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Module 9 Assignment

Microeconomics module 9 assignment

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Ziarehman Shar
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16 views

Module 9 Assignment

Microeconomics module 9 assignment

Uploaded by

Ziarehman Shar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problem 1

Part a
Without international trade:
There is a need to identify the market price level that will be obtained from the demand and
supply schedules.
From this table, for instance, it emerges that this is possible when set at a price of $150 per
container and with 9 million containers per year.
Part b
Comparative advantage:
To decide who is best off — who has a comparative advantage — we must compare the
opportunity costs of producing roses in the U.S. and elsewhere.
As for the rest of the world, we don’t have voluminous cost information but from the fact that
wholesalers are willing to import roses at $125 per container.
This goes further to mean that other countries in the world have a lower opportunity cost in
producing roses than United States.

Problem 2
With international trade:
Wholesalers will purchase roses at a source they find to be most affordable.
They can buy roses from Aalsmeer at $125 container therefore they will only source from U.S
growers at a cheaper price.
From the supply schedule, it is clear that U.S growers supply roses at $ 125 per, container or
below.
As a result, wholesalers will purchase 6 million containers from growers in the United States
($125 each) and 3 million from Aalsmeer.

Problem 12
Part a
Imported sugar in the United States market will cost 10 cents per pound and home-grown sugar
will cost as follows: This situation prevails because the U.S can now procure sugar more cheaply
than it would have to produce it locally.
Part b
United States consumers will spend more on sugar. For this reason with the new lower price the
consumers will be motivated to buy more sugars.
Part c
American growers of sugar will produce less sugar. Since the domestic price is lower than the
equilibrium price it is less and less worthwhile for the US growers to grow sugar.
Part d
The United States will also be a sugar importer. At the moment, the world price is lower than the
domestic price; as such, it will be cheaper for the US to import rather than produce sugar locally.

Problem 13
Part a
It would also raise its price for steel produced and sold in India to a $100 a ton. When India has
opened up for international trade it can sell its steel at the higher price prevailing in the global
market.
Part b
The nature of the industry in India envisages the manufacture of a greater quantity of steel.
Whereby the higher price will encourage production of steel for the Indian steel producers
generating adequate incentive.
Part c
India will buy less of the steel. Should the price for steel rise within the country, Indian buyers
will be less inclined to purchase steel.
Part d
India will export steel. Since the domestic price is lower than the world price, India is
comparatively better than others in producing steel, and hence exports steel to all these countries.

Problem 19
Price and quantity changes:
Price: If tariffs were reduced, the price necessary for the American consumer to pay for goods
imported from Mexico reduced. This is so because tariffs are mere forms of taxation that are
placed on imported good making them costly.
Quantity: As a result, because of lower prices, the US consumers overloaded the Mexican
markets with their demand. This led to a growth of the amount of imports from Mexico into the
United States.
Winners and losers:
Winners:
U.S. consumers: On the consumers’ side they reap the gains from lower prices and greater
product differentiation.
U.S. businesses that import goods from Mexico: These businesses also suffer from less input
costs.
Mexican exporters: They reap the benefits from getting better access to the American market.
Losers:
U.S. producers who compete with Mexican imports: These producers may have other producers
competing with them and may not be making as much of a profit as the above stated companies.
Government: There is loss of tariff revenue for the government.

Problem 20
Quantity of U.S. exports and tariff revenue:
Quantity of U.S. exports: The untying of tariffs on Mexican goods saw increase the exportation
of goods from United States to Mexico. This is because if consumers in the other country buy
cheaper products from Mexico this will lead to the importation of more products from the U.S.
Tariff revenue: Specifically, the Mexican trade tariffs’ revenue for the U.S. government declined
to zero. This means that since tariffs were adopted there is no longer any form of tax levied on
goods imported in the country.

Problem 21
Impact of an import quota on Mexican tomatoes:
Winners:
U.S. tomato growers: On the same note it would lower the number of tomatoes imported from
Mexico, they might cause a hike in the price of tomatoes in the U.S market so as to protect local
growers.
Losers:
U.S. consumers: They would pay a higher price for tomatoes.
U.S. businesses that use Mexican tomatoes: These businesses would be subject to increase in
cost of inputs.
Mexican tomato growers: The quota would severely restrict that access, in particular to the all-
important American market.

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