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Describe how international trade in goods with economies of scale can lead to welfare gains for the world economy simultaneously with welfare losses for an individual country.

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019

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Japanese officials are considering a new tariff on imported pork products from the USA in an attempt to reduce Japan's reliance on U.S. pork. Due to political pressure, the U.S. International Trade Representative's (ITR) office is also considering a new tariff on imported steel from Japan. Officials in both Japan and the U.S. must assess the social welfare ramification of their tariff decisions. Reports from a reliable think-tank indicate the following: if neither country imposes a new tariff, social welfare in Japan's economy will remain at $4.8 billion and social welfare in the U.S. will remain at $44 billion. If both countries impose a new tariff, welfare in the U.S. declines 0.5 percent to $43.78 billion and welfare in Japan declines by 0.8 percent to $4.76 billion. If Japan does not impose a tariff but the U.S. does, projected welfare in Japan is $4.66 billion while welfare in the U.S. is $ 44.2 billion. Finally, if the U.S. does not impose a tariff but Japan does, welfare is projected at $43.66 billion in the U.S. and $4.85 billion in Japan. Determine the Nash equilibrium outcome when policymakers in the two countries simultaneously but independently make tariff decisions in a myopic (one-shot) setting. Is it possible for the countries to improve their social welfare by "agreeing" to different strategies? Explain.

16. When an economist claims that trade liberalization is "welfare-enhancing” she actually means that A. everybody gains B. there are more winners than losers C. the gains to the winners are used to compensate the losers for their losses D. None of the above

Question 1 What factors determine the demand for British pounds in foreign exchange markets? How are exchange rates determined under a flexible exchange rate system?

Question 2 Why can't all the balance of payments accounts be in surplus?

Question 3 How can tariffs protect U.S. jobs? Do tariffs lead to a net increase in jobs? Explain. Who are the winners and losers from trade restrictions? Given that trade restrictions impose losses on an economy, why are trade restrictions so common?

Question 4 Describe developing countries and how they differ from industrial market economies. How can international trade aid development? In what ways does the international economy impose problems on developing countries?

Question 5 How can two countries both be better off as a result of trade?

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