Exam 5: Nontariff Trade Barriers

The most likely/common reason for international dumping is that firms are international price discriminators,responding to different demand conditions in different markets.

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.Compared to free trade,the Japanese export quota leads to an increase in Mexican producer surplus of $1050.

Import quotas will increase the price consumers pay for imported goods and

Which government agency/agencies make investigations in order to resolve dumping cases?

Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection. Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country -Referring to Figure 5.1,suppose the Mexican government imposes an import quota equal to 2 tons of steel.??If foreign exporters behave as monopoly sellers,and Mexican importers behave as competitive buyers,the overall welfare loss of the quota to Mexico equals:

For a tariff-rate quota

An import quota is a physical restriction on the quantity of goods that may be imported during a specified time period.

If the Australian government imposes a domestic content requirement of 75 percent on autos,at least 25 percent of an auto's value must be produced in a foreign country if that auto is to be sold in Australia.

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,Mexican producer surplus equals $2450 and Mexican consumer surplus equals $200.

With a tariff on auto imports,increased domestic demand leads to a fall in the number of autos imported and a rise in the number of autos produced domestically.

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.

Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection. Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country -Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers,as indicated by the supply schedule SM (with subsidy).??The total cost of the subsidy to the Mexican government equals:

Figure 5.2 illustrates the revenue and cost conditions of ABC Inc.which sells calculators in Canada and France. Figure 5.2.International Dumping -Referring to Figure 5.2,consider if ABC Inc.sells 27 calculators at a price of $5 each,realizing profits totaling $54.Of this quantity,ABC Inc.sells ____ calculators in Canada and realizes revenues totaling $____; the firm sells ____ calculators in France and realizes revenues totaling $____.

Figure 5.3 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 5.3.Sweden's Apple Market -Consider Figure 5.3.If the Swedish government auctions import licenses to the highest bidder in a competitive market,it could realize revenues of up to:

By limiting the amount of foreign sourcing,local content laws are viewed as a means of jobs preservation for domestic workers.

In 2011 Whirlpool Inc.won an antidumping/subsidy case against clothes-washer imports from Samsung and LG.This resulted in antidumping/subsidy duties being imposed on imports of clothes washers from these foreign producers.

Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection. Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country -Consider Figure 5.1.With free trade,the quantity of steel imported by Mexico equals:

Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection. Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country -Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers,as indicated by the supply schedule SM (with subsidy).??The overall deadweight welfare loss to Mexico equals:

A subsidy granted to an import-competing producer imposes a deadweight loss on the domestic economy equal to the redistribution effect plus consumption effect.

A firm suffering idle plant capacity would minimize losses by selling its product abroad at a lower price than at home,provided that the foreign price more than covers average variable cost.