《国际贸易》芬斯特拉版人大版练习题答案.pdfVIP

Import Tariffs and Quotas under Imperfect Competition 1 Figure 9 1 shows the Home no trade equilibrium under perfect competition with the price PC and under monopoly with the price PM In this question we com pare the welfare of Home consumers in these two situations a Under perfect competition with the price PC label the triangle of consumer surplus and the triangle of producer surplus Outline the area of total Home sur plus the sum of consumer surplus and producer surplus Answer Refer to Figure 9 1 Consumer surplus is the area under the demand curve D and above the market price and producer surplus is the area above the marginal cost curve MC and below the market price Under perfect competi tion consumer surplus is PCBPD where PDis the intersection of the demand curve with the vertical axis Producer surplus is PCBPMC where PMCis the in tersection of the marginal cost curve with the vertical axis Total surplus is thus represented by the triangle PMCBPD b Under monopoly with the price PM label the consumer surplus triangle Answer Refer to Figure 9 1 Consumer surplus is the triangle PMAPD c Producer surplus is the same as the profi ts earned by the monopolist To measure this label the point in Figure 9 1 where the MR curve intersects MC at point B For selling the units between zero and QM marginal costs rise along the MC curve up to B The monopolist earns the difference between the price PMand MC for each unit sold Label the difference between the price and the MC curve as producer surplus or profi ts Answer Refer to the following fi gure Producer surplus is represented by the trapezoid PMAB PMC S 79 9 d Outline the area of total Home surplus with a Home monopoly Answer Refer to the fi gure from part c Total surplus is represented by the trapezoid PDAB PMC e Compare your answer with parts a and d and outline the difference between these two areas What is this difference called and why Answer Refer to the fi gure from part c This is called the deadweight loss due to monopoly and is represented by the triangle ABB It is called a deadweight loss because it is a loss that is not gained by any other party 2 Figure 9 2 shows the free trade equilibrium under perfect competition and under monopoly both with the price PW In this problem we compare the welfare of Home consumers in the no trade situation and under free trade a Under perfect competition with the price PW label the triangle of consumer surplus and the triangle of producer surplus Outline the area of total Home sur plus the sum of consumer surplus and producer surplus Answer Refer to the following fi gure The free trade equilibrium under per fect competition has a Home consumer surplus of PDB PW and a producer sur plus of PWBPMC S 80Solutions Chapter 9 Import Tariffs and Quotas under Imperfect Competition Price PD PM PMC PC QCQuantityQM A B MC MR D B b Based on your answer to part a in this problem and part a of the last problem outline the area of gains from free trade under perfect competition Answer Refer to the fi gure from part a Gains from trade are represented by the shaded triangle c Under monopoly still with the price PW again label the triangle of consumer surplus and the triangle of producer surplus Answer Refer to the fi gure from part a The free trade equilibrium under mo nopoly has a Home consumer surplus of PDB PW and a producer surplus of PWBPMC This is identical to the free trade surplus under perfect competition d Based on your answer to part c in this problem and part d of the last prob lem outline the area of gains from free trade under Home monopoly Answer Refer to the following fi gure Gains from trade are represented by the shaded area e Compare your answer with parts b and d That is which area of gains from trade is higher and why Answer The area representing gains from trade is larger in part d than in part b This is because the opening of trade in the monopoly case eliminates the monopolist s ability to charge a price higher than the perfectly competitive price Solutions Chapter 9 Import Tariffs and Quotas under Imperfect CompetitionS 81 Price Quantity Gains from trade MC MR B A PD PM PW PMC QMS1D1 D B X MR Price Gains from trade MC D X MR MR B A B PD PM PW QM S1D1 PMC Quantity As such trade additionally eliminates the deadweight loss associated with mo nopoly making gains from trade higher 3 Rank the following in ascending order of Home welfare and justify your answers If two items are equivalent indicate this accordingly a Tariff t in a small country with perfect competition b Tariff t in a small country with a Home monopoly c Quota with the same imports M in a small country with a Home monopoly d Tariff t in a country facing a Foreign monopoly Answer c a b d As shown in problem 2 a small country with free trade has equivalent levels of welfare under either perfect competition or monopoly Adding a tariff in either case reduces welfare due to the deadweight loss associated with the tar iff but does not reintroduce any additional deadweight losses due to monopoly Thus a b A quota in a country with a monopoly maintains the market power of the monopolist and the deadweight loss due to monopoly is additive to the deadweight loss due to the quota such that c a b Finally a tariff with a Foreign monopoly can actually increase welfare if the terms of trade gain is greater than the deadweight loss and if so a b d 4 Refer to the prices of Japanese automobile imports under the VER Figures 9 5 and 9 6 and answer a What component of the price of imported automobiles from Japan rose the most during the period 1980 to 1985 Answer Quality improvements increased the price of Japanese cars by the most during that period b Sketch how Figures 9 5 and 9 6 might have looked if the U S had applied a tariff to Japanese auto imports instead of the VER with the same level of im ports In words discuss how the import prices and U S prices might have compared under a tariff and the VER Answer Under a percentagte i e ad valorem tariff the relative price of high quality automobiles is unchanged relative to low quality automobiles Therefore you would not expect the average quality level of imports to change as a result of the tariff Therefore Figure 9 5 would not show the large increase in quality of Japanese imports For U S producers the tariff would not enable them to raise their prices as much as they did Therefore Figure 9 6 would not show the large increase in the price of American small cars c Which policy a tariff or the VER would have been least costly to U S consumers Answer Because the tariff would lead to a smaller increase in the prices of small American cars it would be less costly than the VER 5 In this problem we analyze the effects of an import quota applied by a country fac ing a Foreign monopolist In Figure 9 7 suppose that the Home country applies an import quota of X2 meaning that the Foreign fi rm cannot sell any more than that amount a To achieve exports sales of X2 what is the highest price that the Foreign fi rm can charge Answer Refer to the following fi gure To achieve export sales of exactly X2 the Foreign monopolist would charge P2 S 82Solutions Chapter 9 Import Tariffs and Quotas under Imperfect Competition b At the price you have identifi ed in part a what is the Home consumer surplus Answer Refer to the fi gure in part a Home consumer surplus is represented by the shaded triangle with area b c Compare the consumer surplus you identifi ed in part b with the consumer sur plus under free trade Therefore outline in Figure 9 7 the Home losses due to the quota Hint Remember that there is no Home fi rm so you do not need to take into account Home producer surplus or tariff revenue Assume that quota rents go to Foreign fi rms Answer Refer to the fi gure in part a Consumer surplus under free trade is a triangle with area b c d Under a quota consumer surplus decreases by c d The Home welfare loss due to the quota is thus area c d d Based on your answer to c which has the greater loss to the Home country a tariff or a quota leading to the same level of sales X2 by the Foreign fi rm Answer Because there is no terms of trade gain associated with the quota wel fare is lower under a quota regime relative to a tariff regime 6 Suppose that the demand curve for a good is represented by the straight line P 10 Q Answer In italics in the following chart Solutions Chapter 9 Import Tariffs and Quotas under Imperfect CompetitionS 83 Price Foreign Exports MR P2 X2X1 P1 MC A d b c QuantityPriceTotal RevenueMarginal Revenue 0100NA 1999 28167 37215 46243 55251 6424 1 7321 3 8216 5 919 7 1000 9 a Draw a graph containing both the demand curve and marginal revenue curve Answer b Is the marginal revenue curve a straight line as well What is the slope of the mar ginal revenue curve How does that slope compare with that of the demand curve Answer Like the demand curve the marginal revenue curve is a straight line The slope of the marginal revenue curve is 2 and the slope of the demand curve is 1 Thus the slope of the marginal revenue curve is twice as steep as the de mand curve c Does the marginal revenue curve contain negative values over the specified range of quantities Explain why or why not Answer Over the specified range of quantities the marginal revenue curve does contain negative values After the fifth unit sold to sell a sixth the fall in price on every unit sold causes revenue to decrease yielding a negative marginal revenue 7 Consider the case of a Foreign monopoly with no Home production shown in Fig ure 9 7 Starting from free trade at point A consider a 10 tariff applied by the Home government a If the demand curve is linear as in problem 6 what is the shape of the marginal revenue curve Answer The shape of the marginal revenue curve is also linear but twice as steep b Therefore how much does the tariff inclusive Home price increase because of the tariff and how much does the net of tariff price received by the Foreign fi rm fall Answer Because the marginal revenue curve is steeper than the demand curve twice as steep in this case the vertical increase along the marginal revenue curve of 10 refl ecting the tariff is twice as much as the corresponding vertical increase along the demand curve Thus the Home tariff inclusive price increases by 5 and the net of tariff Foreign price decreases by 5 c Discuss the welfare effects of implementing the tariff Use a graph to illustrate under what conditions if any there are increases in Home welfare S 84Solutions Chapter 9 Import Tariffs and Quotas under Imperfect Competition Quantity Price Demand Marginal Revenue 10 8 6 4 2 0 2 4 6 8 10 1 2 3 4 5 6 7 8 9 10 Answer Refer to the following fi gure The tariff decreases Home consumer sur plus by the area c d increases government revenue by the area c and improves Home s terms of trade by the area e Thus if e exceeds d there is an overall wel fare gain from the tariff 8 Suppose the home firm is considering whether to enter the foreign market Assume that the home firm has the following costs and demand Fixed costs 140 Marginal costs 10 per unit Local price 25 Local quantity 20 Export price 15 Export quantity 10 a Calculate the firm s total costs from selling only in the local market Answer Total Costs 10 20 140 340 b What is the firm s average cost from selling only in the local market Answer 340 20 17 c Calculate the firm s profit from selling only in the local market Answer 25 20 340 160 d Should the home firm enter the foreign market Briefly explain why Answer The firm should enter the Foreign market because it would be earn ing an additional 50 The firm is able to earn the extra profit because the ex porting price 15 although lower than the average costs 17 is higher than the marginal cost of 10 Solutions Chapter 9 Import Tariffs and Quotas under Imperfect CompetitionS 85 Price Foreign ExportsX2 P2 P1 P3 P2 t X1 B e cd c t d MC t MC A MR Variable Costs Fixed Costs Total Costs Average Costs RevenueTotal Costs Profi ts S 86Solutions Chapter 9 Import Tariffs and Quotas under Imperfect Competition e Calculate the firm s profit from selling to both markets Answer 25 20 15 10 10 30 140 210 f Is the home firm dumping Briefly explain Answer The firm is dumping because its export price 15 is lower than its lo cal price 25 9 Suppose that in response to a threatened antidumping duty of t the Foreign monop oly raises its price by the amount t a Illustrate the losses for the Home country Answer Refer to the following fi gure The threat of an antidumping duty causes the Foreign fi rm to increase its price by t P2 P1 Consumer surplus decreases by the area a b b How do these losses compare with the losses from a safeguard tariff of the amount t applied by the Home country against the Foreign monopolist Answer A safeguard tariff would differ in two ways 1 The Home government would collect revenue on imports and 2 there would be a terms of trade gain for the Home country because the incidence of the tariff would be shared by the Foreign monopolist Both differences reduce the amount of Home welfare loss under a tariff relative to a threatened antidumping duty c In view of your answers to a and b why are antidumping cases fi led so often Answer Despite their higher welfare costs antidumping tariffs have a higher likelihood of being implemented under U S trade law than safeguard tariffs Because Home producers benefi t due to higher prices when there is even a threat of an antidumping duty they have an incentive to apply for this kind of protection 10 Why is it necessary to use a market failure to justify the use of infant industry pro tection Answer If all markets are working perfectly there is no reason why a potentially suc cessful fl edgling industry cannot survive without government intervention Let us consider the two justifi cations for using an infant industry tariff The fi rst is that the industry will learn over time which will drive down its average costs to the point where it is competitive if credit markets were working perfectly that industry could borrow against future profi tability to keep it in business until that time The second Price Quantity D b a D2 P2 P1 D1 RevenueVariable Costs Fixed Costs Profi ts Solutions Chapter 9 Import Tariffs and Quotas under Imperfect CompetitionS 87 justifi cation explicitly assumes a market imperfection A positive externality in pro duction implies that the socially optimal level of infant industry output is above that determined by the market equilibrium 11 What is a positive externality Explain the argument of knowledge spillovers as a po tential reason for infant industry protection Answer Positive externality exists when the increase in production by one fi rm gen erates benefi ts to other fi rms by lowering industry costs By imposing the tariff the government could nurture the infant industry because the increase in output allows the fi rms to reduce their future costs by learning from each other Without the pro tection each fi rm on its own would lack the incentive to invest in learning through increasing its current production 12 If infant industry protection is justifi ed is it better for the Home country to use a tar iff or a quota and why Answer To the extent that the Home infant industry has market power it is better to use a tariff rather than a quota The infant industry calculus weighs the benefi ts of future producer surplus against current deadweight losses due to protection Because deadweight losses are greater under a quota due to maintaining Home market power infant industry protection has a better chance of being worthwhile by using a tariff 13 Figures A B and C are taken from the paper The Pattern of Antidumping and Other Types of Contingent Protection by Chad Bown World Bank PREM Notes No 144 October 21 2009 a Figure A shows the number of newly initiated trade remedy investigations in cluding safeguard SF China safeguard CSF antidumping AD and counter vailing duty CVD a countervailing duty is used when foreign firms receive a subsidy from their government and then the CVD prevents them from charging lower prices in the importing country Each bar shows the number of new cases in each quarter of the year Q1 Q2 etc for 2007 2009 The number of cases is graphed separately for developing countries and developed countries What does this graph tell us about what has happened to the number of such cases since 2007 What might have caused this pattern Answer From the second quarter of 2007 onward the number of newly initi ated trade remedy investigations increased in nearly every quarter One of many possible explanations is that the global recession which started in late 2007 has led to greater protectionism as we have discussed in this chapter S 88Solutions Chapter 9 Import Tariffs and Quotas under Imperfect Competition b Figure B shows the number o