4. Consider country A with a sector characterised by increasing returns to scale, where homogeneous firms produce a differentiated good and operate under monopolistic competition. If the elasticity of substitution (1/ (1 – a)) is constant and higher than one (i.e., a € (0, 1)), bilateral trade liberalisation with country B, characterised by the same preferences and technology, but one third the size of A (LA = 3LB): (a) makes varieties triple in B and welfare increase by less than 50 percent in A (b) makes varieties triple in A and welfare increase by less than 50 percent in B (c) makes varieties double and welfare less than double in both countries (d) none of the above

4. Consider country A with a sector characterised by increasing returns to scale, where homogeneous firms produce a differentiated good and operate under monopolistic competition. If the elasticity of substitution (1/ (1 – a)) is constant and higher than one (i.e., a € (0, 1)), bilateral trade liberalisation with country B, characterised by the same preferences and technology, but one third the size of A (LA = 3LB): (a) makes varieties triple in B and welfare increase by less than 50 percent in A (b) makes varieties triple in A and welfare increase by less than 50 percent in B (c) makes varieties double and welfare less than double in both countries (d) none of the above

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Consider country A with a sector characterised by increasing returns to scale, where homogeneous firms produce a differentiated good and operate under monopolistic competition. If the elasticity of substitution (1/ (1 – a)) is constant and higher than one (i.e., a E (0, 1)), bilateral trade liberalisation with country B, characterised by the same preferences and technology, but one third the size of A (LA = 3LB): (a) makes varieties triple in B and welfare increase by less than 50 percent in A (b) makes varieties triple in A and welfare increase by less than 50 percent in B (c) makes varieties double and welfare less than double in both countries (d) none of the above
Suppose the domestic industry is a Monopoly, with which commercial policy instrument ( quota or tariff? - assuming both of them yields the same level of imports- ) would it prefer to be protected and why?
Ñ7 Which of the following is a true statement about barriers to international business? Devaluation discourages the sale of domestic goods and tourism. Legal and ethical requirements for successful business are decreasing globally. Many of the legal rights that Americans take for granted do not exist in other countries. The Webb-Pomerene Export Trade Act of 1918 allows selected U.S. firms to limit free trade within the United States.
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6 Consider two countries Home and Partner trading industry goods. Partner’s supply curve can be represented as follows: XSP=P-1 Home’s import demand for industry goods is given by: MD=10-P The rest of the world is represented by the following supply of industry goods. XSRoW=P-1 a) Derive and graph Home’s import supply curve and find the equilibrium price under free trade. Quantify the amount of goods exported and imported. b) Assume that Home imposes a MFN-tariff of 1 on all industry imports. Find the new equilibrium and quantify the domestic price, border prices and quantities exported and imported. c) What happens if Home removes the tariff for imports from Partner but not from the rest of the world. Find the new equilibrium and quantify domestic price, border prices and quantities exported and imported.
The Stolper-Samuelson theorem postulates - that the imposition of import tariff will result in : (a) an increase in the real returns to the scarce factors. (b) a decrease in the real returns to the scares factors (c) an increase in the real returns to the abundant factors (d) an increase in the real returns to the scarce and abundant factor
What are the comparative advantages (country-specific advantages)) of Rawanda for EU multinational companies? Can you relate those comparative advantages to the theories of international trade?
15. Which one of the following statements about international trade is FALSE? a) when consumption externality is ignorant, importing will always be environmentally beneficial b) Import happens only when the global price for a goods is smaller than the domestic price c) Exports of carbon emissions happens when a country importing goods from other countries d) Multi-national companies' production decisions should be blamed for creating pollution havens in less-developed countries e) The process and production methods used in trade agreements should be blamed for creating pollution havens. 16. Which one of the following statements about trade and the environment is true? a) Inclusion of externality impacts increases the net gains from trade b) Inclusion of externality impacts implies that international trade decreases overall social welfare c) Free trade always has a damaging effect on the environment d) Free trade always has a beneficial effect on the environment e) Inclusion of…
Ma3. Suppose that Canada possesses the following industry (inverse) supply and demand curves for clothing (where quantity measured in pounds): ps= 5 + 20q pd= 130-5q. Now suppose that the world export supply curve is perfectly elastic and given by p = $65. Given the above, Canada will import__________ of clothing. Now suppose that Canada imposes a tariff of $10 per pound. Assume that all tariff revenue is rebated to consumers. In Canada, the new tariff-inclusive import price will be and there will be____________ a deadweight loss of______________ (a) 11.25 lbs; $70 per pound; $12.5. (b) 11.25 lbs; $65 per pound; $4.25. (c) 11.25 lbs; $60 per pound; $0. (d) 10 lbs; $75 per pound; $12.5. (e) 10 lbs; $65 per pound; $4.25
Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will a. gain by channeling people's efforts away from unproductive middleman activity toward physical output. b. lose the potential gains from trade that would result from lower transaction costs emanating from middleman activities. c. find that it is richer because the added transaction costs normally imposed by middlemen will be reduced. d. gain because the value of total output will rise.