Exam 5: Nontariff Trade Barriers

The sugar import quotas of the U.S.government have tended to increase the market price of sugar,thus reducing the costs to the government of maintaining sugar price supports for domestic growers.

If import licenses are auctioned off to domestic importers in a competitive market,their scarcity value (revenue effect) accrues to:

Domestic content legislation applied to autos would tend to:

A firm would increase profits from dumping if it charges a lower price at home,where demand is inelastic,and a higher price abroad where demand is elastic.

According to the U.S.Buy American Act,federal government agencies cannot purchase materials and products from U.S.suppliers if their prices are higher than those of foreign competitors.

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

Figure 5.5 illustrates the television market for Mexico,assumed to be a small country that is unable to affect the world price.SMexico is the domestic supply schedule and DMexico is the domestic demand schedule.Suppose that Japan can supply televisions to Mexico at a price of $100 per set. Figure 5.5.Mexico's Television Market -Consider Figure 5.5.With free trade,Mexicans produce 4 TVs,consume 24 TVs,and import 20 TVs.

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.

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.

Local content laws are consistent with the principle of import substitution,in which domestic production replaces the importation of goods from abroad.

Import quotas

An effective Buy American law results in deadweight welfare losses for the United States in the form of the protective effect and consumption effect.

Figure 5.4 illustrates the calculator market for Venezuela,assumed to be a "small" country that is unable to affect the world price.SVenezuela is the domestic supply schedule and DVenezuela is the domestic demand schedule. Figure 5.4.Venezuelan Calculator Market -Consider Figure 5.4.The increase in Venezuelan producer surplus under the production subsidy totals:

Figure 5.6 Domestice Supply and demand for Wine - US -Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.How much will the US produce and import in these circumstances?

During the 1980s,U.S.steel-using companies (Caterpillar) actively supported the U.S.government's negotiation of voluntary export agreements with foreign steel-exporting countries.

Figure 5.2 illustrates the revenue and cost conditions of ABC Inc.which sells calculators in Canada and France. Figure 5.2.International Dumping -Consider Figure 5.2.In the absence of international dumping,ABC Inc.maximizes profits by selling ____ calculators at a price of $____; the firm realizes profits totaling $____.

Figure 5.5 illustrates the television market for Mexico,assumed to be a small country that is unable to affect the world price.SMexico is the domestic supply schedule and DMexico is the domestic demand schedule.Suppose that Japan can supply televisions to Mexico at a price of $100 per set. Figure 5.5.Mexico's Television Market -Consider Figure 5.5.The deadweight welfare loss to Mexico,as a result of the Japanese export quota,totals $1200.

What is the price-based definition of dumping?

Which of the following refers to a market-sharing pact negotiated by trading partners to moderate the intensity of international competition?

Concerning the restrictive impact of an import quota,assume there occurs an increase in the domestic demand for the import product.As long as the quota falls short of what would be imported under free market conditions,the economy's adjustment to the increase in demand would take the form of: