Econ 334: International Trade
Department of Economics
University of Massachusetts Boston
Fall 2019
Assignment II Problem Sets
Due on Thursday, December 12 in class (hard copy) or online (BB course page) before 11pm
Chapter 7
1. What type of occupation would you like to pursue after graduation? To see what is available, go to the Bureau of Labor Statistics website at: https://www.bls.gov/ooh/.
a. Find four occupations that you think fit the four categories shown in the horizontal axis of Figure 7-11: nonroutine manual jobs; routine manual jobs; routine cognitive jobs; and nonroutine cognitive jobs. For each occupation, what is the growth in employment in the United States, and how does it compare with the employment growth since 1990 shown in Figure 7-11?
Non -Routine Manual
Occupation -Animal Care and Service Workers
Growth Rate: 16% (Much faster than average)
Median Pay- $23,950 per year
Routine Manual
Occupation -Assemblers and Fabricators
Growth rate: -11% (Decline)
Median Pay- $32,820 per year
Routine Cognitive
Occupation-Bookkeeping, Accounting, and Auditing Clerks
Growth rate: -4% (Decline)
Median Pay- $40,240 per year
Non-Routine Cognitive
Occupation-Financial Managers
Growth rate: 16% (Much faster than average)
Median Pay- $127,990 per year
b. Choose an occupation that you would most likely to pursue and explain why you
wish to pursue it. What is the employment growth for that occupation?
I would like to Pursue a Financial Managers Job sometime in the Future, the growth rate of this occupation is faster than average and it is 16%.
2. Consider an offshoring model in which Homes skilled labor has a higher relative wage than Foreign skilled labor, and the costs of capital and trade are uniform across production activities.
a. Will Homes off-shored production activities be high or low on the value chain for a given product? That is, will Home offshore production activities that are high-skilled-intensive, or low-skilled-intensive? Explain.
We are given that Homes skilled labor has a higher relative wage than Foreign skilled labor, so Home Country will take the activities that are lower on the value chain because of low wages of low-skilled workers makes the labor-intensive activities cheaper than in Foreign. They will offshore higher value activities to abroad because of high wages of high-skilled workers makes the labor-intensive activities expensive than in Foreign
b. Suppose that Home uniformly increases its tariff level, effectively increasing the cost of importing all goods and services from abroad. How does this affect the slicing of the value chain?
There will be a decrease in Higher value activities that Home offshores to Foreign whereas the Home expand and include Higher value activities
c. Draw relative labor supply and demand diagrams for Home and Foreign showing the effect of this change. What happens to the relative wage in each country?
Average skill Intensity at Home will rise as they are including the Higher value activities, which will increase the demand for high skilled workers at Home. In the same way, demand for high skilled increases in foreign.
Chapter 8
3. Consider a small country applying a tariff t to imports of a good like that represented in Figure 8-5.
a. Suppose that the country decides to increase its tariff to t?. Redraw the graphs for the Home and import markets and illustrate this change. What happens to the quantity of goods produced at Home and their price? What happens to the quantity of imports?
The increase in tariff increase the Price to in small country, which will increase the domestic production to S3 and reduction in Quantity demanded to D3. The Foreign export supply curve shift to , which will reduce the Imports to M3.
b. Are there gains or losses to domestic consumer surplus due to the increase in
tariff? Are there gains or losses to domestic producer surplus due to the increase in tariff? How is government revenue affected by the policy change? Illustrate these on your graphs.
Consumer Surplus will be decreased by the area (a+ b+ c+ d) due to increase in tariff to t from t
Producer Surplus will be increased by the area a due to increase in tariff to t from t
Government Revenue will be increased by the area c due to increase in tariff to t from t ((t-t) *(D3-S3)
c. What is the overall gain or loss in welfare due to the policy change?
Sol: Net Effect is the decreased of the area (b +d).
4. Optimal tariff rate
a. If the foreign export supply is perfectly elastic, what is the optimal tariff Home should apply to increase welfare? Explain.
Since we have foreign export supply is perfectly elastic, this is a Small country Scenario. The Optimal tariff will be 0 for Home, because there is no terms-of trade and imposing tariff will be completely burdened by the consumers.
b. If the foreign export supply is less than perfectly elastic, what is the formula for the optimal tariff Home should apply to increase welfare?
Since we have foreign export supply is less than perfectly elastic, this is a Large country Scenario.
The Formula for optimal tariff = (
c. What happens to Homes welfare if it applies a tariff higher than the optimal tariff?
Welfare will decrease as the deadweight loss outweigh the terms-of trade gain.
d. What happens to Homes welfare if it applies a tariff lower than the optimal tariff?
Welfare will increase as the deadweight loss will not outweigh the terms-of trade gain.
Chapter 9
5. Briefly describe/define the following terms as they relate to international trade.
a. Export subsidy- meaning that the exporter of a good receives a higher price than the buyer pays. An export subsidy reduces the price paid by foreign importers, which means domestic consumers pay more than foreign consumers
b. Dumping-Dumping is defined as the sale of export goods in another country at a price less than that charged at home, or alternatively, at a price less than costs of production and shipping
c. Anti-dumping duties- A tariff applied against a Foreign discriminating monopoly (which charges a lower price to Home than to firms in its own local market) is called an antidumping duty.
d. Countervailing duties- A countervailing duty is used when the foreign government subsidizes its own exporting firms so that they can charge lower prices for their exports
e. Safeguard tariff-Limits or restrictions on imports by a WTO member to protect its domestic industry from excessive Imports.
6. Figure 9-1 shows the Home no-trade equilibrium under perfect competition (with the price PC) and under monopoly (with price PM). In this problem, we compare the welfare of Home consumers in these two situations.
a. Under perfect competition, with the price PC, label the triangle of consumer surplus and the triangle of producer surplus. Outline the area of total Home surplus (the sum of consumer surplus and producer surplus).
Consumer area:
Producer Surplus:
Total Area:
b. Under monopoly, with the price PM, label the consumer surplus triangle.
Consumer surplus triangle:
c. Producer surplus is the same as the profits earned by the monopolist. To measure this, label the point in Figure 9-1 where the MR curve intersects MC at point B?. For selling the units between zero and QM, marginal costs rise along the MC curve, up to B?. The monopolist earns the difference between the price PM and MC for each unit sold. Label the difference between the price and the MC curve as producer surplus, or profits.
Producer Surplus:
d. Outline the area of total Home surplus with a Home monopoly.
Total Area:
e. Compare your answer with parts (a) and (d), and outline what the difference between these two areas is. What is this difference called and why?
It is a deadweight loss due to monopoly and area represented by the area ABB.
Chapter 10
7. Suppose Home is a small exporter of wheat. At the world price of $100 per ton, Home growers export 20 tons. Now suppose the Home government decides to support its domestic producer with an export subsidy of $40 per ton. Use the following figure to answer these questions.
a. What is the quantity exported under free trade and with the export subsidy?
Quantity exported Under free trade = 40- 20 = 20 tons
Quantity exported after export subsidy is (50-10 = 40 tons).
b. Calculate the effect of the export subsidy on consumer surplus, producer surplus, and government revenue.
Consumer Surplus decreased by the area = a+ b
= Area of a +Area of b
= -40*10-1/2*10*40
= -400-200
= -600
Producer Surplus increased by the area =a+ b+ c
= 40*40+1/2*10*40
= 1600+200
= 1800
Government Revenue decreased by the area =b+ c +d
= -40*40
= -1600
c. Calculate the overall net effect of the export subsidy on Home welfare.
Overall Net effect would be =
= -600+1800-1600
= -400
So, total deadweight loss is the area b+ d.
8. Refer to Problem 8 above. Suppose that Home is a large country. Continue to assume that the free-trade world price is $100 per ton and that the Home government provides the domestic producers with an export subsidy in the amount of $40 per ton. Because of the export subsidy, the local price increases to $120, while the foreign market price declines to $80 per ton. Use the following figure to answer these questions.
a. Relative to the small-country case, why does the new domestic price increase by less than the amount of the subsidy?
It is decreased by less in a Large country case, because part of the subsidy is offset by the Decreasing world prices.
b. Calculate the effect of the export subsidy on consumer surplus, producer surplus, and government revenue.
Consumer Surplus decreased by the area = a+ b
= Area of a +Area of b
= -20*15-1/2*5*20
= -300-50
= -350
Producer Surplus increased by the area = a+ b+ c
= 40*20+1/2*5*20
= 800+50
= 850
Government Revenue decreased by the area = b+ c +d +e
= -40*30
= -1200
c. Calculate the overall net effect of the export subsidy on Home welfare. Is the large country better or worse off compared with the small country with the export subsidy? Explain.
d.
Overall Net effect would be =
= -350+850-1200
= -700
The large country is worse off after export subsidy than then Small Country because of terms of trade loss.
Chapter 11
9. Assume that Thailand and India are potential trading partners of China. Thailand is a member of ASEAN, but India is not. Suppose the import price of textiles from India (
India) is 50 per unit under free trade and is subject to a 20% tariff. As of January 1, 2010, China and Thailand entered into the ChinaASEAN free-trade area, eliminating tariffs on Thai imports. Use the following figure to answer the questions:
a. Before the ChinaASEAN free-trade area, how much does China import from each trading partner? What is the import price? Calculate the tariff revenue.
Before the ChinaASEAN free-trade area, China Imports Total 60 Units, its Imports 10 from Thailand (From the and 50 units from India.
Total tariff Revenue = 10*(10+50) = 600
b. After the ChinaASEAN free-trade area, how much does China import from each trade partner? What is the import price? What is the total tariff revenue of China?
After the ChinaASEAN free-trade area, China Imports Total 60 Units, its Imports 40 from Thailand (From the and 40 units from India. Because the supply Curve is for Thailand. Its Imports increased to 40 units. Price is same as
Total tariff Revenue is the area d = 10*20= 200
c. Based on your answer to part (b), what is the impact of the ChinaASEAN free-trade area on the welfare of China?
Price china was paying does not change and its same as but has lost the tariff revenue which corresponds to the area of a+b+c.
d. What is the effect of the ChinaASEAN free-trade area on the welfare of Thailand and India?
Although the India is selling less but they are receiving the same price. Thailand Producer surplus increased by the area a +b, as they are selling more to china, so Thailand is better off.
But as we calculated above China loss tariff revenue (a+b+c) is more than the Gain for Thailand (a +b).
e. The China-ASEAN agreement may lead to a similar one between China and India. How would this affect Chinas imports from each country? What would be the effect on welfare in China, Thailand, and India if such an agreement was signed?
The Supply Curve will become and , China will import 10 units from 10 and 60 Units from India because demand in China will grow to 70 units. Consumer Surplus will grow by the area a+ b+ c+ d+ e, and tariff revenue will be a+ b+ c+ e.
Applied Sciences
Architecture and Design
Biology
Business & Finance
Chemistry
Computer Science
Geography
Geology
Education
Engineering
English
Environmental science
Spanish
Government
History
Human Resource Management
Information Systems
Law
Literature
Mathematics
Nursing
Physics
Political Science
Psychology
Reading
Science
Social Science
Home
Blog
Archive
Essay
Reviews
Contact
google+twitterfacebook
Copyright © 2019 HomeworkMarket.comHOMEWORKMARKET.COM YOUR HOMEWORK ANSWERSHomeworkMarket
Home.Homework Answers.
Help.
Log in / Sign up
Economics
profile
Katep50
Fall.docx
Home>Business & Finance homework help>Economics homework help>Economics
Econ 334: International Trade
Department of Economics
University of Massachusetts Boston
Fall 2019
Assignment II Problem Sets
Due on Thursday, December 12 in class (hard copy) or online (BB course page) before 11pm
Chapter 7
1. What type of occupation would you like to pursue after graduation? To see what is available, go to the Bureau of Labor Statistics website at: https://www.bls.gov/ooh/.
a. Find four occupations that you think fit the four categories shown in the horizontal axis of Figure 7-11: nonroutine manual jobs; routine manual jobs; routine cognitive jobs; and nonroutine cognitive jobs. For each occupation, what is the growth in employment in the United States, and how does it compare with the employment growth since 1990 shown in Figure 7-11?
Non -Routine Manual
Occupation -Animal Care and Service Workers
Growth Rate: 16% (Much faster than average)
Median Pay- $23,950 per year
Routine Manual
Occupation -Assemblers and Fabricators
Growth rate: -11% (Decline)
Median Pay- $32,820 per year
Routine Cognitive
Occupation-Bookkeeping, Accounting, and Auditing Clerks
Growth rate: -4% (Decline)
Median Pay- $40,240 per year
Non-Routine Cognitive
Occupation-Financial Managers
Growth rate: 16% (Much faster than average)
Median Pay- $127,990 per year
b. Choose an occupation that you would most likely to pursue and explain why you
wish to pursue it. What is the employment growth for that occupation?
I would like to Pursue a Financial Managers Job sometime in the Future, the growth rate of this occupation is faster than average and it is 16%.
2. Consider an offshoring model in which Homes skilled labor has a higher relative wage than Foreign skilled labor, and the costs of capital and trade are uniform across production activities.
a. Will Homes off-shored production activities be high or low on the value chain for a given product? That is, will Home offshore production activities that are high-skilled-intensive, or low-skilled-intensive? Explain.
We are given that Homes skilled labor has a higher relative wage than Foreign skilled labor, so Home Country will take the activities that are lower on the value chain because of low wages of low-skilled workers makes the labor-intensive activities cheaper than in Foreign. They will offshore higher value activities to abroad because of high wages of high-skilled workers makes the labor-intensive activities expensive than in Foreign
b. Suppose that Home uniformly increases its tariff level, effectively increasing the cost of importing all goods and services from abroad. How does this affect the slicing of the value chain?
There will be a decrease in Higher value activities that Home offshores to Foreign whereas the Home expand and include Higher value activities
c. Draw relative labor supply and demand diagrams for Home and Foreign showing the effect of this change. What happens to the relative wage in each country?
Average skill Intensity at Home will rise as they are including the Higher value activities, which will increase the demand for high skilled workers at Home. In the same way, demand for high skilled increases in foreign.
Chapter 8
3. Consider a small country applying a tariff t to imports of a good like that represented in Figure 8-5.
a. Suppose that the country decides to increase its tariff to t?. Redraw the graphs for the Home and import markets and illustrate this change. What happens to the quantity of goods produced at Home and their price? What happens to the quantity of imports?
The increase in tariff increase the Price to in small country, which will increase the domestic production to S3 and reduction in Quantity demanded to D3. The Foreign export supply curve shift to , which will reduce the Imports to M3.
b. Are there gains or losses to domestic consumer surplus due to the increase in
tariff? Are there gains or losses to domestic producer surplus due to the increase in tariff? How is government revenue affected by the policy change? Illustrate these on your graphs.
Consumer Surplus will be decreased by the area (a+ b+ c+ d) due to increase in tariff to t from t
Producer Surplus will be increased by the area a due to increase in tariff to t from t
Government Revenue will be increased by the area c due to increase in tariff to t from t ((t-t) *(D3-S3)
c. What is the overall gain or loss in welfare due to the policy change?
Sol: Net Effect is the decreased of the area (b +d).
4. Optimal tariff rate
a. If the foreign export supply is perfectly elastic, what is the optimal tariff Home should apply to increase welfare? Explain.
Since we have foreign export supply is perfectly elastic, this is a Small country Scenario. The Optimal tariff will be 0 for Home, because there is no terms-of trade and imposing tariff will be completely burdened by the consumers.
b. If the foreign export supply is less than perfectly elastic, what is the formula for the optimal tariff Home should apply to increase welfare?
Since we have foreign export supply is less than perfectly elastic, this is a Large country Scenario.
The Formula for optimal tariff = (
c. What happens to Homes welfare if it applies a tariff higher than the optimal tariff?
Welfare will decrease as the deadweight loss outweigh the terms-of trade gain.
d. What happens to Homes welfare if it applies a tariff lower than the optimal tariff?
Welfare will increase as the deadweight loss will not outweigh the terms-of trade gain.
Chapter 9
5. Briefly describe/define the following terms as they relate to international trade.
a. Export subsidy- meaning that the exporter of a good receives a higher price than the buyer pays. An export subsidy reduces the price paid by foreign importers, which means domestic consumers pay more than foreign consumers
b. Dumping-Dumping is defined as the sale of export goods in another country at a price less than that charged at home, or alternatively, at a price less than costs of production and shipping
c. Anti-dumping duties- A tariff applied against a Foreign discriminating monopoly (which charges a lower price to Home than to firms in its own local market) is called an antidumping duty.
d. Countervailing duties- A countervailing duty is used when the foreign government subsidizes its own exporting firms so that they can charge lower prices for their exports
e. Safeguard tariff-Limits or restrictions on imports by a WTO member to protect its domestic industry from excessive Imports.
6. Figure 9-1 shows the Home no-trade equilibrium under perfect competition (with the price PC) and under monopoly (with price PM). In this problem, we compare the welfare of Home consumers in these two situations.
a. Under perfect competition, with the price PC, label the triangle of consumer surplus and the triangle of producer surplus. Outline the area of total Home surplus (the sum of consumer surplus and producer surplus).
Consumer area:
Producer Surplus:
Total Area:
b. Under monopoly, with the price PM, label the consumer surplus triangle.
Consumer surplus triangle:
c. Producer surplus is the same as the profits earned by the monopolist. To measure this, label the point in Figure 9-1 where the MR curve intersects MC at point B?. For selling the units between zero and QM, marginal costs rise along the MC curve, up to B?. The monopolist earns the difference between the price PM and MC for each unit sold. Label the difference between the price and the MC curve as producer surplus, or profits.
Producer Surplus:
d. Outline the area of total Home surplus with a Home monopoly.
Total Area:
e. Compare your answer with parts (a) and (d), and outline what the difference between these two areas is. What is this difference called and why?
It is a deadweight loss due to monopoly and area represented by the area ABB.
Chapter 10
7. Suppose Home is a small exporter of wheat. At the world price of $100 per ton, Home growers export 20 tons. Now suppose the Home government decides to support its domestic producer with an export subsidy of $40 per ton. Use the following figure to answer these questions.
a. What is the quantity exported under free trade and with the export subsidy?
Quantity exported Under free trade = 40- 20 = 20 tons
Quantity exported after export subsidy is (50-10 = 40 tons).
b. Calculate the effect of the export subsidy on consumer surplus, producer surplus, and government revenue.
Consumer Surplus decreased by the area = a+ b
= Area of a +Area of b
= -40*10-1/2*10*40
= -400-200
= -600
Producer Surplus increased by the area =a+ b+ c
= 40*40+1/2*10*40
= 1600+200
= 1800
Government Revenue decreased by the area =b+ c +d
= -40*40
= -1600
c. Calculate the overall net effect of the export subsidy on Home welfare.
Overall Net effect would be =
= -600+1800-1600
= -400
So, total deadweight loss is the area b+ d.
8. Refer to Problem 8 above. Suppose that Home is a large country. Continue to assume that the free-trade world price is $100 per ton and that the Home government provides the domestic producers with an export subsidy in the amount of $40 per ton. Because of the export subsidy, the local price increases to $120, while the foreign market price declines to $80 per ton. Use the following figure to answer these questions.
a. Relative to the small-country case, why does the new domestic price increase by less than the amount of the subsidy?
It is decreased by less in a Large country case, because part of the subsidy is offset by the Decreasing world prices.
b. Calculate the effect of the export subsidy on consumer surplus, producer surplus, and government revenue.
Consumer Surplus decreased by the area = a+ b
= Area of a +Area of b
= -20*15-1/2*5*20
= -300-50
= -350
Producer Surplus increased by the area = a+ b+ c
= 40*20+1/2*5*20
= 800+50
= 850
Government Revenue decreased by the area = b+ c +d +e
= -40*30
= -1200
c. Calculate the overall net effect of the export subsidy on Home welfare. Is the large country better or worse off compared with the small country with the export subsidy? Explain.
d.
Overall Net effect would be =
= -350+850-1200
= -700
The large country is worse off after export subsidy than then Small Country because of terms of trade loss.
Chapter 11
9. Assume that Thailand and India are potential trading partners of China. Thailand is a member of ASEAN, but India is not. Suppose the import price of textiles from India (
India) is 50 per unit under free trade and is subject to a 20% tariff. As of January 1, 2010, China and Thailand entered into the ChinaASEAN free-trade area, eliminating tariffs on Thai imports. Use the following figure to answer the questions:
a. Before the ChinaASEAN free-trade area, how much does China import from each trading partner? What is the import price? Calculate the tariff revenue.
Before the ChinaASEAN free-trade area, China Imports Total 60 Units, its Imports 10 from Thailand (From the and 50 units from India.
Total tariff Revenue = 10*(10+50) = 600
b. After the ChinaASEAN free-trade area, how much does China import from each trade partner? What is the import price? What is the total tariff revenue of China?
After the ChinaASEAN free-trade area, China Imports Total 60 Units, its Imports 40 from Thailand (From the and 40 units from India. Because the supply Curve is for Thailand. Its Imports increased to 40 units. Price is same as
Total tariff Revenue is the area d = 10*20= 200
c. Based on your answer to part (b), what is the impact of the ChinaASEAN free-trade area on the welfare of China?
Price china was paying does not change and its same as but has lost the tariff revenue which corresponds to the area of a+b+c.
d. What is the effect of the ChinaASEAN free-trade area on the welfare of Thailand and India?
Although the India is selling less but they are receiving the same price. Thailand Producer surplus increased by the area a +b, as they are selling more to china, so Thailand is better off.
But as we calculated above China loss tariff revenue (a+b+c) is more than the Gain for Thailand (a +b).
e. The China-ASEAN agreement may lead to a similar one between China and India. How would this affect Chinas imports from each country? What would be the effect on welfare in China, Thailand, and India if such an agreement was signed?
The Supply Curve will become and , China will import 10 units from 10 and 60 Units from India because demand in China will grow to 70 units. Consumer Surplus will grow by the area a+ b+ c+ d+ e, and tariff revenue will be a+ b+ c+ e.
Applied Sciences
Architecture and Design
Biology
Business & Finance
Chemistry
Computer Science
Geography
Geology
Education
Engineering
English
Environmental science
Spanish
Government
History
Human Resource Management
Information Systems
Law
Literature
Mathematics
Nursing
Physics
Political Science
Psychology
Reading
Science
Social Science
Home
Blog
Archive
Essay
Reviews
Contact
google+twitterfacebook
Copyright © 2019 HomeworkMarket.com
