Exam 5: Nontariff Trade Barriers

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.With international dumping,ABC Inc.sells ____ calculators to Canadian buyers at a price of $____ and ____ calculators to French buyers at a price of $____.

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.The quota leads to a deadweight welfare loss for Sweden of an amount equaling:

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.After the quota is levied,the price of apples in Sweden will equal:

A subsidy granted to import-competing producers is intended to lead to increased domestic production and decreased imports for the home country.

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 instead that the Mexican government provides a subsidy of $200 per ton to its steel producers,as indicated by the supply schedule SM (with subsidy).??As a result of the subsidy,the welfare loss to Mexico due to inefficient domestic production equals:

For a tariff-rate quota,the within-quota tariff rate is more than the over-quota tariff rate.

In 1933 the U.S.government enacted the Buy American Act which requires federal agencies to purchase materials and products from American suppliers if their prices are not unreasonably higher than those of foreign competitors.

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.Suppose that the governments of Mexico and Japan negotiate a voluntary export agreement in which Japanese TV exports to Mexico are limited to 8 units.Under the quota,the price of TVs in Mexico equals $250 while Mexicans produce 10 TVs and purchase 18 TVs.

Export quotas,placed on Japanese auto shipments to the United States in the 1980s,led to rising prices of both Japanese autos and U.S.-produced autos purchased by the U.S.consumer.

The distribution of an import quota's revenue effect depends on the relative concentration of bargaining power between foreign exporters and domestic importers.

A voluntary export agreement

Government imposed limits on the quantities of goods traded between nations are called

A subsidy granted to an import-competing producer tends to be absorbed by producer surplus and higher-costs of production.

In the long run,increased import quotas by Mexico's government would tend to

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.Assume that Swedish import companies behave as competitive buyers while foreign export companies behave as a monopoly seller.Compared to free trade,Sweden's import quota results in domestic welfare:

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.If the US imposes a quota of 15 bottles of wine ,how much revenue will the US government collect?

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.In the absence of trade,Sweden's equilibrium price and quantity of apples would be:

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

To the extent that subsidies granted to exporting firms reduce the foreign price of their goods,the subsidizing country's terms of trade worsen.

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 rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an export quota equal to 2 tons.??Assuming Mexican importers behave as competitive buyers while foreign exporters behave as monopoly sellers,the overall welfare loss of the quota to Mexico is: