(a) Explain, using a diagram, how an increase in the demand for a country’s exports is likely to affect its terms of trade and its balance of trade. (b) Do PEDs for exports and imports come into play?
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(a) Explain, using a diagram, how an increase in the demand for a country’s exports is likely to affect its terms of trade and its balance of trade . (b) Do PEDs for exports and imports come into play?
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- Two countries produce and consume bushels of corn: the US and the ROW. The domestic markets for the two countries are depicted above. The two countries trade with one another and there are no transportation costs and no trade barriers. a. Draw the import demand and export supply functions making sure to identify the P-intercepts. Note the equilibrium traded quantity (imports = exports) and the equilibrium world price. b. How much is produced (supplied) in the US after trade is opened? How much is consumed (demanded)?2. At one time, it was believed that the way for a nation to prosper was to export as much as possible while importing as little as possible. More money would flow into a country than out of a country. Is this really a sound economic strategy? What is the relationship between exports and imports?If a large country in the world trade instituted a large set of subsidies for its exports, this must Select one: A. have no effect on its terms of trade. B. decrease its marginal propensity to consume. C. improve its terms of trade. X D. harm world terms of trade. E. harm its terms of trade.
- 14. The gain to consumers from trade in Country A is $_______. 15. The net gain to the economy as a result of trade in Country A is $______. 16. What quantity will Country A supply to the rest of the world at P=$15?Consider a small country imposing a tariff of $2/unit in imported corn (Policy A). Suppose the country was importing 300 units and this policy resulted in a decline of imports to 250 units. a. Draw the XS and MD before and after the policy is imposed. Label the level of imports. b. Suppose the government decides to double the tariffs and as a result the imports decrease to 200 units (Policy B). Show this on your graph and label the new level of imports. c. Suppose the government adjusts the policy so that there is a tariff of $2/unit is imposed up to a quota of 100 units and then the tariff rate doubles to $4/unit for any imports above that level (Policy C). Show this on your graph and label the new level of imports. d. Under which policy are imports the highest? e. Under which policy is government revenue the highest? f. Under which policy is domestic price the highest? g. Under which policy is world price the highest? h. Can you think of reasons why Policy C may be preferable to a…Macmillan Leaming International Trade – End of Chapter Problem Consider the graph of domestic supply and demand for oil in the United States. Without trade, the domestic price of oil is $50 a barrel. With trade, the United States imports oil. a. Shift the price line to reflect the world price for oil. Price (5 per barrel) 100 90 50 10 A B C L Quantity supplied domestically F Quantity demanded domestically Quantity imported Area of M e 12 Quantity (millions of barrels a day) consumer surplus Area of producer surplus H N 15 b. Use the letters and values (prices and quantities) in the graph to fill in the table: Without trade Domestic Supply Price line Domestic Demand With trade
- If an economy formerly in autarky opens to trade, and discovers that there is excess supply of a good from the world market, then they would expect to see domestic consumers buying __________ of a good, domestic producers selling __________, and at a __________ price. a. more; less; higher b. more; more; higher c. more; less; lower d. less; more; higher e. less; more; lower14. The gain to consumers from trade in Country A is $_______. 15. The net gain to the economy as a result of trade in Country A is $______. 16. What quantity will Country A supply to the rest of the world at P=$15? 17. What quantity will Country A supply to the rest of the world at P=$19?Home's demand curve for wheat isD = 100- 20P.Its supply curve isS= 20 + 20P.Derive and graph Home's import demand schedule. What would the price of wheat be in the absence of trade?2. Now add Foreign, which has a demand curve*D=80-20pand a supply curve = 40 + 20P.Derive and graph Foreign's export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.b. Now allow Foreign and Home to trade with each other, at zero transportation cost.Find and graph the equilibrium under free trade. What is the world price? What isthe volume of trade? 3. Home imposes a specie tariff of 0.5 on wheat imports.a. Determine and graph the effects of the tariff on the following: (1) the price ofwheat in each country; (2) the quantity of wheat supplied and demanded in each country; (3) the volume of trade.b. Determine the effect of the tariff on the welfare of each of the following groups:(1) Home import-competing producers; (2) Home consumers; (3) the Homegovernment.c.…
- Economics A trade expert compares the modern tariffs to the Depression-era Smoot-Hawley tariffs. He says “The economic impact is going to take years to play out." What was the effect of the Smoot- Hawley tariffs on U.S. trade? a) Both imports and exports rose by nearly about the same amount, the trade balance remained about the same, and the total volume of trade increased. b) Both imports and exports fell by nearly about the same amount, the trade balance remained about the same, and the total volume of trade decreased. c) Imports decreased, and the trade balance increased. The total volume of trade was nearly unchanged. d) Imports decreased, and the trade balance was nearly unchanged. The total volume of trade decreased.Table: The Prodection Posibilities for Tractors and Crude Oil Crude ell Tracters theesands of harrel) Coustry United States Mexice 40 60 180 1. The table above show the production possibilities for Mexico and the United States. The US. can make 80 trsctors and O harels of crude oil, 0 tractors and 40,000 barrels of crude oil, er any combination in between a Which country has an absolute advantage in crude oil? b. Which country has a comparative advantage in crude oil? * What is the United States' opportunity cost of producing 10,000 hamels of crude oil? Use the following gaph to answer questions 2-4: Suppose the world price $50,000 and there is free trade. Price of SUVS 0.000 M000 45000 4.300 40.000 000 30000 2.000 20.000 12 SUVe (milions) 2 The United Sutes would A) import 6 million SUVE B) export 6 million O cxport 2 million D) import 2 million 3, In the United States, consumer urplus would A) increase; decrease and ptoducer surplus would C) decrease, decrease B) increase; increase…(a) With the help of a graph, explain how the quantities of exports and imports of a country canbe determined in a two-country and two-goods world. (b) Explain with the help of a graph theeffect of an increase in the relative price of the exported good of a country on its welfare.