Reference no: EM131376511
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 orROW? 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.
|
What are the main features of the dual-coding hypothesis
: What are the main features of (a) the dual-coding hypothesis, (b) the conceptual-propositional hypothesis, and (c) the functional-equivalency hypothesis
|
|
Actions policymakers in the country
: Ground your arguments in part on economic variables discussed in Module 1. Describe what actions policymakers in the country are likely to take and/or should take in the future to continue their growth and economic success.
|
|
Consistent with profit-maximization
: Management charges higher nightly rates in the winter, when its average occupancy rate is 75 percent, than in the summer, when its occupancy rate is 85 percent. Can this policy be consistent with profit-maximization? Explain.
|
|
How can consciousness be studies scientifically
: How can consciousness be studies scientifically? Describe the stages of sleep
|
|
Compute the equilibrium price of spark plugs in the us
: 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 orROW? Compute the equilibrium price of spark plugs in the U.S., the quantit..
|
|
What makes working for google so great you may ask
: For the past couple of years Google has been reported being the number one company to work for in Fortune magazine. What makes working for Google so great you may ask?
|
|
Summary of the major issues facing the client
: A summary of the major issues facing the client needing to be addressed. A working diagnosis for the client (with diagnostic summary and rationale) utilizing the following information from the CAGE screening tool and case history information
|
|
Determining the first wave of globalization
: Define the two waves of globalization. List at least three factors that played a key role in determining the first wave of globalization.
|
|
Degree of financial market integration
: Describe two ways in which economists measure the degree of financial market integration (provide a brief explanation for their use).
|