Reference no: EM131372971
The demand for spark plugs in the United States is given by Q= 100-P, where Q indicates the number of spark plugs purchased and P is the price. Suppose that there are no spark plugs produced in the U.S., but they can be imported from either Mexico or the rest of the world (ROW).The price of spark plugs in Mexico is $20, and the price from the lowest cost supplier is $10. In each case, spark plugs are produced with a horizontal supply curve, so that these prices are fixed and will not change with changes in the U.S. policy. The U.S. tariff on spark plugs is a specific tariff in the amount of $15 per unit imported.
1. If there is no free trade agreement between any countries, so that every country must pay the same tariff, from where will U.S. consumers import their spark plugs: Mexico or ROW? Compute the equilibrium price of spark plugs in the U.S., the quantity imported and consumed, and the U.S. consumer surplus and tariff revenue.
2. Now, suppose the US signs a free trade agreement with Mexico that eliminates the tariff on spark plugs from Mexico, but leaves the tariff on sparks plugs from ROW unchanged.How will the equilibrium change? Answer the same questions as in the previous question under this new policy regime.
3. Identify the welfare change due to trade creation, and the welfare change due to trade diversion. Does the free trade agreement raise or lower U.S. welfare?
4. Now, how would your answer to question (7) change if the tariff had been $50? Explain without the need for additional calculations.
5. Now, how would your answer change if the tariff had been $5? No calculation is needed.
|
Economic growth model or models
: Choose a country in the Asian-Pacific region. In a well-researched essay, explain which economic growth model or models have been applied by the country and evaluate the effectiveness of this (these) model (models).
|
|
Raising of the price be considered a poison pill
: Describe two ways in which Microsoft hoped to benefit from the acquisition of Yahoo in 2008. Can Yahoo’s perpetual raising of the price be considered a “poison pill”?
|
|
Explain difference between earth ground and signal return
: ECET 402- Explain the difference between earth ground and signal return. Find the current in a ground loop that is 200 ft long, has a wire resistance of 0.05 Ω/ft, and has a difference of 4 V between grounds.
|
|
Find rules regulating the authenticity of digital signatures
: Bounce and Tumble Bedspring Company is concerned that its employees are emailing private messages while at work. In order to determine the scope of the problems, the executives at the company propose to monitor for one week all email communications a..
|
|
Compute the equilibrium price of spark plugs
: Compute the equilibrium price of spark plugs in the U.S., the quantity imported and consumed, and the U.S. consumer surplus and tariff revenue.
|
|
What can you say about the parity of a - s
: Given any integers a, b, and s, if a - b is odd and b - s is even, what can you say about the parity of a - s -Detective Sharp interviewed the men and determined that all were lying except for one.
|
|
About the planned merger of two large tobacco companies
: Which of the following is the most accurate statement about the planned merger of two large tobacco companies in the United States?
|
|
Usually imply weaker price competition
: "Niche strategies are generally more profitable than "mass- market" strategies because they usually imply weaker price competition." Comment.
|