tariff should be moderate at 20%. The remaining people believe the country should be independent and produce everything own their own, so they want a 1000% tariff. According to the median voter theorem, what is most likely to be the elected outcome? Briefly explain why

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 2PA

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