Exam 15: Arguments for Interventionist Trade Policies

Remembering micro theory, why can it be assumed that home demand for the product of a foreign monopoly supplier (at the initial as well as the post-tariff point) is elastic? Even if the net welfare impact of the "tariff to extract foreign monopoly profit" is uncertain, why is it certain that home consumers will incur less total spending on the good after the imposition of the tariff than before the imposition of the tariff?

Why might a foreign export subsidy decrease welfare in the foreign country? Why might the foreign country provide such a subsidy despite the adverse welfare effect?

The following diagram shows the demand and marginal revenue curves facing a foreign monopoly supplier of a good to the home country, as well as the firm's horizontal marginal cost curve when there is no tariff by the home country (MC) and the marginal cost curve when a specific tariff is imposed by the home country (MC + T). (Assume that average cost (AC) equals marginal cost.) In this situation, the price to home country consumers after the tariff has been imposed is __________.

In the game-theoretic analysis of tariff reaction functions of two governments, suppose that the equilibrium position has been attained (i.e., the countries are located at the intersection of their respective tariff reaction functions). If, from this equilibrium position, one country reduces its tariff rate while the other country does not change its tariff rate, the result, other things equal, is that the country that has reduced its tariff will experience __________.

In the case of the economist's definition of "dumping," an exporting firm is selling its product at a __________ price in the importing country than in the exporter's home country, and this suggests that demand for the exporter's product is __________ in the exporting country than in the importing country.

The macroeconomic view of a trade deficit implies that, other things equal, the imposition of a tariff will reduce the country's trade deficit

The diagram below shows the demand curve (D) facing a foreign monopoly Supplier of a good to home country I, the ssociated marginal revenue curve (MR), and the foreign monopolist's marginal cost curve (MC), which equals the Average cost curve (AC). If country I places a tariff of the amount T on the Import of the foreign firm's product, the MC curve shifts vertically upward by the Amount of the tariff to (MC + T), which is also (AC + T). Given this situation,Which one of the following statements is TRUE?

The following diagram shows a "reaction function" graph for two firms selling in an export market, where HH is the home firm's reaction function and FF is the foreign firm's reaction function. Reaction function HH reflects the fact that, if the foreign firm increases its quantity sold in this market, then the home firm will __________ its sales level in the market; reaction function FF reflects the fact that, if the home firm increases its quantity sold in this market, the foreign firm will __________ its sales level in the market.

The argument that a tariff can provide temporary protection to an industry so that the industry can expand, realize economies of scale, and eventually become an export industry is known as the

The existence of which type of dumping most likely constitutes the weakest argument for the imposition of an antidumping duty?

In the model relating R&D spending to output and output to R&D spending, suppose that, for whatever autonomous reason, the home firm desires to spend more on R&D at each level of output. In this model, what does this greater R&D spending by the home firm do to R&D spending by the foreign firm? Why? Does this result conform to your expectation of foreign firms' reactions in practice to increased R&D spending by home firms? Explain.

How would you respond to an argument to impose a tariff on imports arriving from a particular country in order to improve the balance of trade with that particular country? Do the criticisms of the tariff to improve the overall trade balance with all partners apply in this bilateral context? Why or why not? Are there additional considerations to be taken into account? Explain.

In the situation of the "tariff to extract foreign monopoly profit," do you think that the existence of a home producer of the good would strengthen or weaken the case for protection from the standpoint of the impact on home country welfare? Explain.

If tariffs are used in an attempt to improve country A's balance of trade, and if exchange rates are flexible, the imposition of the tariffs will cause __________ in the value of A's currency relative to other currencies and, as a consequence, A's exports will __________.

The general policy rule that states that the appropriate policies for alleviating a problem are those policies aimed directly at the source of the problem is called

If the United States government imposes a "countervailing duty," this duty is being imposed to offset

Illustrate and explain how a country could attain its optimum tariff position (optimum terms of trade) on the foreign offer curve by using an import quota rather than a tariff. Could this position also be attained by negotiation of a "voluntary" export restraint (VER) with the foreign country rather than by the use of a tariff? Why or why not?