suggesting that foreign countries have a comparative advantage in
producing the good.
2. When does a country become an exporter of a good? An
importer?
答案：
If the world price is higher than the domestic price, then a
country would become an exporter. Producers would be eager to
receive the higher prices available abroad and would start selling
their
good to buyers in other countries. Conversely,if the
world price is lower than the domestic price, then
a country
would become an importer. Because foreign sellers offer a
better rice,
Domestic consumers would quickly start buying
from other countries.
3. Draw the supply-and-demand diagram for an
importing country. What is consumer surplus and
producer surplus before trade is allowed? What is
consumer surplus and producer surplus with free trade?
What is the change in total surplus?
答案：
Before trade is allowed, the price adjusts to balance domestic
supply and domestic demand. Consumer surplus, the area between the
demand curve and the before-trade price. Producer surplus, the area
between the supply curve and the before-trade price. Total surplus
before trade, the sum of consumer and producer surplus. After trade
is allowed, the domestic price rises to the world price. Consumer
surplus is the area between the demand curve and the world price.
Producer surplus is the area between the supply curve and the world
price.When a country allows trade and becomes an exporter of a
good, producers of the good are better off, and consumers of the
good are worse off. When a country allows trade and becomes an
importer of a good,consumers are better off, and producers are
worse off. In both cases, the gains from trade exceed the losses.
In other words the total surplus will increase with free
trade.
4. Describe what a tariff is, and describe its economic
effects.
答案：
A tariff—a tax on imports—moves a market closer to the equilibrium
that would exist without trade and,therefore, reduces the gains
from trade. Although domestic producers are better off and the
government raises revenue, the losses to consumers exceed these
gains.
5. What is an import quota? Compare its economic effects
with those of a tariff.
答案：
Import quota is a limit on the quantity of imports.An import quota
has effects that are similar to those of a tariff. Under a quota,
however, the holders of the import licenses receive the revenue
that the government would collect with a tariff.
6. List five arguments often given to support trade
restrictions. How do economists respond to these
arguments?
答案：
THE JOBS ARGUMENT：Opponents of free trade often argue that trade
with other countries destroys domestic jobs；
THE NATIONAL-SECURITY ARGUMENT：When an industry is threatened with
competition from other countries, opponents of free trade often
argue that the industry is vital for national security；
THE INFANT-INDUSTRY ARGUMENT：New industries sometimes argue for
temporary trade restrictions to help them get started. After a
period of protection, the argument goes, these industries will
mature and be able to compete with foreign competitors. Similarly,
older industries sometimes argue that they need temporary
protection to help them adjust to new conditions；
THE UNFAIR-COMPETITION ARGUMENT：A common argument is that free
trade is desirable only if all countries play by the same rules. If
firms in different countries are subject to different laws and
regulations,then it is unfair (the argument goes) to expect the
firms to compete in the international marketplace；
THE PROTECTION-AS-A-BARGAINING-CHIP ARGUMENT：Another argument for
trade restrictions concerns the strategy of bargaining. Many
policymakers claim to support free trade but, at the same time,
argue that trade restrictions can be useful when we bargain with
our trading partners. They claim that the threat of a trade
restriction can help remove a trade restriction already imposed by
a foreign government.
Ecomomists' response:
To THE JOBS ARGUMENT:Free trade creates jobs at the same time that
it destroys them;
To THE NATIONAL-SECURITY ARGUMENT：Economists acknowledge that
protecting key industries may be appropriate when there are
legitimate concerns over national security. Yet they fear that this
argument may be used too quickly by producers eager to gain at
consumers’ expense.
To THE INFANT-INDUSTRY ARGUMENT：
Economists are often
skeptical about such claims. The primary reason is that the
infant-industry argument is difficult to implement in practice. To
apply protection successfully, the government would need to decide
which industries will eventually be profitable and decide whether
the benefits of establishing these industries exceed the costs to
consumers of protection. Yet “picking winners” is
extraordinarily
difficult. It is made even more difficult by the political process,
which often awards protection to those industries that are
politically powerful. And once a powerful industry is protected
from foreign competition, the “temporary” policy is hard to
remove.
In addition, many economists are skeptical about the
infant-industry argument even in principle. Suppose, for instance,
that a industry is young and unable to compete profitably against
foreign rivals. Yet there is reason to believe that the industry
can be profitable in the long run. In this case, the owners of the
firms should be willing to incur temporary losses in order to
obtain the eventual profits. Protection is not necessary for an
industry to grow.
To THE UNFAIR-COMPETITION ARGUMENT：The gains of the consumers from
buying at the low price would exceed the losses of the
producers.
To THE PROTECTION-AS-A-BARGAINING-CHIP ARGUMENT：The problem with
this bargaining strategy is that the threat may not work. If it
doesn’t work, the country has a difficult choice. It can carry out
its threat and implement the trade restriction, which would reduce
its own economic welfare. Or it can back down from its threat,
which would cause it to lose prestige in international affairs.
Faced with this choice, the country would probably wish that it
had
never made the threat in the first place.
7. What is the difference between the unilateral and
multilateral approaches to achieving free trade? Give an
example of each.
答案：
A country can take one of two approaches to achieving free trade.
It can take a unilateral approach and remove its trade restrictions
on its own. This is the approach that Great Britain took in the
nineteenth century and that Chile and South Korea have taken in
recent years. Alternatively, a country can take a multilateral
approach and reduce its trade restrictions while other countries do
the same. In other words, it can bargain with its trading partners
in an attempt to reduce trade restrictions around the world.One
important example of the multilateral approach is the North
American Free Trade Agreement (NAFTA), which in 1993 lowered trade
barriers among the United States, Mexico, and Canada.
Problems and Applications
1. The United States represents a small part of the world
orange market.
a. Draw a diagram depicting the equilibrium in the
U.S. orange market without international trade.
Identify the equilibrium price, equilibrium quantity,
consumer surplus, and producer surplus.
答案：
Because there is no international trade, the market consists solely
of
domestic buyers and sellers. The domestic price adjusts
to balance the quantity supplied by domestic sellers and the
quantity demanded by domestic buyers.Consumer surplus, the area
between the demand curve and the before-trade price. Producer
surplus, the area between the supply curve and the before-trade
price.
b. Suppose that the world orange price is below the
U.S. price before trade, and that the U.S. orange
market is now opened to trade. Identify the new
equilibrium price, quantity consumed, quantity
produced domestically, and quantity imported.
Also show the change in the surplus of domestic
consumers and producers. Has domestic total
surplus increased or decreased?
答案：
Because that the world orange price is below the U.S.
price
so
U.S.should be a importer of orange if trade is allowed.
The new equilibrium price will be the world price which is
lower than the price before trade and the quantity consumed will be
increased while the quantity produced domestically will be
decreased.The quantity imported equals the gap between the
increased consumer demand and decreased domestic supply. The
domestic consumers surplus will be better off while the domestic
producer surplus worse off.The gains of consumers surplus is
bigger than the loss of
producer surplus so the
domestic total surplus has increased.
2. The world price of wine is below the price that would
prevail in the United States in the absence of trade.
a. Assuming that American imports of wine are a
small part of total world wine production, draw a
graph for the U.S. market for wine under free trade.
Identify consumer surplus, producer surplus, and
total surplus in an appropriate table.
答案：
After trade is allowed, the domestic price rises to the world
price. Consumer surplus is the area between the demand curve and
the world price. Producer surplus is the area between the supply
curve and the world price. The consumer surplus is better off while
the producer surplus is worse off. The total gains bigger than the
loss.The total surplus is the consumer surplus plus the producer
surplus, which is bigger than without trade.
b. Now suppose that an unusual shift of the Gulf
Stream leads to an unseasonably cold summer in
Europe, destroying much of the grape harvest
there. What effect does this shock have on the
world price of wine? Using your graph and table
from part (a), show the effect on consumer surplus,
producer surplus, and total surplus in the United
States. Who are the winners and losers? Is the
United States as a whole better or worse off?
答案：
Due to the cold weather the grape supply is reduced.The consumer
demand is remain the same while the producer supply is decreased.
The supply curve shifts to the left and
raise the
equilibrium point that will make the world price higher than
before.Because the world price is increased the consumer will be
worse off while the producer will be better off. The total surplus
is the sum of consumer surplus and producer surplus. If
the
new equilibrium point is higher than the equilibrium point without
trade the total surplus in the U.S.can be possibly higher than
before. If the new
equilibrium
price is lower than
the
price without trade
the total surplus is
less than before.
The winners of this
grape
disaster is
the grape growers out of Europe while the
lossers of this is
the consumer
around the world and
the grape grower in Europe. As I mentioned before in the total
surplus in the U.S. whether the United States as a whole is better
off or worse off depends on the new world price.Because if the new
world price is high enough it will make the United States an
exporter of grape and that will increase the producer surplus and
can possibly make U.S. as a whole to be better off.
3. The world price of cotton is below the no-trade price in
Country A and above the no-trade price in Country B.
Using supply-and-demand diagrams and welfare tables
such as those in the chapter, show the gains from trade
in each country. Compare your results for the two
countries.
答案：
Country A price is higher than the world price.Country A will be a
importer.In this case the consumer surplus in Country A will
increase because the domestic price will
drop to the
world prce.The producer surplus will decrease. The gains is bigger
than the loss and the total surplus of Country A will increase.
Country B price is lower than the world price.Country B will be an
exporter and the domestic price will rise to the world price. In
this case the consumer surplus in Country B will decrease and the
producer surplus will increase in Country B. The gains of the
producer will bigger than the loss of consumer and the total
surplus of Country B will increase.Both Country A and Country B
will benefit from trade.
4. Suppose that Congress imposes a tariff on imported
autos to protect the U.S. auto industry from foreign
competition. Assuming that the U.S. is a price taker in
the world auto market, show on a diagram: the change
in the quantity of imports, the loss to U.S. consumers,
the gain to U.S. manufacturers, government revenue,
and the deadweight loss associated with the tariff. The
loss to consumers can be decomposed into three pieces:
a transfer to domestic producers, a transfer to the
government, and a deadweight loss. Use your diagram
to identify these three pieces.
答案：
The import quantity before the tariff is Q4-Q1;After the tariff the
import quantity is Q3-Q2;The loss to U.S.consumers is B+E+F+G;The
gains to U.S.producer is B;The government revenue is F;The
deadweight loss associated with the tariff is E+G;Accordingly the
loss to consumers which transfers to domestic producers equals B,to
the government equals F,to the deadweight loss equals E+G;
5. According to an article in The New York Times (Nov. 5,
1993), “many Midwest wheat farmers oppose the [North
American] free trade agreement [NAFTA] as much as
many corn farmers support it.” For simplicity, assume
that the United States is a small country in the markets
for both corn and wheat, and that without the free trade
agreement, the United States would not trade these
commodities internationally. (Both of these assumptions
are false, but they do not affect the qualitative responses
to the following questions.)
a. Based on this report, do you think the world wheat
price is above or below the U.S. no-trade wheat
price? Do you think the world corn price is above
or below the U.S. no-trade corn price? Now analyze
the welfare consequences of NAFTA in both
markets.
答案：
Based on this report, I think the world wheat price is below the
U.S. no-trade wheat price while the world corn price is above the
U.S. no-trade corn price. NAFTA will cut the U.S.wheat farmers
surplus
but increase wheat consumers surplus.
NAFTA
will cut the U.S. corn consumers surplus while increase the corp
farmers surplus. In both case the total surplus of U.S. will be
increased.
b. Considering both markets together, does NAFTA
make U.S. farmers as a group better or worse off?
Does it make U.S. consumers as a group better or
worse off? Does it make the United States as a
whole better or worse off?
答案：
Considering both markets together it's hard to say whether NAFTA
makes U.S. farmers as a group better or worse off.Because
wheat farmers surplus
is increased
while corp
farmers surplus
is decreased so we cann't decide the
total surplus of the U.S farmers
is
increased
or decreased. For the same reason the total surplus of
U.S. consumers as a group is uncertain either. Because the
gains of wheat consumer is bigger than the loss of wheat farmer and
the gains of corp farmer is bigger than the loss of corp consumer,
so the United State as a whole will be better off because of NAFTA.
And because the total surplus of the United States is
increased so
at lease farmers as a group or consumers as a
group are better off. It could be possible that both the farmers
as a group and consumers as a group are better off but it is
not possible that both groups are worse off.
6. Imagine that winemakers in the state of Washington
petitioned the state government to tax wines imported
from California. They argue that this tax would both
raise tax revenue for the state government and raise
employment in the Washington state wine industry. Do
you agree with these claims? Is it a good policy?
答案：
I don't quite agree with these claims.Firstly a tax on imports
moves a market closer to the
equilibrium that would exist without trade and,therefore, reduces
the gains from trade. Although domestic producers are better off
and the government raises revenue, the losses to consumers exceed
these gains.If the tarrif is too high the the importers will lose
the incentive to import and that will make no increase in tax
revenue. Secondly import will also creates new jobs so the shrink
in import will make job losses. So based on the above mentioned two
points it is not a good policy.
7. Senator Ernest Hollings once wrote that “consumers do
not benefit from lower-priced imports. Glance through
some mail-order catalogs and you’ll see that consumers
pay exactly the same price for clothing whether it is
U.S.-made or imported.” Comment.
答案：
I think consumers will benefit from lower-priced imports.Firstly it
will give the customer more choices;Secondly because of these
lower-priced imports the domestic producers will lower the price of
their products to the level of these imports in order to be
competitive and that will increase the consumers surplus. Even
though the price of the U.S.made
and
imported
clothing appeared to be same but in fact without the imports local
demand will
remain high while
local supply
relatively low
and the price will rise accordingly,
so the consumers will be worse off.
篇幅有限，下略。
