PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 16, Problem 7P
(a)
To determine
Identify the
(b)
To determine
Describe the effects of import quota on quantity imports and exports.
(c)
To determine
Effects of import quota on consumers and producers.
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Students have asked these similar questions
Suppose that Canada imports pearl necklaces from India. The free market price is $111.00 per necklace.
If the tariff on imports in Canada is initially 26%, Canadians pay $
per necklace.
One of the accomplishments of the Uruguay Round that took place between 1986 and 1993 was significant across-the-board tariff cuts for industrial
countries, as well as many developing countries. Suppose that as a result of the Uruguay Round, Canada reduces its import tariffs to 13%.
Assuming the price of pearl necklaces is still $111.00 per necklace, consumers now pay the price of $
Based on the calculations and the scenarios presented, the Uruguay Round most likely hurts consumers
hurts consumers in India.
per necklace.
in Canada and
Q5(5): Kutaro is a small island nation in the South Pacific. The inhabitants of Kutaro work to
produce one of two goods: honey and clams. Recently Kutaro has begun to trade with other
countries, and the Kutaran economy has adjusted to the international prices for honey and clams
and is in equilibrium. The current international price for honey is $2 per jar, and the international
price for clams is $16 per pound.
a) If the Kutarans decide to give up producing 100 pounds of clams, how many more jars of
honey could they produce?
b) Now suppose that the Kutarans want to increase production of clams by 50 pounds. How
many jars of honey must they give up to make this possible?
Q1
Suppose that two countries, initially in autarchy, decide to create a single market for only one product.
Demand for this product is given by Q(p) = 21 - p in country 1, and by Q(p) = 42 – 2p in country 2. With the
creation of the single market for this product, the total demand in the unified market will be given by the
horizontal sum of the two demands: Q(p) = (21-p) + (42 - 2p) = 63-3p. Assume that there is free entry,
all firms in both countries have the same cost function TC(q) = 4 + q, and firms compete in the style of
Cournot.
Please compute the equilibrium number of firms, the equilibrium price, the consumer surplus, and total
profits in autarchy and after the completion of the single market. Interpret the results.
You can use any of the formulas from the lecture notes that you need. You don't have to compute
everything from the very beginning!
Chapter 16 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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