The opportunity to exploit economies of scale is one of the gains to be made

# The opportunity to exploit economies of scale is one

• Test Prep
• 7
• 100% (6) 6 out of 6 people found this document helpful

This preview shows page 3 - 5 out of 7 pages.

12. The opportunity to exploit economies of scale is one of the gains to be made from removing tariffs and other trade distortions. Thesegains will be found by a decrease in(a)world prices of imports.(b)the consumption distortion loss triangle.(c)the production distortion loss triangle.(d)Both (b) and (c).(e)None of the above.13. International trade based on scale economies is likely to be associated with14. The fact that trade barriers often impose harm on large numbers of people, and benefit only a few may be explained by15. Given the following information:Labor Requirements to Produce One UnitCloth WheatHome 20 Foreign 60 2030II. Analytical Problems (55pts total)1. Suppose that the steel demand curve of Home country, which is a small country, is given byD=140-20P.Its supply curve is S=20+20P. The world price of wheat is given by 1.5 per ton. Home is considering imposing a trade barrier to protect its steel industry. Assume there are no transport costs.3/6
Name__________________________(a) (10pts) If Home engages in free trade, but then decides to impose a specific tariff of 1on steel imports, show graphically and calculate (i) the change in Home consumer surplus, (ii) the change in Home producer surplus, (iii) the change in Home government revenue, (iv) the terms of trade gain, (v) efficiency loss, and (vi) the total net effect that the tariff will have on welfare. Show your work.(b) (5pts) Now Suppose the Home country decides to impose a quota instead of the tariff in part (a), but wants to generate the same effect on the domestic price level as in the tariff case. Would it be possible for home to do this? If yes, calculate the amount of quota, if no, explain why not.