AEMECON 2300 PS3 Solutions

AEMECON 2300 PS3 Solutions - International Trade and...

Info icon This preview shows pages 1–3. Sign up to view the full content.

International Trade and Finance Professor David R. Lee AEM/ECON 2300 Spring 2009 Solutions to Problem Set #3 Due Thursday, March 5, 2009 by 4:30pm. Please print and perform your work in the spaces provided below; attach extra sheets if necessary. Question 1: Effective Protection Brazil uses $3,000 worth of imported electronic parts and $2,000 worth of imported steel to produce a car. Assume that Brazil needs no other input. Assume too that the world price of a car is $8,000. 1. What is the value added of the Brazilian car industry? $ _ 3000 _ 2. (Scenario 1) Suppose now, that Brazil imposes a 10 percent ad valorem tariff on imports of cars. There is no tariff on either the electronic parts or steel imported as inputs. What is the effective rate of protection provided to the Brazilian producers of cars? Show your working. E = [n-(a 1 b 1 +a 2 b 2 )] / [1-(a 1 +a 2 )] =(.1 - .625*0)/ (1- .625) ______ 26.67 __% 3. (Scenario 2) Suppose that Brazil reduces the tariff on imports of cars to 5 percent, but at the same time imposes tariffs of 5 percent on imports of electronic parts. Brazil allows free import of steel. Calculate the new effective rate of protection for car manufacturers in Brazil. Show your working. E = (.05 - .625*((.05 * .6)+(0*.4)))/(1-.625) _______ 8.33 __% 4. (Scenario 3) Suppose now, tariff on imports of cars is maintained at 5 percent. But Brazil decides to remove tariffs on electronic part imports but introduces instead a tariff of 10 percent on imported steel. Recalculate the new effective rate of protection. Show your working. E = (.05 - .625*((0 * .6)+(0.1*.4)))/(1-.625) _______ 6.67 __% 5. Which scenario would a Brazilian car manufacturer who wants to be protected from imports like best? (i.e., Under which scenario is the Brazilian car manufacturer offered most effective protection) Scenario _____(1)__ 1
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Question 2: Dumping and Countervailing Duty Tomato farmers in the US have accused Mexico, Guatemala and Nicaragua of dumping tomatoes in the US domestic markets, to the detriment of tomato farmers in the US. The US Government needs to determine if this claim is true, before it can make an appropriate response. You are given the task of verifying this claim, using the information given below, by answering the questions below. Assume that the US imports tomatoes duty-free, i.e. there is no tariff on tomato imports from these countries.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

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