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InternationalTrade.Fall2014.FelipeBenguria.

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ProblemSet4;1]TradePolicy;The demand for carsin Home is q = 20 Pand the supply of cars in Home is q = P. The;demandforcarsinForeignisq=10PandthesupplyofcarsinForeignisq=P.;a)Calculatetheautarkyequilibriumpriceandquantityineachcountry.;b)Whoistheimporterofcarsandwhoistheexporter?;c)WritetheimportdemandforHomeandtheexportsupplyforForeign.;d) Find the equilibrium world price under free trade. What is the amount of cars traded;betweenthetwocountries?;e)Calculatetheconsumersurplus,producersurplusandtotalsurplusineachcountryunder;freetrade.Asidefromfindinganumericalanswers,showtheresultsinagraph.;f)Supposethecountrythatistheimporterimposesatariffof$1perunitoncarimports.;Findthenewequilibriumworldpriceunderthetariff.Whatistheamountofcarstraded;betweenthetwocountriesnow?;g)Calculatetheconsumersurplus,producersurplus,governmentrevenueandtotalsurplus;ineachcountryunderthetariff.Asidefromfindinganumericalanswers,showtheresultsin;agraph.;h)Compareyourfindingsine)andg).DoconsumersinHomegainorlosefromthetariff?;DoproducersinHomegainorlosefromthetariff?DoconsumersinForeigngainorlosefrom;the tariff? Do producers in Foreign gain or lose from the tariff? Does Home gain or lose;overallfromthetariff?DoesForeigngainorloseoverallfromthetariff?;i) The change in total surplus in the importer country can be expressed as the sum of;efficiencylosses(whichwecalltheproductionandconsumptiondistortions)andatermsof;tradegain.Illustratetheseinagraphandcalculatetheirvalue.;j) The change in total surplus in the exporter country can be expressed as the sum of;efficiencylosses(whichwecalltheproductionandconsumptiondistortions)andatermsof;tradeloss.Illustratetheseinagraphandcalculatetheirvalue.;2]Supposethatinthepreviousproblem,insteadofatariffimposedbytheimporterthere;isanexportsubsidyof$1perunitimposedbytheexporter.Repeatyouranalysisofpartsf);throughj)forthiscase,whicharemodifiedasfollows.;f)Supposethecountrythatistheexporterimposesanexportsubsidyof$1perunitoncar;exports.Findthenewequilibriumworldpriceunderthesubsidy.Whatistheamountofcars;tradedbetweenthetwocountriesnow?;g)Calculatetheconsumersurplus,producersurplus,governmentrevenueandtotalsurplus;ineachcountryunderthesubsidy.Asidefromfindinganumericalanswers,showtheresults;inagraph.;h)Compareyourfindingsine)andg).DoconsumersinHomegainorlosefromthesubsidy?;DoproducersinHomegainorlosefromthesubsidy?DoconsumersinForeigngainorlose;fromthesubsidy?DoproducersinForeigngainorlosefromthesubsidy?DoesHomegain;orloseoverallfromthesubsidy?DoesForeigngainorloseoverallfromthesubsidy?;i)Doesthecountryimposinganexportsubsidy(theexporter)experienceatermsoftrade;gain or a terms of trade loss? Discuss the effects of the subsidy on this countrys overall;welfare.;j)Doestheimporterexperienceatermsoftradegainoratermsoftradeloss?Discussthe;effectsofthesubsidyonthiscountrysoverallwelfare.

 

Paper#18301 | Written in 18-Jul-2015

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