ps1-ak-6333-sp18.pdf - ECO 6333 Trade Policy Spring 2018...

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ECO 6333: Trade Policy Thomas Osang Spring 2018 Problem Set 1: Trade Barriers under Perfect Competition - Answer Key Part I: The tariff could be either a specific tariff or an ad valorem tariff. Since the two foreign supply curves are parallel to each other, the free-trade supply curve can be regarded as having shifted up by a constant dollar amount at each quantity imported - hence it can be a specific tariff. However, since the free trade price stays constant for any quantity imported, adding vertically a given percentage of the free-trade price at each quantity also yields a parallel line above the free-trade supply curve by a constant dollar amount. Thus the tariff could also be ad-valorem in nature. Part II: 1. Industries and residents of a country who can benefit from protection are continuously seeking mechanisms by which their well-being can be enhanced. As tariffs have been reduced through international negoti- ations, these economic agents have sought to preserve their protected status by pushing for legislation and regulations regarding other barri- ers (NTBs) not covered by the negotiations.
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