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hw7 - and most important it would help to clean up domestic...

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1 Econ 4550/6550 International Trade Assignment 7 Due on: Monday, November 30 Please type your answers and secure or staple all pages before you turn in this assignment. 1. What is an “optimum” tariff? Under what conditions can a country use a tariff to improve its welfare? Explain clearly the mechanism through which the imposition of a tariff can improve national welfare. Does a positive optimum tariff always exist? Why or why not? [5] 2. For a small country like the Philippines, a move to free trade would have huge advantages. It would let consumers and producers make their choices based on the real costs of goods, not artificial prices determined by government policy; it would allow escape from the confines of a narrow domestic market; it would open new horizons for entrepreneurship;
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Unformatted text preview: and, most important, it would help to clean up domestic politics .” Discuss the merits and/or demerits of this statement, by carefully separating out and identifying the economic arguments for free trade. [5] 3. Critically evaluate the “market failure” argument against free trad e, by carefully outlining the justifications for government intervention and the potential problems associated with such an action. [5] 4. Explain how the notion of collective action helps small groups of producers receive prolonged protection from the government at the cost of consumers, who are a much larger group? To what extent then, does trade policy reflect voter preferences? [5]...
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