Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 7

In 1997 Canadian 2 × 4 lumber studs with two holes drilled in them (so that electricians could run wires) were categorized by customs agents as Category $4418 and free of any tariffs. If they had been categorized as #4407, they would have fallen under a quota system whereby only the first 14.7 billion board-feet of lumber Canada imports to the United States are duty free. The next 650 million are subject to a $50 export fee per 1000 board-feet, and beyond that, a $100 fee. Roughly 15 billion board-feet of lumber is imported to the United States each year from Canada. If the Canadian 2 × 4 studs with holes are classified as #4407, this adds about $3,000 to the cost of a new home. Discuss the expected lobbying behavior of lawmakers from timber producing states (Montana and Alabama), the National Association of Homebuilders, and US lumber companies (for instance, Georgia Pacific).