(a)
Identify the
(a)
Explanation of Solution
Table-1 shows the data of quantity demanded and quantity supplied as follows:
According to the equilibrium condition, the number of the container of roses is produced where the quantity demanded is equal to the quantity supplied and the price is charged at the corresponding equilibrium quantity level. Since the quantity demanded is equal to the quantity supplied, Country U produces 6 million containers per year. In this
(b)
Identify the
(b)
Explanation of Solution
According to Table-1, the price charged by Country U is $175 per container. The wholesalers brought roses at auction from Countries A and H for $125 per container. The cost of production of roses in Country U is higher than that of Countries A and H. Therefore, the rest of the world has a comparative advantage in producing roses than Country U.
Comparative advantage: Comparative advantage is a term in economics that explains the ability of a country to produce an output or production of goods and services in an economy at a minimum
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Chapter 15 Solutions
Macroeconomics
- You are watching the nightly news. A political candidate being interviewed says, "I'm for free trade, but it must be fair trade. If our foreign competitors will not raise their environmental regulations, reduce subsidies to their export industries, and lower tariffs on their imports of our goods, we should retaliate with tariffs and import quotas on their goods to show them that we won't be played for fools!" If a foreign country subsidizes the production of a good exported to the United States, who bears the burden of their mistaken policy?arrow_forwardGeorgia and Moldova are famous for their quality of wine and the United Kingdom decides to start importing from them. There is an 5£ tariff on imported wine. Considering the graph below, where does the UK buy its wine from and how much does it cost on the domestic market? Price per bottle £10 £7 Moldovan price £5 Georgian price UK demand for imported wine Quantity (millions of bottles per year) 10 15 22 Suppose the UK joins a trade bloc with Moldova and maintains its 5£ tariff on wine from outside the bloc. a) What will the new domestic price be? b) How much do consumers gain/lose? c) How about the government? d) Is there trade creation or trade dıversion or both? e) How much does the UK gain/lose?arrow_forwardSuppose that in a day a worker in the United States can produce 10 bushels of corn or 2 shirts. In Russia a worker can produce 9 bushels of corn or 3 shirts in one day. Which of the following would benefit both the United States and Russia if trade occurred? 1 shirt for 6 bushels of corn -----1 shirt for 4 bushels of corn 1 shirt for 1 bushel of corn 1 shirt for 2 bushels of corn Im doing review for a class and I realize that 1 shirt and for bushels are the correct answer I am just confused on what formula would apply to figue this outarrow_forward
- The graph below shows the domestic supply of and demand for mangos in India. 25 24 23 22 21 20 19 18 17 16 15 (300, 18) 13 10 8 7 6 5 4 3 2 1 Price ($) 500 100 200 300 400 Quantity of mangos (cases) 600 '700 回回 The world price is $16 a case, and India is open to free trade. Will India export or import mangos? a. India will (Click to select) ☑ mangos since, (Click to select) b. What quantity will domestic producers supply? cases of mangos. c. What quantity will India export or import? Click to enl care of mannanarrow_forwardThe following graph represents the domestic supply and demand for wheat in Turkey. $100 55 50 40 75 150 180 240 340 450 Millions of tons a. In the absence of trade, what is the equilibrium price and equilibrium quantity? b. The government opens the wheat market to free trade and U.S enters the Turkish market, pricing wheat at $40 per ton. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will be imported from U.S? c. The government imposes a $10 per ton tariff on all imported wheat. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will now be imported from U.S? Price per tonarrow_forwardThe figure below shows the hypothetical domestic supply and demand for baseball caps in the country of Spain. Domestic Supply and Demand for Baseball Caps Spain Price (€ per cap) 10 X 10 20 30 40 50 60 70 80 90 100 9 8 7 5 3 2 1 0 Sd Ddarrow_forward
- The US, the domestic country, is currently operating a price of $14 per hammer. The US and China are not engaging in international trade. A new treaty is signed, and the world price and domestic price of the product are now $10 per unit. The US producers claim that this new treaty will harm them. The world price of hammers is $10 per hammer before and after the treaty. A. Calculate the consumer surplus before international trade is allowed. Show your work. A. Calculate the consumer surplus after international trade is allowed. Show your work. C. Will the producers in the domestic economy support or argue against opening up to international trade? Briefly explain and support your answer.arrow_forwardAssume Australia is an importer of sofas and there are no trade restrictions. Australian consumers buy 1 000 000 sofas per year, of which 450 000 are produced domestically and 550 000 are imported.a Suppose that a technological advance among Swedish sofa manufacturers causes the world price of sofas to fall by $200. Draw a graph to show how this change affects the welfare of Australian consumers and Australian producers, and how it affects total surplus in Australia.b After the fall in price, Australian consumers buy 1 150 000 sofas, of which 300 000 are produced domestically and 850 000 are imported. Calculate the change in consumer surplus, producer surplus and total surplus from the price reduction.c If the government responded by putting a $200 tariff on imported sofas, what would this do? Calculate the revenue that would be raised and the deadweight loss. Would it be a good policy from the standpoint of Australian welfare? Who might support the policy?d Suppose that the fall in…arrow_forward40 36 32 28 24 20 16 D 12 8 16 24 32 40 48 56 64 Quantity (millions of shirts per year) The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. 18. In the figure above, with the tariff the United States imports shirts per year. million O 24 32 16 Price (dollars per :arrow_forward
- The graph shows the domestic demand and domestic supply for soybeans. Assume this country is open to international 100 trade, that soybeans are a perfectly competitive good, and that 90 the world price of soybeans is $30. Domestic supply 80- Suppose a tariff of $10 is imposed. What price will result in this country? 70. 60 - 50 40 - World price 30 - 20 - Domestic demand After the tariff is imposed, how many units of soybeans will 10 - be imported? 0 10 20 30 40 50 60 70 80 90 100 Quantity Units %24 Price ($)arrow_forwarda. In the absence of trade, what is the equilibrium price and equilibrium quantity? b. The government opens the wheat market to free trade and U.S enters the Turkish market, pricing wheat at $40 per ton. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will be imported from U.S? c. The government imposes a $10 per ton tariff on all imported wheat. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will now be imported from U.S? d. How much revenue will the Turkish government receive from the $10 per ton tariff?arrow_forwardThe country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 34.6 and Table 34.7. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell? What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell? Sketch two supply and demand diagrams, one for each country, in the situation before trade. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade. If the Land of Submarines imposes an anti- dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country. Does your general answer change if the Land of Submarines imposes an import quota of 70?arrow_forward
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