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Tutorial 3

International econmic

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13 views4 pages

Tutorial 3

International econmic

Uploaded by

a206140
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Tutorial 3

EPPE 3023 International Economic


Topic 3: Tariff

1. 1.An importer of computers is required to pay a duty to the government of $100 per
computer regardless of the price of the computer. What type of tariff is described in this
example?
2. A tax of 20 cents per unit on imported cheese is an example of a(an) ________________.
3. A tax of 15 percent per imported item is an example of a(an) ___________________.
4. If the world price is $40, a specific tariff of $10 is equivalent to an ad valorem tariff of
_____________.
5. Distinguish between consumer surplus and producer surplus. How do these concepts relate
to a country’s economic welfare?

6. Figure 1. Domestic Market for Gasoline in the United States

a. It represents the domestic market for gasoline in the United States. What is the consumer
surplus in this market?

b. It represents the domestic market for gasoline in the United States. What is the producer
surplus in this market?
7. Figure 2 illustrates the demand and supply schedules for pocket calculators in Mexico, a small
nation unable to affect the world price.
Figure 2. Import Tariff Levied by a "Small" Country

a. In the absence of trade, how much does Mexico produce and consume for pocket calculators?
b. In the absence of trade, Mexico's producer surplus and consumer surplus respectively equal
c. With free trade, how much does Mexico import for pocket calculators?
d. With free trade, the total value of Mexico's imports for pocket calculators equal
e. With free trade, Mexico's producer surplus and consumer surplus respectively equal
f. With a per-unit tariff of $3, the quantity of imports decreases to________________.
g. The loss in Mexican consumer surplus due to the tariff equals
h. The tariff results in the Mexican government collecting
i. Mexican manufacturers gain ____________ because of the tariff.
j. The deadweight cost of the tariff totals
Topic 4: Non-Tariff Barrier

1. Give three examples of nontariff trade barriers?

2. In the early 1980s, the Japanese government limited shipments of Japanese automobiles to the
United States. This limitation was known as_________________.
Question 3-13, answer true or false
3. An import quota is a physical restriction on the quantity of goods that may be imported during
a specified time period.

4. A global import quota permits a specified number of goods to be imported each year, but does
NOT specify where the product is shipped from and who is permitted to import.

5. During periods of growing demand, a tariff more effectively restricts the volume of imports
than an equivalent import quota.

6. With a quota placed on imported sugar, increased domestic demand leads to increased sugar
imports but NOT to higher sugar prices.

7. An elimination of nontariff barriers on apples tends to increase apple imports, reduce profits
of import-competing apple producers, and generate job losses for domestic apple workers.

8. To the extent that a local content requirement forces firms to locate production in a high-cost
nation, product price rises and consumer surplus falls.

9. Voluntary export restraint agreements typically apply to all of the world's exporting nations
rather than only the most important exporting nations.

10. A subsidy granted to an import-competing producer imposes a deadweight loss on the


domestic economy equal to the redistribution effect plus consumption effect.

11. A subsidy granted to import-competing producer reduces overall domestic welfare by the
same amount as would a tariff or quota that restricts imports by the same amount.

12. International dumping occurs when foreign buyers are charged higher prices than domestic
buyers for an identical product, after allowing for transportation costs and tariff duties.

13. Sporadic (distress) dumping would occur if domestic orange producers dispose of an excess
quantity of oranges, resulting from an abnormally large harvest, by selling them at lower
prices abroad than at home.
14. Figure 3 illustrates the apple market for Sweden, assumed to be a small country that is unable
to affect the world price. SSweden is the domestic supply and DSweden is the domestic demand.
SSweden+Quota is Sweden's supply schedule with an import quota.
Figure 3. Sweden's Apple Market

a. In the absence of trade, Sweden's equilibrium price and quantity of apples would be
b. Suppose the rest of the world can supply apples to Sweden at a price of $0.60 per pound. With
free trade, Sweden produces _______ pounds of apples and imports _______ pounds of apples.
c. At the free-trade price of $0.60 per pound, Sweden's consumer surplus totals _____ and producer
surplus totals ______.
d. If SSweden+Quota represents the supply schedule after a quota is levied, Sweden's imports will
equal_______.
e. After the quota is levied, the price of apples in Sweden will equal________.
f. As a result of the quota, Sweden's consumer surplus (gain/lose) equal to $____________.
g. The quota leads to a deadweight welfare loss for Sweden of an amount equaling $__________.
h. The quota's revenue effect equals $____________.

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