Exam 5: Nontariff Trade Barriers

Figure 5.4.Venezuelan Calculator Market -Consider Figure 5.4.Suppose the rest of the world supplies calculators to Venezuela at a price of $4 each.With free trade,Venezuelan imports total:

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 monopoly buyers while foreign exporters behave as competitive sellers,the overall welfare loss of the quota to Mexico is:

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

Voluntary export restraint agreements typically apply to all of the world's exporting nations rather than only the most important exporting nations.

Consider Figure 5.5.Compared to free trade,the Japanese export quota leads to an increase in Mexican producer surplus of $1050.

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.

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.

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:

In certain industries,Japanese employers do not lay off workers.Therefore,they sometimes have excess supplies of goods that they cannot sell on the home market without lowering prices.To hold down losses,they sell goods in overseas markets at prices well beneath those in Japan.This practice is best referred to as:

International dumping occurs when foreign buyers are charged higher prices than domestic buyers for an identical product,after allowing for transportation costs and tariff duties.

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.What will happen to the price of a bottle of wine in the US if a quota of 15 bottles of wine is imposed?

Consider Figure 5.5.Compared to free trade,the Japanese export quota leads to an increase in Mexican consumer surplus of $3150.

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

During the 1980s,the U.S.government imposed sugar import quotas in an attempt to reduce its costs of maintaining price supports for U.S.sugar growers.

Consider Figure 5.5.The government of Mexico collects 50 percent of the export quota's revenue effect,or $600,in the form of tax revenue.

Which of the following refers to a market-sharing pact negotiated by trading partners to moderate the intensity of international competition?

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.

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

Import tariffs and import quotas yield identical protection effects,consumption effects,redistribution effects,and revenue effects.