2.4.1 Welfare Analysis of an Import Quota
|
|
- May Norman
- 6 years ago
- Views:
Transcription
1 2.4 Import Quota The benefits of free trade have been emphasized in this course. Free markets and free trade are based on voluntary, mutually-beneficial transactions that make both trading partners better off. The global economic gains from free trade have been enormous, as they enhance efficiency of resource use. Comparative advantage and gains from trade allow each individual, firm, or nation to do what they do best, and trade for the rest. Not everyone wins from trade, however. The overall net benefits are positive, but there are winners and losers from trade. Specifically, producers in importing nations and consumers in exporting nations lose due to price changes that negatively affect them. Like all public policies, free trade has winners and losers. Trade barriers are most often erected to protect domestic producers from imports. Sugar is produced in the United States, but at higher production costs than sugar production in tropical climates found in Cuba, the Dominican Republic, and Haiti. If free trade prevailed, all sugar consumed in the USA would be imported, since it is cheaper to buy sugar than to produce it domestically. Sugar producers are interested in maintaining sugar production in the USA, as this is how they make their living. Agricultural trade policy has limited sugar imports to a much smaller amount than the free trade level, through a sugar quota, demonstrated in Figure In a closed economy, market forces ensure that supply and demand are equal (Q s = Q d ). If the USA were a closed economy, the price of sugar would be very high, well above the world market price of sugar Pw. Suppose that the USA is a small nation purchaser of sugar: this means that the USA is a price taker, facing a constant world price of sugar for all quantities purchased. This is represented as a horizontal line at Pw in Figure At the world price of Pw, the USA would produce Q s domestically and consume Q d. The difference between quantity demanded and quantity supplied is imports (Q d Q s ). The equality of domestic supply and demand has been broken by the ability to import less expensive sugar from other nations. Domestic sugar producers lobby the government for protection, and receive it in the form of a sugar quota, meaning a maximum amount of sugar imports. The right to import sugar is auctioned off to the highest bidder, who pay for the right to import sugar. Suppose that the quota is set at Q d Q s. This level of imports is the horizontal distance between Q d and Q s in Figure At this quota level, the price of sugar increases to P, since the quantity of sugar in the market is reduced from free market 69
2 levels. At this high price (P ), quantity supplied increases from Q s to Q s, and quantity demanded decreases from Q d to Q d. These changes are due to the quota, which decreases the amount of sugar allowed into the country. Sugar producers are pleased with this policy, since the price is higher and domestic quantity supplied larger Welfare Analysis of an Import Quota The welfare analysis of the import quota identifies the changes in economic surplus of producers, consumers, and the government. The government gains from selling the import quota permits to the sugar importers. These firms will compete with each other to win the right to import sugar. The firms will bid up the price in an auction until the price is equal to the market value of the quota. In this case, the market value is equal to (P Pw), since this is the gain from importing one pound of sugar into the USA. The complete welfare analysis is: 70
3 ΔCS = A B C D, ΔPS = + A, ΔG = + C, ΔSW = B D, and DWL = B + D. Producers gain, but at large costs to consumers. The government gains from the sale of the quota permits to sugar importers. Sugar consumers are made much worse off from this policy. The area B is called the production loss of the policy. This area is equal to the losses of using scarce resources to produce sugar in the USA instead of buying it at the world price. Area B represents the production costs, since it is the area under the supply curve, and above the price. These resources could be more efficiently used producing something other than sugar. Area D is called the consumption loss of the import quota. This is the area under the demand curve and above the world price, which represents the extra dollars spent by US consumers buying domestic sugar instead of low-cost imported sugar. Areas B and D represent the loss in social welfare, or the deadweight loss of the government intervention. Free markets and free trade would provide efficiency of resource use and lower costs to consumers. In the USA, sugar prices are typically one to two times higher than the world price, resulting in billions of dollar losses to sugar consumers. This policy also has an interesting unintended consequence. High fructose corn syrup (HFCS) is a perfect substitute in consumption for sucrose (sugar made from sugar cane or sugar beets). Corn producers lobby to maintain the sugar import quota, to keep the price of sugar high. When sugar price is high, buyers of sugar (Coca Cola, Pepsi, Mars, etc.) switch out of sucrose and into fructose. Corn farmers are among the largest supporter of the sugar import quota! Quantitative Welfare Analysis of an Import Quota Suppose that the inverse demand and supply of sugar are given by: 71
4 P = 100 Q d, and P = 10 + Q s, Where P is the price of sugar in USD/lb, and Q is the quantity of sugar in million pounds. Suppose also that the world price of sugar is given by Pw = 20 USD/lb, as shown in Figure In a closed economy, market equilibrium would be found where supply equals demand: Q e = 45 million pounds of sugar and P e = 55 USD/lb. This is a high price of sugar relative to the world price. If imports are allowed, the USA can break the equality of production and consumption through imports of less expensive sugar. If we assume that the USA is a small nation in sugar trade, then the USA is a price taker, and can import as much or as little sugar as it desires at the world 72
5 price. Note that a large nation means that a country is a price maker, and has enough market power to influence the price of the imported good. The free market equilibrium in an open economy can be calculated by substitution of the world price into the inverse supply and demand functions. At the world price, Q s = 10 m lbs sugar and Q d = 80 m lbs sugar. Imports are equal to Q s - Q d = 70 m lbs sugar. Social welfare is maximized at this free trade equilibrium, since sugar is produced by the lowest cost producers. Ten m lbs are produced by domestic producers along the supply curve below the world price, and 70 m lbs are produced by foreign sugar producers at the world price of 20 USD/lb. Now assume that a sugar import quota is implemented, equal to 50 m lbs of sugar. Since this is less than the free trade import level, it will decrease the amount of sugar available in the USA, and cause price to increase. The sugar price that results from the quota (P ) can be calculated using the inverse supply and demand curves and the import quota: Q d - Q s = 50, P = 100 Q d, and P = 10 + Q s. Rearranging the first equation: Q d = 50 + Q s. Substitution of the first equation into the inverse demand equation yields: P = 100 (50 + Q s ) = 50 - Q s. This equation can be set equal to the inverse supply equation: P = 50 - Q s = 10 + Q s. Solving for Q s : 2Q s = 50 10, or Q s = 40/2 = 20 m lbs sugar. Substituting this into the import equation and the inverse supply function yield: P = 30 USD/ lb, and Q d = 70 m lbs sugar. 73
6 These values are all shown in Figure Notice that quantity supplied has increased and quantity demanded has decreased due to the import quota and the resulting higher price. The welfare analysis can now be conducted by calculation of the areas in the graph. ΔCS = A B C D = USD million ΔPS = + A = USD million ΔG = + C = million ΔSW = B D = USD million DWL = B + D = million The government gains area C by auctioning off the permits that allow firms to import sugar. Taxes are analyzed in the next section. 74
Chapter 9. The Instruments of Trade Policy
Chapter 9 The Instruments of Trade Policy Introduction So far we learned that: 1. Tariffs always lead to deadweight losses for small open economies 2. A large country can increase its welfare by using
More informationChapter 4 Specific Factors and Income Distribution
Chapter 4 Specific Factors and Income Distribution Introduction If trade is so good for the economy, why is there such opposition? Two main reasons why international trade has strong effects on the distribution
More information14.03 Fall 2004 Problem Set 3 Solutions
14.03 Fall 2004 Problem Set 3 Solutions Professor: David Autor October 26, 2004 1 Sugarnomics Comment on the following quotes from articles in the reading list about the US sugar quota system. 1. In terms
More informationChapter 9 Nontariff Barriers and the New Protectionism
Chapter 9 Nontariff Barriers and the New Protectionism Nontariff barriers to trade (NTBS) are now perhaps as much as ten times more restrictive of international trade than tariffs. Walters and Blake, The
More informationAP Econ Day 92.notebook February 04, 2013
FIGURE 37.2 Trading possibilities lines and the gains from trade. Pg 761 - Questions As a result of specialization and trade, both the United States and Mexico can have higher levels of output than the
More informationPBAF 516 YA Prof. Mark Long Practice Midterm Questions
PBAF 516 YA Prof. Mark Long Practice Midterm Questions Note: these 10 questions were drawn from questions that I have given in prior years (in a similar class). These questions should not be considered
More informationECS ExtraClasses Helping you succeed. Page 1
Page 1 ECS 1501 Oct/Nov 2014 Exam Recommended Answers 1. 2 2. 2 3. 2 4. 4 5. 1, a movement along the PPC involves an opportunity cost, to produce more of one good the firm has to produce less of the other
More informationChapter 1 Introduction to Economics 1.0 CONTENTS. Introduction to the Series
CONTENTS Introduction to the Series iv 1 Introduction to Economics 5 2 GDP and its Determinants 17 3 Aggregate Demand and Aggregate Supply 28 4 The Macroeconomic Objectives 47 5 Fiscal Policy 73 6 Monetary
More informationReview Session Dec. 2nd
International Trade Short answer/multiple choice Review Session Dec. 2nd 1. Other things equal, which one of the following will cause an increase in the ERP in the automobile industry? a. a decrease in
More informationNCEA Level 3 Economics (91400) 2013 page 1 of 7
NCEA Level 3 Economics (91400) 2013 page 1 of 7 Assessment Schedule 2013 Economics: Demonstrate of efficiency of different market structures analysis (91400) Evidence Statement Question Evidence ONE (a)
More information05/12/2011. Preview. Chapter 9. The Instruments of Trade Policy
Chapter 9 The Instruments of Trade Policy Preview Partial equilibrium analysis of tariffs in a single industry: supply, demand, and trade Costs and benefits of tariffs Export subsidies Import quotas Voluntary
More informationChapter 6. The Theory of Tariffs and Quotas. Copyright 2008 Pearson Addison-Wesley. All rights reserved.
Chapter 6 The Theory of Tariffs and Quotas Chapter Objectives Introduce the theory of tariffs Discuss the welfare and efficiency effects of tariffs Analyze the distinction between tariffs and quotas 6-2
More informationPreview. Chapter 9. The Instruments of Trade Policy
Chapter 9 The Instruments of Trade Policy Copyright 2012 Pearson Addison-Wesley. All rights reserved. Preview Partial equilibrium analysis of tariffs in a single industry: supply, demand, and trade Costs
More informationEcon Principles of Microeconomics - Assignment 2
Econ 2302 - Principles of Microeconomics - Assignment 2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. If a nonbinding price ceiling is imposed on a market,
More informationAggregate Supply and Demand
Aggregate demand is the relationship between GDP and the price level. When only the price level changes, GDP changes and we move along the Aggregate Demand curve. The total amount of goods and services,
More informationECO 2023: Principle of Microeconomics, Exam one
Name: Panther ID: ECO 2023: Principle of Microeconomics, Exam one Multiple Choice: Choose the one alternative that best completes the statement or answers the question. (Points: 25*4=100) 1. In economics,
More informationSuppose that the government in this economy decides to impose an excise tax of $80 per clock on producers of clocks.
Economics 101 Spring 2016 Answers to Homework #3 DueMarch 15, 2016 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the
More informationChapter 2 Supply, Demand, and Markets SOLUTIONS TO EXERCISES
Firms, rices & Markets Timothy Van Zandt August 0 Chapter Supply, Demand, and Markets SOLUTIONS TO EXERCISES Exercise.. Suppose a market for commercial water purification systems has buyers with the following
More informationEXAMINATION 2 VERSION B "Applications of Supply and Demand" March 9, 2015
Signature: William M. Boal Printed name: EXAMINATION 2 VERSION B "Applications of Supply and Demand" March 9, 2015 INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted,
More informationPubPol 201. Module 3: International Trade Policy. Class 2 The Gains and Losses from Trade
PubPol 201 Module 3: International Trade Policy Class 2 The Gains and Losses from Trade Class 2 Outline The Gains and Losses from Trade Comparative advantage Other sources of gain from trade Who gains
More informationSugar Program: The Basics
Remy Jurenas Specialist in Agricultural Policy March 14, 2013 CRS Report for Congress Prepared for Members and Committees of Congress Congressional Research Service 7-5700 www.crs.gov R42535 Contents Sugar
More informationPrevious lecture: analysis of the impact of tariff protection on PIC welfare.
Protectionism through quotas; demise of Fiji s sugar industry; garments exports to Australia under quota; guest worker schemes for labour supply to Aust/NZ eg Economic Partnership Agreements currently
More informationMicroeconomics Pre-sessional September Sotiris Georganas Economics Department City University London
Microeconomics Pre-sessional September 2016 Sotiris Georganas Economics Department City University London Organisation of the Microeconomics Pre-sessional o Introduction 10:00-10:30 o Demand and Supply
More informationECONS 301 Homework #1. Answer Key
ECONS 301 Homework #1 Answer Key Exercise #1 (Supply and demand). Suppose that the demand and supply for milk in the European Union (EU) is given by pp = 120 0.7QQ dd and pp = 3 + 0.2QQ ss where the quantity
More informationChapter 8. Preview. Instruments of trade policy. The Instruments of Trade Policy
Chapter 8 The Instruments of Trade Policy Slides prepared by Thomas Bishop Preview Partial equilibrium analysis of tariffs: supply, demand and trade in a single industry Costs and benefits of tariffs Export
More informationIntroduction. Countries engage in international trade for two basic reasons:
Introduction Countries engage in international trade for two basic reasons: They are different from each other in terms of climate, land, capital, labor, and technology. They try to achieve scale economies
More informationECO 352 International Trade Spring Term 2010 Week 3 Precepts February 15 Introduction, and The Exchange Model Questions
ECO 35 International Trade Spring Term 00 Week 3 Precepts February 5 Introduction, and The Exchange Model Questions Question : Here we construct a more general version of the comparison of differences
More informationINTERNATIONAL TRADE. Xie, Yiqing
INTERNATIONAL TRADE Xie, Yiqing LECTURE 7 IMPORT TARIFFS AND QUOTA UNDER PERFECT COMPETITION Introduction A Brief History of the World Trade Organization The Gains from Trade Import Tariffs for a Small
More informationNAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Midterm II November 9, 2006
NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1. The marginal
More informationProblem Set 1: Trade Barriers under Perfect Competition - Answer Key
ECO 6333: Trade Policy Spring 2018 Thomas Osang Problem Set 1: Trade Barriers under Perfect Competition - Answer Key Part I: The tariff could be either a specific tariff or an ad valorem tariff. Since
More informationRecitation #6 Week 02/15/2009 to 02/21/2009. Chapter 7 - Taxes
Recitation #6 Week 02/15/2009 to 02/21/2009 Chapter 7 - Taxes Exercise 1. The government wishes to limit the quantity of alcoholic beverages sold and therefore is considering the imposition of an excise
More informationEXAMINATION 2 VERSION A "Applications of Supply and Demand" March 9, 2015
Signature: William M. Boal Printed name: EXAMINATION 2 VERSION A "Applications of Supply and Demand" March 9, 2015 INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted,
More informationApplication: International Trade
9 Application: International Trade PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 The Determinants of Trade The equilibrium without trade Only domestic buyers and sellers
More informationPARTIAL EQUILIBRIUM Welfare Analysis
PARTIAL EQUILIBRIUM Welfare Analysis [See Chap 12] Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved. 1 Welfare Analysis We would like welfare measure. Normative properties
More informationProblem Set 1: Trade Barriers under Perfect Competition - Answer Key
ECO 6333: Trade Policy Spring 2019 Thomas Osang Problem Set 1: Trade Barriers under Perfect Competition - Answer Key Part I: The tariff could be either a specific tariff or an ad valorem tariff. Since
More informationApplication: International Trade. Copyright 2004 South-Western
Application: International Trade 9 Copyright 2004 South-Western The Effects of a Tariff A tariff is a tax on goods produced abroad and sold domestically. Tariffs raise the price of imported goods above
More informationPrinciple of Macroeconomics, Summer B 2017 Exam one
Principle of Macroeconomics, Summer B 2017 Exam one Name: (Please write your answer in the last page) Pather ID: 1) When goods and services are produced at the lowest possible cost, occurs. A) allocative
More informationEXAMINATION 2 VERSION C "Applications of Supply and Demand" March 9, 2015
Price William M. Boal Signature: Printed name: EXAMINATION 2 VERSION C "Applications of Supply and Demand" March 9, 2015 INSTRUCTIONS: This exam is closed-book, closed-notes. Simple calculators are permitted,
More informationPubPol 201. Module 3: International Trade Policy. Class 2 Outline. Class 2 Outline. Class 2. The Gains and Losses from Trade
PubPol 201 Module 3: International Trade Policy Class 2 The Gains and Losses from Trade Class 2 Outline The Gains and Losses from Trade Comparative advantage Other sources of gain from trade Who gains
More information2. Examine Figure 5.1. Is the text using the small country model? Explain the interpretation of each of the areas a, b, c, and d in this figure.
Study Questions for Week 5 1. What is the small country assumption? What is the large country assumption? Is the US a small country in the international oil market? In the international tea market? In
More informationEconomics II - Exercise Session, December 3, Suggested Solution
Economics II - Exercise Session, December 3, 008 - Suggested Solution Problem 1: A firm is on a competitive market, i.e. takes price of the output as given. Production function is given b f(x 1, x ) =
More informationLecture 12: Taxes. Session ID: DDEE. EC101 DD & EE / Manove Taxes & International Trade p 1. EC101 DD & EE / Manove Clicker Question p 2
Lecture 12: Taxes Session ID: DDEE Taxes & International Trade p 1 Clicker Question p 2 Summary of DWL from Price Controls When the distribution of income is very unequal, WTP is not a good measure of
More informationEXAMINATION #3 ANSWER KEY
William M. Boal Version A EXAMINATION #3 ANSWER KEY I. Multiple choice (1)a. (2)a. (3)a. (4)b. (5)b. (6)b. (7)b. (8)c. (9)b. (10)e. II. Short answer (1) a. 3.2 %. b. 0.8 %. (2) a. 0 (shut down). b. 10
More informationChapter 18 Trade and Development, page 1 of 8
Chapter 18 Trade and evelopment, page 1 of 8 trade protection: in general economists advocate international trade encouraging exports has been more successful than limiting imports at encouraging growth
More informationFinal Exam - Solutions
Econ 303 - Intermediate Microeconomic Theory College of William and Mary December 12, 2012 John Parman Final Exam - Solutions You have until 3:30pm to complete the exam, be certain to use your time wisely.
More informationANSWERS FINAL 342 VERSION 1
ANSWERS FINAL 342 VERSION 1 Question 1: Suppose Boeing and Airbus are deciding whether to invest in R&D to improve the quality of their medium-capacity planes. i. Given the following payoff matrix in millions
More informationPublic Affairs 856 Trade, Competition, and Governance in a Global Economy Lecture 12 3/5/2018. Instructor: Prof. Menzie Chinn UW Madison Spring 2018
Public Affairs 856 Trade, Competition, and Governance in a Global Economy Lecture 12 3/5/2018 Instructor: Prof. Menzie Chinn UW Madison Spring 2018 Import Tariffs and Quotas Under Perfect Competition 8
More information2.) In graph A, the large country s equilibrium price after the quota is a. P 1 b. P 2 * c. P 3 d. P 4
AGEC 5343 Dr. Shida Henneberry Midterm II November 5, 2009 1.) In graph A, the import quota amount is represented by a. The distance between Q 1 and Q 3 b. The distance between Q 1 and Q 2* c. The distance
More information3. Trade and Development
Trade and Development Table of Contents 3. Trade and Development the arguments a) Effects of an import tariff b) Effects of an export subsidy c) Arguments for trade policy 164 a) Effects of an import tariff
More informationCHAPTER DYNAMIC POWERPOINT SLIDES BY SOLINA LINDAHL. International Trade
CHAPTER 9 DYNAMIC POWERPOINT SLIDES BY SOLINA LINDAHL International Trade CHAPTER OUTLINE Analyzing Trade with Supply and Demand The Costs of Protectionism Arguments against International Trade For applications,
More informationInternational Economics International Trade (Industrial and Commercial policies lecture 7)
University of Cassino Economics and Business Academic Year 2018/2019 International Economics International Trade (Industrial and Commercial policies lecture 7) Maurizio Pugno University of Cassino 1 Industrial
More informationMarket demand is therefore given by the following equation:
Econ 102 Spring 2013 Homework 2 Due February 26, 2014 1. Market Demand and Supply (Hint: this question is a review of material you should have seen and learned in Economics 101.) Suppose the market for
More informationGlobalization. University of California San Diego (UCSD) Catherine Laffineur.
Globalization University of California San Diego (UCSD) Econ 102 Catherine Laffineur c.laffineur@hotmail.fr http://catherinelaffineur.weebly.com Introduction Outline of the Lecture Instruments of trade
More informationEconomics Honors Exam 2009 Solutions: Microeconomics, Questions 1-2
Economics Honors Exam 2009 Solutions: Microeconomics, Questions 1-2 Question 1 (Microeconomics, 30 points). A ticket to a newly staged opera is on sale through sealed-bid auction. There are three bidders,
More informationThe Ricardian Model. Rafael López-Monti Department of Economics George Washington University Summer 2015 (Econ 6280.
SURVEY OF INTERNATIONAL ECONOMICS The Ricardian Model Rafael López-Monti Department of Economics George Washington University rlopezmonti@gwu.edu Summer 2015 (Econ 6280.20) Required Reading: Feenstra,
More informationRemember the reasons for trade:
Ricardian model Remember the reasons for trade: Differences between countries (climate, technology, productivity, resources, etc.) Comparative advantage Increasing returns to scale Imperfect competition
More informationIB Economics International Trade 3.4: Trade Protection
IB Economics: www.ibdeconomics.com 3.4 TRADE PROTECTION: STUDENT LEARNING ACTIVITY Answer the questions that follow. 1. DEFINITIONS Define the following terms: Budget deficit Budget surplus Ceteris paribus
More informationUTILITY THEORY AND WELFARE ECONOMICS
UTILITY THEORY AND WELFARE ECONOMICS Learning Outcomes At the end of the presentation, participants should be able to: 1. Explain the concept of utility and welfare economics 2. Describe the measurement
More informationChapter 5. The Standard Trade Model. Slides prepared by Thomas Bishop
Chapter 5 The Standard Trade Model Slides prepared by Thomas Bishop Preview Measuring the values of production and consumption Welfare and terms of trade Effects of economic growth Effects of international
More informationEcon 101A Final exam May 14, 2013.
Econ 101A Final exam May 14, 2013. Do not turn the page until instructed to. Do not forget to write Problems 1 in the first Blue Book and Problems 2, 3 and 4 in the second Blue Book. 1 Econ 101A Final
More informationGOVERNMENT ACTIONS IN MARKETS
Chapt er 6 GOVERNMENT ACTIONS IN MARKETS Key Concepts A Housing Market with a Rent Ceiling The government might regulate a market. A price ceiling or a price cap is a government regulation that makes it
More information1. Consider a small country (Thailand) with the following demand and supply curves for steel:
Fall 005 Econ 455 Econ 455 Answers - Problem Set 4 Harvey Lapan 1. Consider a small country (Thailand) with the following demand and supply curves for steel: Supply = 6( 10 ) Ps 0 ; Demand = 1800 P s (the
More informationECON 442: Quantitative Trade Models. Jack Rossbach
ECON 442: Quantitative Trade Models Jack Rossbach Instruments of Trade Policy Many instruments available to affect international trade flows and prices. Non-exhaustive list: Tariffs: Taxes on Imports.
More informationTest Review. Question 1. Answer 1. Question 2. Answer 2. Question 3. Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9. Nominal GDP.
Question 1 Test Review Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9 All of the following variables have trended upwards over the last 40 years: Real GDP The price level The rate of inflation The
More informationTariffs in a small economy
Lecture 8a: Tariffs in a small economy Thibault FALLY C181 International Trade Spring 2018 1- Introduction These coming lectures (Feenstra and Taylor ch. 8): 1. How large are tariffs? 2. Is it beneficial
More informationProblem Set 3: Suggested Solutions
Microeconomics: Pricing 3E00 Fall 06. True or false: Problem Set 3: Suggested Solutions (a) Since a durable goods monopolist prices at the monopoly price in her last period of operation, the prices must
More informationAnswers to Text Questions and Problems in Chapter 15
Answers to Text Questions and Problems in Chapter 15 Answers to Review Questions 1. Prior to and during World War Two, Canada s leading trade partners were the United Kingdom and the United States. Today,
More informationAP Macro Unit 3: Int'l Trade and Finance
Name: Class: Date: AP Macro Unit 3: Int'l Trade and Finance Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. The overall U.S. balance of payments
More informationNote 1: Indifference Curves, Budget Lines, and Demand Curves
Note 1: Indifference Curves, Budget Lines, and Demand Curves Jeff Hicks September 19, 2017 Vancouver School of Economics, University of British Columbia In this note, I show how indifference curves and
More informationIntermediate Macroeconomics: Economics 301 Exam 1. October 4, 2012 B. Daniel
October 4, 2012 B. Daniel Intermediate Macroeconomics: Economics 301 Exam 1 Name Answer all of the following questions. Each is worth 25 points. Label all axes, initial values and all values after shocks.
More informationEcon 101A Final exam May 14, 2013.
Econ 101A Final exam May 14, 2013. Do not turn the page until instructed to. Do not forget to write Problems 1 in the first Blue Book and Problems 2, 3 and 4 in the second Blue Book. 1 Econ 101A Final
More informationTrade Policy: From efficiency to meeting social objectives
Trade Policy: From efficiency to meeting social objectives Enhancing the contribution of PTAs to inclusive and equitable trade: Bangladesh 28-29 March 2017 Dhaka Workshop outline Trade policy: from efficiency
More informationECON-140 Midterm 2 Spring, 2011
ECON-140 Midterm 2 Spring, 2011 Name_Answer Key Student ID Please answer each question fully, with a complete explanation (the reasoning). INDICATE YOUR FINAL NUMERICAL ANSWER WITH A BOX AROUND IT. Part
More informationLecture 12 International Trade. Noah Williams
Lecture 12 International Trade Noah Williams University of Wisconsin - Madison Economics 702 Spring 2018 International Trade Two important reasons for international trade: Static ( microeconomic ) Different
More informationOverview Basic analysis Strategic trade policy Further topics. Overview
Robert Stehrer Version: June 19, 2013 Overview Tariffs Specific tariffs Ad valorem tariffs Non-tariff barriers Import quotas (Voluntary) Export restraints Local content requirements Subsidies Other Export
More informationUnit 2: Supply, Demand, and Consumer Choice
Unit 2: Supply, Demand, and Consumer Choice 1 Unit 2: Supply, Demand, and Consumer Choice Length: 3 Weeks Chapters: 3, 20, and 21 Activity: Pearl Exchange Assignment: PS #2 2 DEMAND DEFINED What is Demand?
More informationECON/MGMT 115. Industrial Organization
ECON/MGMT 115 Industrial Organization 1. Cournot Model, reprised 2. Bertrand Model of Oligopoly 3. Cournot & Bertrand First Hour Reviewing the Cournot Duopoloy Equilibria Cournot vs. competitive markets
More information0 $50 $0 $5 $-5 $50 $35 1 $50 $50 $40 $10 $50 $15 2 $50 $100 $55 $45 $50 $35 3 $50 $150 $90 $60 $50 $55 4 $50 $200 $145 $55 $65
I. From Seminar Slides: 1. Output Price Total Marginal Total Marginal Profit Revenue Revenue Cost Cost 0 $50 $0 $5 $-5 1 $50 $50 $40 $10 $50 $15 2 $50 $100 $55 $45 3 $50 $150 $90 $60 $50 $55 4 $50 $200
More informationAuction is a commonly used way of allocating indivisible
Econ 221 Fall, 2018 Li, Hao UBC CHAPTER 16. BIDDING STRATEGY AND AUCTION DESIGN Auction is a commonly used way of allocating indivisible goods among interested buyers. Used cameras, Salvator Mundi, and
More information1 of 32. Market Efficiency and Government Intervention. Economics: Principles, Applications, and Tools O Sullivan, Sheffrin, Perez 6/e.
1 of 32 2 of 32 In the late 1600s, England shifted its residential tax base from hearths to windows. P R E P A R E D B Y FERNANDO QUIJANO, YVONN QUIJANO, AND XIAO XUAN XU 3 of 32 1 A P P L Y I N G T H
More informationProtectionism: An Indirect Subsidy from Consumers to Producers
Protectionism: An Indirect Subsidy from Consumers to Producers By: OpenStaxCollege When a government legislates policies to reduce or block international trade it is engaging in protectionism. Protectionist
More informationAGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT. Chapter 20
1 AGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT Chapter 20 AGGREGATE EXPENDITURE AND EQUILIBRIUM OUTPUT The level of GDP, the overall price level, and the level of employment three chief concerns of macroeconomists
More informationECON 340/ Zenginobuz Fall 2011 STUDY QUESTIONS FOR THE FINAL. x y z w u A u B
ECON 340/ Zenginobuz Fall 2011 STUDY QUESTIONS FOR THE FINAL 1. There are two agents, A and B. Consider the set X of feasible allocations which contains w, x, y, z. The utility that the two agents receive
More information9 Application: International Trade
Seventh Edition Principles of Macroeconomics N. Gregory Mankiw Wojciech Gerson (1831-1901) CHAPTER 9 Application: International Trade In this chapter, look for the answers to these questions What determines
More informationProf. Bryan Caplan Econ 812
Prof. Bryan Caplan bcaplan@gmu.edu http://www.bcaplan.com Econ 812 Week 9: Asymmetric Information I. Moral Hazard A. In the real world, everyone is not equally in the dark. In every situation, some people
More informationLecture # 14 Profit Maximization
Lecture # 14 Profit Maximization I. Profit Maximization: A General Rule Having defined production and found the cheapest way to produce a given level of output, the last step in the firm's problem is to
More informationANTITRUST ECONOMICS 2013
ANTITRUST ECONOMICS 2013 David S. Evans University of Chicago, Global Economics Group Elisa Mariscal CIDE, ITAM, CPI TOPIC 3: DEMAND SUPPLY & STATIC COMPETITION Date Topic 3 Part 1 7 March 2013 Overview
More informationPerfect Competition in the Short-run
Perfect Competition in the Short-run Perfect Competition Monopolistic Competition Oligopoly Pure Monopoly Imperfect Competition Characteristics of Perfect Competition: Many sellers Homogenous/standardized
More informationMACROECONOMICS - CLUTCH CH. 6 - INTRODUCTION TO TAXES.
!! www.clutchprep.com CONCEPT: INTRODUCING TAXES AND TAX INCIDENCE Taxes allow the government to provide public services. Taxes can either be imposed on the buyer or the seller of a good. The tax shifts
More informationTariffs in a large economy
Lecture 8b: Tariffs in a large economy Thibault FALLY C181 International Trade Spring 2018 2- Tariffs in a small economy Effect of tariffs? Conclusion for a small open economy: Tariffs net welfare loss
More informationProblems. units of good b. Consumers consume a. The new budget line is depicted in the figure below. The economy continues to produce at point ( a1, b
Problems 1. The change in preferences cannot change the terms of trade for a small open economy. Therefore, production of each good is unchanged. The shift in preferences implies increased consumption
More informationECON CHAPTER. McEachern Micro. International Trade. Designed by Amy McGuire, B-books, Ltd.
Designed by Amy McGuire, B-books, Ltd. Micro ECON McEachern 2010-2011 19 CHAPTER International Trade Chapter 19 Copyright 2010 by South-Western, a division of Cengage Learning. All rights reserved 1 The
More informationНазвание теста: Международная торговля(international trade) Предназначено для студентов специальности: Международные отношения, (3 курс 4 го), очное
Название теста: Международная торговля(international trade) Предназначено для студентов специальности: Международные отношения, (3 курс 4 го), очное Текст вопроса 1 Which trade theory holds that nations
More informationMACROECONOMICS - CLUTCH CH DERIVING THE AGGREGATE EXPENDITURES MODEL
!! www.clutchprep.com CONCEPT: AGGREGATE EXPENDITURES MODEL AND MACROECONOMIC EQUILIBRIUM Aggregate expenditures (AE) represent the total in an economy The aggregate expenditures model describes the relationship
More informationPRACTICE QUESTIONS CHAPTER 5
CECN 104 PRACTICE QUESTIONS CHAPTER 5 1. Marginal utility is the: A. sensitivity of consumer purchases of a good to changes in the price of that good. B. change in total utility realized by consuming one
More informationEconomics 201 Fall 2010 Introduction to Economic Analysis Problem Set #1 Due: Wednesday, September 8
Economics 201 Fall 2010 Introduction to Economic Analysis Jeffrey Parker Problem Set #1 Due: Wednesday, September 8 Instructions: This problem set is due in class on Wednesday, September 8. Each student
More informationTRADING WITH THE WORLD*
Chapter 17 TRADING WITH THE WORLD* Key Concepts Patterns and Trends in International Trade The goods and services we buy from producers in other nations are our imports; the goods and services we sell
More informationChapter 10 THE PARTIAL EQUILIBRIUM COMPETITIVE MODEL. Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 10 THE PARTIAL EQUILIBRIUM COMPETITIVE MODEL Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved. 1 Market Demand Assume that there are only two goods (x and y)
More information2. David Ricardo's model explains trade based on: A) labor supply. B) technology. C) population. D) government control.
1. Which of the following is NOT a reason why countries trade goods with one another? A) differences in technology used in different countries B) differences in countries' total amount of resources C)
More informationInternational Economics Econ 4401 Midterm Exam Key
International Economics Econ 4401 Midterm Exam Key Tim Uy Name: Student Number: 1 Short Answer Questions (30 Points) 1. [5] Give five reasons (or five theories that explain) why countries trade. Acceptable
More information