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 $____.

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.

The margin of dumping equals the amount by which the foreign price is greater than the domestic price, or the amount by which the foreign price exceeds the cost of production.

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

Predatory dumping would occur if Toyota Inc. of Japan sells autos to U.S. consumers at lower prices than to Japanese consumers in order to put Chrysler Inc. out of business.

A subsidy granted to an import-competing producer shifts its supply schedule outward to the right.

The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to:

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 $____.

The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers. Which of the following best represents this legislation?

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. At the free-trade price of $0.60 per pound, Sweden's consumer surplus totals $____ and producer surplus totals $____.

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. As a result of the quota, Sweden's consumer surplus:

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.

Although the Tokyo Round of international trade negotiations reduced the Buy-American restrictions of the U.S. government, many state governments have maintained restrictive Buy-American policies.

From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods sold to the United States:

To the extent that domestic importing companies organize as a monopoly buyer, and foreign exporting companies behave as competitive sellers, the importing companies capture the revenue effect of a quota.

Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, $\underline { \text { unlike } }$ domestic subsidies, import tariffs and quotas:

For most nations, the ratio of imports to total purchases in the public sector is much higher than in the private sector.

Concerning the restrictive impact of an import quota, assume there occurs an $\underline { \text { increase } }$ 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 $\underline { \text { increase } }$ in demand would take the form of:

Figure 5.5 illustrates the television market for Mexico, assumed to be a small country that is unable to affect the world price. S_Mexico is the domestic supply schedule and D_Mexico 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 Japanese export quota's revenue effect totals $1200.

Import quotas tend to lead to all of the following except: