Home's demand and supply for cars are given by: D = 130 - 30P and S = 10 + 30P, while Foreign's demand and supply for cars are: D = 60 - 30P and S = 40 + 30P (P is thousands of US$). Home has the ad valorem tariff of T = 0.4 per car in place. Now, the Foreign government decides to grant an ad valorem export subsidy of T = 0.4 per exported car. How does this subsidy affect Home welfare? Show graphically the changes to surpluses and tax revenues for Foreign.

Home's demand and supply for cars are given by: D = 130 - 30P and S = 10 + 30P, while Foreign's demand and supply for cars are: D = 60 - 30P and S = 40 + 30P (P is thousands of US$). Home has the ad valorem tariff of T = 0.4 per car in place. Now, the Foreign government decides to grant an ad valorem export subsidy of T = 0.4 per exported car. How does this subsidy affect Home welfare? Show graphically the changes to surpluses and tax revenues for Foreign.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter35: International Trade Restrictions

Section: Chapter Questions

Problem 1E

See similar textbooks

Similar questions

Let us consider the case of Good X in Malaysia. The demand and supply functions for Good X in Malaysia are Demand function: QD=361−2P Supply function: QS=23+P If the world price is 70, then is Malaysia an importer or exporter? Find out the number of imports at Pw=70 (Please give your answers in two decimal places. ) If the import quota was 80 units what will be the new price in the Malaysian market? (Please give your answers in two decimal places.) How many Good X will be produced domestically after the quota has been implemented? (Please give your answers in two decimal places.) How many Good X will be consumed by domestic consumers after the quota has been implemented? (Please give your answers in two decimal places.) What will be the import after implementing an import quota of 80 units (Please give your answers in two decimal places.) What is the percentage change in imports after the imposition of import quota? (Please give your answers in two decimal places, Multiply by 100 to…
The United States Embassy in the Philippines is being required by the Bureau of Customs to pay custom duties on all properties being transported to the Philippines, for use in the embassy by the ambassador and other diplomatic officers. May the US government be required to pay?
In an economy, a manufacturing company produces 1,000 units of a product at a total cost of $10,000. If the government imposes a tariff of $2 per unit on imported raw materials used in production, and the company is also subject to a corporate tax rate of 15%, calculate the new total cost of production after considering the cost of tariff and taxation. Assume no other costs are affected.
Based on your answer to the Senate Foreign Relations Committee one of the senators raises a concern that the free market price might be too high for the typical Chinese citizen to pay. Accordingly, she asks you to explain what would happen if the Chinese government privatized the market but then set a price ceiling at the Chinese equivalent of $1.50. How do you answer? Assume that the market demand and supply curves (in U.S. dollar equivalent prices) are still given by Qd = 10 − 2P and Qs = 2 + 2P
Consider a small country with only three producers, X, Y, and Z, who produce ink, pen, and paper, respectively. Y uses ink (output of X) in its production of pens. X produces 1,457 liters of ink monthly, Y produces 57,291 pens monthly, and Z produces 14 metric tons of paper monthly. X sells all of the ink it produces to Y at a market price of $338 per liter. Y sells 43,385 pens at a market price of $0.59 per pen and stores the rest as inventory. Z sells all of its paper at the market price of $781 per metric ton. The annual market value of production in this economy is $__?
You are an employee of a U.S. firm that produces personal computers in Thailand and then exports them to the United States and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at the time were Malaysia and Hong Kong. The U.S. government decides to impose punitive 100 percent ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U.S. exports to Thailand. How should your firm respond? What does this tell you about the use of targeted trade barriers?
For a large country import tariffs will yield a price increase for domestic consumer that is A higher than the tariff itself B equal to the tariff itself C smaller than the tariff itself
consider the domestic demand for apples to be given by Qd= 25-0.5P and that apples can be imported at an international price of $40 per basket. if the government percieves this price to be too high and decides to subsidize imports by $20 per basket. this policy will increase the imports of apples by ____ and create a deadweight loss of ____.
7 Q. China is known to price its exports differently in international markets compared to price in its domestic market. What would be the economic rational for segmenting markets? What can the importing country do to prevent or retaliate against such pricing?
Domestic demand for natural gas in a small economy is characterized by the equation P= 350-5Q, domestic supply is characterized by the equation (Q= 0.5.P+ 35, and the world price is equal to $60. An export tariff of $6 per unit will result in a net welfare loss of 14.6 lead to an export level that is less than half of the original amount lead to a loss in consumer surplus result in tariff revenue that is larger than the loss in producer surplus
occurs when a company exports to a foreign market at a price that is either lower than the domestic prices in that country or less than the cost of production.
Please no written by hand solutions Question 1: State whether each of the following statements is true or false. Justify for all statements and illustrate graphically/numerically whenever necessary. 1. The steeper the supply and demand curves for a certain commodity, the lower the trade and revenue effects of a tariff imposed on imports of such commodity. 2. With a positive nominal tariff on the final commodity, more of the commodity is produced domestically than would be under free trade. 3. If imported inputs constitute half the value of the final commodity and are admitted duty free, then the rate of effective protection is equal to the nominal tariff rate on the final commodity. 4. Export subsidies can be regarded as a form of dumping.