Chapter 20: Q. 25 (page 490)
How is international trade, taken as a whole, likely to affect the average level of wages?
Increases.
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Who gains and who loses from trade?
Microeconomic theory argues that it is economically rationale (and profitable) to sell additional output as long as the price covers the variable costs of production. How is this relevant to the determination of whether dumping has occurred?
The country of Pepper land exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table.
| Price\( | Qd | Qs |
|---|---|---|
| 60 | 230 | 180 |
| 70 | 200 | 200 |
| 80 | 170 | 220 |
| 90 | 150 | 240 |
| 100 | 140 | 250 |
Table 20.6 Pepper land
| Price\) | Qd | Qs |
|---|---|---|
| 60 | 430 | 310 |
| 70 | 420 | 330 |
| 80 | 410 | 360 |
| 90 | 400 | 400 |
| 100 | 390 | 440 |
Table 20.7 Land of Submarines
a. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?
b. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?
c. Sketch two supply and demand diagrams, one for each country, in the situation before trade.
d. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.
e. If the Land of Submarines imposes an antidumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.
f. Does your general answer change if the Land of Submarines imposes an import quota of 70?
Why is trade a good thing if some people lose?
Show graphically that for any tariff, there is an equivalent quota that would give the same result. What would be the difference, then, between the two types of trade barriers?
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