International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
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Question
Chapter 3, Problem 13SQ
(a)
To determine
Determine the
(b)
To determine
Determine how many calculators are traded at this price
(c)
To determine
Determine how many calculators will each country produce, consume, and trade, if transportation cost is $5.
(d)
To determine
Explain the volume of trade.
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Draw a domestic supply and demand diagram for a product in which the United States does not have a comparative advantage. What impact do foreign imports have on domestic price and quantity? On your diagram show a protective tariff that eliminates approximately one-half of the assumed imports. What are the price-quantity effects of this tariff on ( a) domestic consumers, (b) domestic producers, and (c) foreign exporters? How would the effects of a quota that creates the same amount of imports differ?
Q.3 Suppose the following table given below describes the production possibilities of Rice and Cloth for Pakistan and China:
Wheat (Kgs/hour)
Cloth (Meters/hour)
PAKISTAN
5
10
CHINA
10
40
Without trade, what is the relative price of wheat in terms of cloth in Pakistan?
What is the price in China?
Which country has an absolute advantage in the production of each good?
Which country has a comparative advantage in the production of each good?
If both countries trade with each other, which good will each export?
What is the range of prices at which trade can occur?
[India is the world’s largest consumer of sugar. Assume the world price for sugar is $750 per ton.]
[Assume India currently has a tariff of $50 per ton on sugar and imports 7 million tons of sugar. Show this situation in a graph. Label the quantity demanded and the quantity supplied domestically and imports clearly on a graph. Explain your graph in 3-4 sentences.
How to draw the graph?
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