After the opening of trade, the Stopler-Samuelson theorem predicts Multiple Choice O rise in the real income of the owners of the lactors used intensively in the production of expon ocented industries e equalization of factor prices within the country O short and long effects on factor prices that are the same are the recome of the owners of the factors used intensively in the impons-competing industries
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- If one assumes that automobile transportation costs from South Korea to France surpass the price differential in autos that existed before trade between South Korea and France, then, in similar cases trade is:a. Unattainableb. Probablec. Very profitabled. Marginally profitable“Trading blocs”/ Regional Integration efforts maybe considered the status quofor international trading under the new WTO “rules” as influenced and driven byglobalization, what are the reasons considered for their necessity/importance?Also what are the factors which act as impediments to the successful implementation ofthese regional areas?Suppose that the world demand and supply elasticities of crude oil are -0.906 and 0.515, respectively. The current equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year. Derive the linear demand and supply equations. Now suppose the world supply curve you derived above consists of competitive supply and OPEC supply. If the competitive supply equation is: SC = 7.78 + 0.29P, what must be OPEC's level of production in this equilibrium? Now suppose social and political unrest in some non-OPEC producing countries reduced the competitive supply by 30 percent, what happens to the world price of crude oil?
- You are the manager of the only firm worldwide that specializes in exporting fish productsto Japan. Your firm competes against a handful of Japanese firms that enjoy a significant first-mover advantage. Recently, one of your Japanese customers has called to inform you that theJapanese legislature is considering imposing a quota that would reduce the number of poundsof fish products you are permitted to ship to Japan each year. Your first instinct is to call thetrade representative of your country to lobby against the import quota. Is following throughwith your first instinct necessarily the best decision? Explain in a few sentences.Assume the United States is a large consumer of steel, able to influence the world price. Its demand and supply schedules are respectively denoted by Dus and Sus in Figure 42. The overall (United States plus world) supply schedule of steel is denoted by Sus.. Figure 4.2. Import Tariff Levied by a Large Country 8 550 475 450 325 0 5 10 O $450, 5 tons, 60 tons, 55 tons O $475, 10 tons, 50 tons, 40 tons O $525, 5 tons, 60 tons, 55 tons 20 O $630, 30 tons, 30 tons, 0 tons 30 40 Consider Figure 4.2. With free trade, the United States achieves market equilibrium at a price of Sus 50 55 Sus W.1 Sus+ w Dus Tons of Steel At this price, of steel are produced by U.S. firms, are bought by U.S. buyers, and are imported.Now, suppose that Island is a large exporting country with the following demand and supply functions and the free-trade world price is $5,000 per unit. D = 900,000 − 150P and S = 100,000 + 50P The Island government offers an export subsidy that increases the domestic market price to $5,500 and lowers the world price to $4,500. However, starting next month, the Island government will be removing the export subsidy in compliance with the latest international trade pact. A. What is the impact of the removal of the subsidy on domestic consumers? B. What is the change in producer surplus due to the movement to free trade? C. What is the net effect of moving to free trade on Island welfare?
- 15. Data and empirical observations have validated the fact thata. Sectors specific to export industries tend to lose from international trade, while sectorsspecific to import-competing industries tend to gain.b. All sectors tend to lose.c. All sectors tend to gain.d. None of the above is true.Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 5 cans tuna fish Tunata: 1 can baby formula ≡ 7 cans tuna fish a. In what product should each nation specialize? Canswicki should produce _____- , and Tunata should produce _____ b. Would the following terms of trade be acceptable to both nations? i. 1 can baby formula ≡ 4 cans tuna fish: yes or no ii. 1 can baby formula ≡ 8 cans tuna fish: yes or no iii. 1 can baby formula ≡ 5.5 cans tuna fish: yes or noWhen Korea moved to an export-oriented industrialization strategy in the mid-1960s it did not dismantle the protection of the existing infant industries. Infant industries were vigorously promoted alongside the export drive, the main thrust coming in the mid-1970s under the name of “heavy and chemical industrialization” policy. In the early 1980s, Korean industrial policy ceased to favor explicitly certain industries but had to cope with the legacy of previousindustrial policy. In summary, Korean infant industries were not allowed to live complacently behind the wall of protection but rather were driven to compete and improve performance. The process was not interrupted by foreign exchange crises. This should have also led to faster growth of output for infant industries. Protected infant industries failed to grow fast in most developing countries apparently for the same reasons they failed to mature a) What could have been the motivations of the Korean government for carrying out an…
- Assume that the comparative-cost ratios of two products— baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 2 cans tuna fish Tunata: 1 can baby formula ≡ 4 cans tuna fishIn what product should each nation specialize? Which of the following terms of trade would be acceptable to both nations: (a) 1 can baby formula ≡ 2 1 2 cans tuna fish; (b) 1 can baby formula ≡ 1 can tuna fish; (c) 1 can baby formula ≡ 5 cans tuna fish?Givenw: (1) two nations (1 and 2) which have the sametechnology but different factor endowments and tastes, (2)two commodities (X and Y) produced under increasingcosts conditions and (3) no transportation costs, tariffs orother obstructions to trade.Prove geometrically that mutually advantageous tradebetween the two nations is possible.Note: Your answer should show the autarky (no-trade) andfree-trade points of production and consumption for eachnation, show gains from trade of each nation and expressthe equilibrium condition that should prevail when trade Stop equilibruma) It is sometimes argued that, if a government protects a domestic industry (forexample, using tariffs or subsidies) that is facing import competition from a moreefficient foreign industry, this would be a net gain for the country as a whole, evenif the foreign industry is itself protected. Give arguments for and against this pointof view, drawing on Ricardo’s theory of trade, the Standard Model, and other theorythat you consider relevant. Finally, does the size of the country matter?