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Suppose that Canada produces




1. Suppose that Canada produces 1.0 million bicycles a year and imports another 4.0 million, there is no tariff or other import barriers. Bicycles sell for $400 each. Parliament is considering a $40 tariff on bicycles. What is the maximum net national loss that this could cause Canada? What is the minimum national loss if Canada is a small country that can not affect the world price? (Hint: draw a diagram with supply and demand and put numbers given here on it. Next, imagine the possible positions and slopes of the relevant curves.);2. Assume Canada is the only country with a production site in the world for hyperhoney infinite pasta, a wonderful product produced using a delicate, highly perishable extract obtainable from some trees that grow only in Canada. Furthermore, there is no domestic demand for this product in the country, so all production will be exported. The Canadian government has the choice of forming the pasta-producing industry either as a monopoly or as a large number of small pasta producers that will act as perfect competitors. What is your advice to the Canadian government about which market structure to choose for pasta industry? Justify your suggestion.


Paper#29424 | Written in 18-Jul-2015

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