5 how would the result in problem 8 be affected if

Info icon This preview shows pages 16–19. Sign up to view the full content.

View Full Document Right Arrow Icon
5. How would the result in Problem 8 be affected if Nation 1 were instead assumed to be a large nation? 6. Intensive commodities? Why? What effect is this likely to have on the distribution of income between labor and capital in India? 7. Sta India more likely to restrict its imports of L-intensive or K-i rting with the free trade offer curve of Nation 1 and Nation 2 in Figure 8.6 and building on your figure in Problem 1, draw a figure analogous to Figure 8.6 showing the general equilibrium effects of the 100 percent ad valorem import tariff on commodity Y imposed by Nation 1, now assumed to be a large nation. 8. Draw a figure analogous to Figure 8.7 for Nation 1 showing that with the optimum tariff Nation 1 will trade 25X for 40Y and also showing the effect of Nation 2 retaliating with an optimum tariff of its own. 9. What happens if the two nations retaliate against each other’s optimum tariff several times? 10. What is meant by an ad valorem, a specific, and a compound tariff? Are import or export tariffs more common in industrial nations? in developing nations? 11. What is meant by the consumption, production, trade, revenue, and redistribution effects of a tariff? 12. Describe a specific tariff, an ad valorem tariff and a compound tariff. What are the advantages and disadvantages of each? 13. What are the methods that customs appraisers use to determine the values of commodity imports? 14. Under what conditions does a nominal tariff applied to an import product overstate or understate the actual, or effective, protection afforded by the nominal tariff? 15. Less-developed nations sometimes argue that the industrialized nations’ tariff structures discourage the less-developed nations from undergoing industrialization, Explain. 16
Image of page 16

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

View Full Document Right Arrow Icon
Chapter 5: Tariffs 16. Distinguish between consumer surplus and producer surplus. How do these concepts relate to a country’s economic welfare? 17. When a nation impose tariff on the importation of a commodity, economic inefficiencies develop that detract from the nation welfare. Explain. 18. What factors influence the size of the revenue, protective, consumption, and retributive effects of a tariff? 19. A nation that imposes tariffs on imported goods may find its welfare improving should the tariff result in favorable shift in the terms of trade. Explain. 20. Which of the argument for tariffs do you feel are most relevant in today’s world? 21. Although tariffs may improve the welfare of a single nation, the world’s welfare may decline. Under what conditions would this be true? 22. What impact does the imposition of a tariff normally have on a nation’s terms of trade and volume of trade? 23. Suppose that the production of $1 million worth of steel in Canada requires $100,000 worth of taconite. Canada’s nominal tariff rates for importing these goods are 20 percent for steel and 10 percent for taconite. Given this information, calculate the effective rate of protection for Canada’s steel industry. 17
Image of page 17