EOC 9 Solutions - modern principles of economics 9 modern...

This preview shows page 1 - 3 out of 12 pages.

S-1 MODERN PRINCIPLES : MACROECONOMICS 9 19 MODERN PRINCIPLES OF ECONOMICS Facts and Tools 1. The Japanese people currently pay about four times the world price for rice. If Japan removed its trade barriers so that Japanese consumers could buy rice at the world price, who would be better off and who would be worse off: Japanese consumers or Japanese rice farmers? If we added all the gains and losses to the Japanese, would there be a net gain or net loss? Who would make a greater effort lobbying for or against this reduction in trade barriers: Japanese consumers or Japanese rice farmers? 1. Japanese consumers would be better off and Japanese rice farmers would be worse off. The theory of trade tells us that Japanese consumers would be better off by more than Japanese producers would be worse off so the net gains would be positive. The theory of politics, however, tells us that Japanese rice farmers would probably spend more effort and money opposing the reduction in trade barriers than consumers would spend favoring the reduction in barriers. The gains to consumers would be small per consumer but the losses to producers would be concentrated so the producers have a greater incentive and ability to oppose reductions in trade barriers. 2. The supply curve for rice in Japan slopes upward, just like any normal supply curve. If Japan eliminated its trade barriers to rice, what would happen to the number of workers employed in the rice-producing industry in Japan: Would it rise or fall? What would these workers probably do over the next year or so? Will they ever work again? 2. The number of rice farmers would fall. They would search for new work over the next year or so, but as we saw in our discussion of job creation and destruction the vast majority would find new employment fairly rapidly. 3. In Figure 9.3, consider triangles B and C . One of these could be labeled “Workers and machines who could be better used in another sector of the economy,” while the other could be labeled “Consumers who have to pay more than necessary for their product.” Which is which? 3. Triangle C is “Consumers who have to pay more”; Triangle B is “Workers and ma- chines who could be better used.” 4. In his book The Choice, economist Russ Roberts asks how voters would feel about a machine that could convert wheat into automobiles. a. Do you think that voters would complain that this machine should be banned, since it would destroy jobs in the auto industry? Solution Solution Solution International Trade Cowen3e_CH09_Solutions.indd 1 29/06/15 10:18 AM
Image of page 1

Subscribe to view the full document.

S-2 CHAPTER 9 International Trade b. Would this machine, in fact , destroy jobs in the auto industry? If so, would roughly the same number of jobs eventually be created in other industries?
Image of page 2
Image of page 3

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern