Exam 5: Nontariff Trade Barriers

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.

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

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 $____.

Today most industrial countries protect their industries via global import quotas rather than selective import quotas.

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.

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

The U.S.-Japaneses agreement in 1981 to limit imports of small Japanese cars to the U.S.

The imposition of a tariff on imported steel for the home country results in:

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:

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

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

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?

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.

Compared to an import quota,an equivalent tariff may provide a less certain amount of protection for home producers since:

Anti-dumping law has been called unfair for all of the following reasons EXCEPT:

Concerning international dumping,many economists argue that "fair value" should be based on

An elimination of nontariff barriers on apples tends to increase apple imports,reduce profits of import-competing apple producers,and generate job losses for domestic apple workers.

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.

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.