Exam 5: Nontariff Trade Barriers

Figure 5.3 illustrates the apple market for Sweden, assumed to be a "small" country that is unable to affect the world price. S_Sweden is the domestic supply and D_Sweden is the domestic demand. S_Sweden+Quota is Sweden's supply schedule with an import quota. Figure 5.3. Sweden's Apple Market -Consider Figure 5.3. If S_Sweden+Quota represents the supply schedule after a quota is levied, Sweden's imports will equal:

If the Japanese demand for computers is elastic and the Canadian demand for computers is inelastic, a profit-maximizing firm would charge a higher price to Canadian buyers than to Japanese buyers.

In the post-World War II era, Nontariff trade barriers have decreased in importance relative to tariff barriers.

Which trade restriction stipulates the percentage of a product's total value that must be produced domestically in order for that product to be sold domestically?

Figure 5.3 illustrates the apple market for Sweden, assumed to be a "small" country that is unable to affect the world price. S_Sweden is the domestic supply and D_Sweden is the domestic demand. S_Sweden+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 a monopoly buyer while foreign export companies behave as competitive sellers. Compared to free trade, Sweden's import quota results in domestic welfare:

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 $____.

Import quotas can yield revenue for the domestic government if it auctions import licenses to the highest bidder in a competitive market.

To maintain that South Koreans are dumping their VCRs in the United States is to maintain that:

The purpose of international dumping is to decrease a firm's costs and increase its profits, compared to what would be realized in the absence of dumping.

The practice of Canadian firms dumping their products in Sweden poses a problem for economic policymakers since dumping tends to:

Assume the U.S. has a competitive advantage in producing calculators, while the rest of the world has a competitive advantage in steel. Suppose the U.S. and the rest of the world enter into an agreement to $\underline { \text { lower } }$ import quotas $\underline {\text { below } }$ existing levels on calculators and steel. Which of the following would $\underline {\text { least } }$ likely occur for the U.S.? Rising levels of:

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 Mexican steel importers behave as monopoly buyers and foreign exporters behave as competitive sellers, the overall welfare loss of the quota to 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 S_{M (with subsidy)}. The total cost of the subsidy to the Mexican government equals:

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.

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

Under U.S. antidumping law, an antidumping duty can be levied when the U.S. Commerce Department determines that a foreign product is being sold in the United States at less than fair value and the U.S. International Trade Commission determines that the dumped product is causing economic harm to domestic producers.

A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a given time period is referred to as:

If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then:

According to the cost-based definition of dumping, dumping begins to occur when a firm sells a product at a price that is less than average variable cost.

For years the U.S. government levied quotas on inexpensive oil imported from the Middle East. The quotas led to cost increases for U.S. consumers totaling $3 billion for oil products. An apparent justification for this policy was that: