Suppose Russia can produce automobiles relatively cheaply, but they have poor gas mileage and create a great deal of air pollution. The U.S. government, concerned about the quality of air, would like to see fewer Russian automobiles and more cleaner-running American automobiles on the road.What is the nature of the market failure that would justify the U.S. government taking some action against the importation of Russian automobiles?Explain why imposing a tariff is a second-best policy to employ in this case and what policy choice would be more efficient if: i) US carries out its own solution; ii) the two countries governments cooperate.

A tariff is a government-imposed tax on products and services imported from other nations that…

Answered: Suppose Russia can produce automobiles…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter35: International Trade Restrictions

Section: Chapter Questions

Problem 3E

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Suppose Russia can produce automobiles relatively cheaply, but they have poor gas mileage and create a great deal of air pollution. The U.S. government, concerned about the quality of air, would like to see fewer Russian automobiles and more cleaner-running American automobiles on the road.

What is the nature of the market failure that would justify the U.S. government taking some action against the importation of Russian automobiles?
Explain why imposing a tariff is a second-best policy to employ in this case and what policy choice would be more efficient if:

i) US carries out its own solution;

ii) the two countries governments cooperate.

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