International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
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Chapter 4, Problem 12SQ
To determine
Calculation of the effective rate of protection for Canada’s steel industry.
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2) Country X faces world prices for finished radios and radio components, which are 90 shillings and 80 shillings respectively. There is a 30% tariff on imported radios and 5% tariff on imported radio components. What is the effective rate of protection ( in percentage terms ) for the radio assembly industry in country X? What is the nominal rate of protection in the radio assembly industry?
The demand and supply functions for a product in two large countries are given as: Country A Country B Qd = 56 - 4P Qd = 110 – 4P Qs = -4 + 2P Qs = -10 + P The importing country imposes an ad valorem tariff of 20%. Calculate the change in consumer surplus, producer surplus, government revenue and social welfare after the imposition of tariff in the importing nation.
In addition to the production and consumption side deadweight losses, what are some of the other potential costs of tariffs?
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- Q) The demand and supply functions for a product in two large countries are given as: Country A Country B Qd = 56 - 4P Qd = 110 – 4P Qs = -4 + 2P Qs = -10 + P The importing country imposes an ad valorem tariff of 20%. Calculate the change in consumer surplus, producer surplus, government revenue and social welfare after the imposition of tariff in the importing nation.arrow_forwardThe effective rate of protection is a weighted average of nominal tariffs and tariffs on imported inputs. It has been noted that in most industrialized countries, the nominal tariffs on raw materials or intermediate components or products are lower than on final-stage products meant for final markets. Why would countries design their tariff structures in this manner? Who tends to be helped, and who is harmed by this cascading tariff structure?arrow_forwardA country imposing a tariff can benefit in terms of social welfare if The terms-of-trade benefit exceeds the sum of production and consumption distortion loss. True/False? Please explainarrow_forward
- The United States currently imports all of its coffee. The annual demand for coffee by U.S. consumers is given by the demand curve Q = 250 – 10P, where Q is quantity (in millions of pounds) and P is the market price per pound of coffee. World producers can harvest and ship coffee to U.S. distributors at a constant marginal (= average) cost of $8 per pound. U.S. distributors can in turn distribute coffee for a constant $2 per pound. The U.S. coffee market is competitive. Congress is considering a tariff on coffee imports of $2 per pound. i. Calculate the tax revenue collected by the government. ii. ii. Does the tariff result in a net gain or a net loss to society as a whole?arrow_forwardSuppose the world price for a good is 40 and the domestic demand-and-supply curves are given by the following equations: Demand: P = 80 – 2Q Supply: P = 5 + 3Q How much is consumed? How much is produced at home? What are the values of consumer and producer surplus? If a tariff of 10 percent is imposed, by how much do consumption and domestic production change? What is the change in consumer and producer surplus? How much revenue does the government earn from the tariff? What is the net national cost of the tariff?arrow_forwardSuppose that the world price of coffee makers is $20 and the value of imported intermediate goods used to produce coffee makers in the US is $12. If a tariff of 10 percent is placed on coffee makers and additional tariff on the imported intermediate goods used to produce coffee makers is 50%, the effective rate of protection is Select one: A. -75 percent. B. -50 percent. C. 0 percent. D. 10 percent. E. 25 percent.arrow_forward
- Country Demand curve (P = S$) Supply curve (P = S$) Singapore P = 76 - 2Q P = 52 + 2Q Thailand P = 68 – 2Q P = 44 + 2Q (Assume that only two countries above involve in Product A in an international market) a) Compute the world equilibrium price and trade quantity for Product A. b) If Singapore government impose tariff of S$4 per unit of Product A, draw a diagram to illustrate the costs and benefits of tariff for Singapore. c) Based on the diagram in part (b) above, compute the following: (i) Producer gain (ii) Consumer loss (iii) Government revenue gainarrow_forwardSuppose the world price for a good is 40 and the domestic demand-and-supply curves are given by the following equations: Demand: P = 80 – 2Q Supply: P = 5 + 3Q How much is consumed? How much is produced at home? What are the values of consumer and producer surplus? If a tariff of 10 percent is imposed, by how much do consumption anddomestic production change? What is the change in consumer and producer surplus? How much revenue does the government earn from the tariff? What is the net national cost of the tariff? I just need number 7!arrow_forwardConsider a large country with a domestic demand characterized by the inverse demand function P=1000-Q. Domestic supply is represented by the equation P=400+Q. Finally, the world price of the good is 900. You know that an export tariff pass-through is 10%, meaning that foreign price decreases by 10% value of an export tariff t; more generally, 10% of any change in the domestic price is absorbed by the world market. a) Draw a diagram of a free trade case, label imports, consumer and producer surplus. b) Now you want to introduce export quota restrictions q. Calculate the value of the optimal export quota q, which maximizes domestic welfare. Illustrate CS, PS, QR, and DWL on your graph. Calculate their numerical values. c) Would you prefer to use an export quota or an export tariff? Explain why. Why do we see both instruments of trade policy being used? What are the advantages and disadvantages of export quotas compared to export tariffs?arrow_forward
- TRUE OR FALSE? EXPLAIN. To protect an industry, it is best when the Effective Rate of Protection is higher than the Normal Rate of Protection. For a Tariff-Rate Quota, the government imposes an import tariff and an import quota. The formation of Free Trade Areas and Custom Unions leads to free trade between all countries. Immiserizing growth takes place when there is an increase in growth and trade of a country. In the U.S, countervailing duties are levied on imported goods if they receive an export subsidy from the foreign government.arrow_forward(a) Boreland and Pipeland are two countries producing toycars, having the following demand and supply conditions : Boreland: DD: Q_(d)=10-2P SS:Q_(5)=2+2P Pipeland: DD: Q_(d)=8-2P SS: Q_(5)=4+2P (i) Given this information, what will be the world equilibrium price and quantity traded? (ii) The fixed cost of setting up a production chain of toycars by the exporting country in the importing country is $2.5, and the cost of transportation is $0.25 per toycar exported. Which route would be preferred by the exporting country: producing toycars abroad or exporting the same from home? (iii) In the light of the above answers, explain the tradeoff faced by the exporting country. PLease answer all three (i),(ii)and(iii)arrow_forwardP F Q5: Suppose there are three countries, A, B and C, in the world and A imports automobiles from either a small country B or a large country C. Assume that the free-trade prices of automobiles from countries B and C are PB=$20,000 and PC=$16,000, respectively, and country A initially imposes a 20% tariff on both B and C. Now A is considering forming an FTA with either B or C. (a) Which one of these FTAs would lead to trade diversion? (b) Use a graph of import demand and export supply curves to show the impact of this FTA on country A’s welfare. (c) What would be country A’s net welfare change if country A formed instead an FTA that leads to trade creation? (d) Suppose country B may become more efficient after forming an FTA with country A and thus may be able to lower its price. What is the price cut required such that the FTA between A and B and the FTA between A and C would generate the same welfare gain for country A? Your answer:arrow_forward
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