Econ8B_Fall2009_Pr_2

Econ8B_Fall2009_Pr_2 - Econ8B Fall 2009 Practice Exam#2 1 A small country imports T-shirts With free trade at a world price of $10 domestic

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1 Econ8B Fall 2009 Practice Exam#2 1. A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. This quota on T-shirts causes domestic producers to gain/lose ______. 2. A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. This quota on T-shirts causes domestic consumers to gain/lose ______. 3. A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. If the government uses a competitive auction to allocate import licenses, it will collect approximately how much in revenue? 4. A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. This quota on T-shirts causes a gain/lose _____ to the nation in the amount of ____. [Hint: Assume that the government uses competitive auction and collects the revenue you calculated in the previous question.] 5. A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. If import licenses are allocated based on fixed favoritism, how much will be gained by the holders of the import licenses? 6. A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government, in an attempt to protect domestic T-shirt producers, pressures foreign exporters to voluntarily restrict their exports of T-shirts to 20
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This note was uploaded on 11/02/2009 for the course ECON 8b taught by Professor Zamb during the Spring '08 term at Brandeis.

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Econ8B_Fall2009_Pr_2 - Econ8B Fall 2009 Practice Exam#2 1 A small country imports T-shirts With free trade at a world price of $10 domestic

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