Microeconomics: Principles & Policy
14th Edition
ISBN: 9781337794992
Author: William J. Baumol, Alan S. Blinder, John L. Solow
Publisher: Cengage Learning
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The following graph shows the market for TV sets in Venezuela. The grey line illustrates the world supply curve of TV sets. Suppose that Venezuela
imposes a quota that limits imports to 300 TV sets.
Use the green points (triangle symbol) to plot the quota-adjusted supply curve on the following graph. (Hint: Make sure you use three points to plot
the curve, which is parallel to the original supply curve, with the last point indicating the upper limit allowed by the graph.) Then, use the black point
(cross symbol) to indicate the new equilibrium point.
PRICE (Dollars per TV set)
600
550
500
450
400
350
300
250
200
150
100
50
0
As a result of the quota, price rises by $
Demand
Supply
SWorld
0 100 200 300 400 500 600 700 800 900 1000
QUANTITY (Number of TV sets)
"
►
Swith quota
+
Ewith quota
and consumer surplus falls by $
(?)
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations:
Demand: P = 115 – 1/15Q Supply: P = 55 + 1/15Q
Where P is Yuan per bushel of soybeans and Q is 10 million bushels per year.
The world price for soybeans is ¥65/bushel. Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including the Domestic Demand curve, Domestic Supply curve, the World Price, and the Price with tariffs.
3. How many bushels of soybeans can the US export to China if there are no tariffs? How many bushels with the imposed tariff?
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations:
Demand: P = 115 – 1/15Q Supply: P = 55 + 1/15Q
Where P is Yuan per bushel of soybeans and Q is 10 million bushels per year.
The world price for soybeans is ¥65/bushel. Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including the Domestic Demand curve, Domestic Supply curve, the World Price, and the Price with tariffs.
4. Who are the greatest benefactors of China’s tariff on US soybeans?
Chapter 21 Solutions
Microeconomics: Principles & Policy
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- The following graph shows a fictional world economy that consists of only two countries, Greenberg and Baxton. Both countries produce airplanes under increasing-cost conditions. Note that the left-hand part of the diagram is a mirror image of a standard supply-demand diagram, and therefore the supply and demand curves slope in directions opposite their usual directions. Greenberg Baxton 30 27 24 +18 + + 15 12 In the absence of trade (that is, autarky), the equilibrium price in Greenberg is $ and the equilibrium price in Baxton is |. (Hint: Enter all monetary values in full. For example, $7,000 rather than $7.) In the absence of trade, which of the following statements is correct? O Greenberg has the comparative advantage in production of airplanes. O Greenberg and Baxton are equally good at producing airplanes. O Baxton has the comparative advantage in production of airplanes. Now suppose both countries open up to international trade with each other. For each country, use the previous…arrow_forwardConsider a hypothetical world consisting of only three countries: Hungary, Australia, and Italy. Each country produces grain. Hungary is a small economy compared to Australia and Italy and thus cannot influence foreign prices. On the following graph, the supply and demand schedules of Hungary are shown as Sun and Dun. Foreign supply schedules of grain are perfectly elastic: Australia is a more efficient supplier of grain than Italy because its supply price is $1.00 per bushel (SAus), whereas Italy's supply price is $2.00 per bushel (Sita). PRICE (Dollars) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 Hun S +T S₁ +T S S + 0 3 6 A Scenario Free trade With tariff With customs union m SHu 12 15 18 21 24 27 30 GRAIN (Thousands of bushels) Calculate the quantity of bushels Hungary imports when the three nations engage in free trade. Enter this value in the first row of the following table. Also indicate which country Hungary imports from. ? Imports (Thousands of bushels) Imports…arrow_forwardSuppose Guatemala is open to free trade in the world market for wheat. Since Guatemala is small relative to the international market, the demand for and supply of wheat in Guatemala have no impact on the world price. The following graph shows the domestic market for wheat in Guatemala. The world price of a ton of wheat is Pw = $400. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). (?) PRICE (Dollars per ton) 1200 1100 1000+ 900 800 700 600 500 400 300- 200 0 Domestic Demand 20 40 Domestic Supply 60 80 100 120 140 QUANTITY (Tons of wheat) PW 160 180 200 A CS T PS Because Guatemala participates in international trade in the market for wheat, it will import tons of wheat. Now suppose the Guatemalan government decides to impose a tariff of $200 on each imported ton of…arrow_forward
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