In the world market, a pair of shoes from China is sold for $40 and that from Mexico is $50. U.S. made shoes are $70 a pair. Initially U.S. does not belong to any free trade agreement and imposes an ad valorem tariff of 30%. Later, the U.S. joins a free trade agreement with Mexico and remove all trade barriers including tariffs. The import demand function for the U.S. is Q = 280 – 4P. (Hint: Draw the import demand curve of the world market as shown in the examples on the textbook and lecture slides.) 13. How much will the U.S. government tariff revenue change (as a result of this free trade agreement? а. Increase by $144 O b. Decrease by $720 C. Decrease by $800 O d. Decrease by $864
In the world market, a pair of shoes from China is sold for $40 and that from Mexico is $50. U.S. made shoes are $70 a pair. Initially U.S. does not belong to any free trade agreement and imposes an ad valorem tariff of 30%. Later, the U.S. joins a free trade agreement with Mexico and remove all trade barriers including tariffs. The import demand function for the U.S. is Q = 280 – 4P. (Hint: Draw the import demand curve of the world market as shown in the examples on the textbook and lecture slides.) 13. How much will the U.S. government tariff revenue change (as a result of this free trade agreement? а. Increase by $144 O b. Decrease by $720 C. Decrease by $800 O d. Decrease by $864
Chapter19: International Trade
Section: Chapter Questions
Problem 2.5P
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Question
![In the world market, a pair of shoes from China is sold for $40 and that from Mexico is $50. U.S. made shoes are $70 a
pair. Initially U.S. does not belong to any free trade agreement and imposes an ad valorem tariff of 30%. Later, the U.S.
joins a free trade agreement with Mexico and remove all trade barriers including tariffs. The import demand function for
the U.S. is Q = 280 – 4P. (Hint: Draw the import demand curve of the world market as shown in the examples on the
textbook and lecture slides.)
13. How much will the U.S. government tariff revenue change (as a result of this free trade agreement?
а.
Increase by $144
O b.
Decrease by $720
C. Decrease by $800
O d. Decrease by $864](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbdbf1a3c-bade-4896-af4f-3d2670984d14%2Fbecaf316-28c6-4319-a570-2adddf857676%2Feutio8s_processed.png&w=3840&q=75)
Transcribed Image Text:In the world market, a pair of shoes from China is sold for $40 and that from Mexico is $50. U.S. made shoes are $70 a
pair. Initially U.S. does not belong to any free trade agreement and imposes an ad valorem tariff of 30%. Later, the U.S.
joins a free trade agreement with Mexico and remove all trade barriers including tariffs. The import demand function for
the U.S. is Q = 280 – 4P. (Hint: Draw the import demand curve of the world market as shown in the examples on the
textbook and lecture slides.)
13. How much will the U.S. government tariff revenue change (as a result of this free trade agreement?
а.
Increase by $144
O b.
Decrease by $720
C. Decrease by $800
O d. Decrease by $864
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