TRUE/FALSE When a country allows free trade of a good, if the world price is higher...

TRUE/FALSE

When a country allows free trade of a good, if the world price is higher than the domestic price

TRUE/FALSE

If a country’s domestic price of a good is lower than the world price, then that country has a comparative advantage in producing that good.

TRUE/FALSE

When a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off

TRUE/FALSE.

If a small country imposes a tariff on an imported good, domestic sellers will gain producer surplus, the government will gain tariff revenue, and domestic consumers will gain consumer surplus.

Solutions

Expert Solution

1. If the world price is higher than the domestic price then the country would export the goods. Hence, this statement is False as the country would not engage in free trade in this case.

2. TRUE. If the domestic price is lower than the world price then the country would export the good and the country would export the good in which it has a comparative advantage.

3. TRUE. When country that imports shoes impose a tariff on it, then the price of the shoes in the country goes higher so consumers are worse off and the Government earns its revenue also.

4. FALSE. As prices increase after the import tariff then the domestic consumers will lose consumer surplus.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

4. A small country imports sugar. With free trade at the world price of $0.10 per...

4. A small country imports sugar. With free trade at the world price of $0.10 per pound: Domestic production = 120 million pounds Domestic consumption = 420 million pounds Imports = 300 million pounds. The country’s government now decides to impose a quota that limits sugar imports to 240 million pounds. With the import quota in effect, the domestic price rises to $0.12 per pound, and domestic production increases to 160 million pounds. The government allocates the licenses to import...

True or false: 1) A country with negative net exports has a trade surplus. 2) When...

True or false: 1) A country with negative net exports has a trade surplus. 2) When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents. 3) By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises. 4) By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow...

A small nation permits free trade in good X. At the good’s free-trade price of $8,...

A small nation permits free trade in good X. At the good’s free-trade price of $8, domestic firms supply 6 million units and imports account for 4.2 million units. Recently, the small country has erected trade barriers with the result that imports have fallen to zero, price has risen to $10, and domestic supply has increased to 8 million units. Calculate the change in consumer surplus and producer surplus resulting from the trade barrier. What is the deadweight loss?

A small nation permits free trade in good X. At the good’s free-trade price of $8,...

A small nation permits free trade in good X. At the good’s free-trade price of $8, domestic firms supply 6 million units and imports account for 4.1 million units. Recently, the small country has erected trade barriers with the result that imports have fallen to zero, price has risen to $10, and domestic supply has increased to 8 million units. Calculate the change in consumer surplus and producer surplus resulting from the trade barrier. What is the deadweight loss?

When a small country engages in free trade, what will be its domestic price? Where can...

When a small country engages in free trade, what will be its domestic price? Where can you find the increase in total surplus when a small country engages in free trade? If a small country puts a per-unit tariff on an imported product, will the world price of the product change? Why? If a large country puts a per-unit tariff on an imported product, will the world price of the product change? Why?

True or False Questions: Please answer true or false. 1. Even when care is free at...

True or False Questions: Please answer true or false. 1. Even when care is free at the point of service, we would expect low and high-income individuals with the same level of need to demand different quantities of health care. 2. We would expect the demand curve for physician visits to be more price elastic than the demand curve for inpatient hospital care. 3. A decision by the provincial governments to include counseling by psychologists within the public insurance plan...

True or False: There is a public good which can be provided for citizens of country...

True or False: There is a public good which can be provided for citizens of country A and citizens of country B. This particular public good can either be produced (one unit) or not (zero units). Country A has 10 citizens who all have a marginal private benefit of the public good valued at 8 and Country B has 2 citizens who all have a marginal private benefit of the public good at 40. Country B is more likely to...

In free trade a country will not trade if A. Autarky prices and free trade prices...

In free trade a country will not trade if A. Autarky prices and free trade prices are the same. B. Autarky prices are larger than free trade prices. C. Autarky prices are smaller than free trade prices. D. The absolute value of autarky prices are negatively correlated with free trade prices. QUESTION A.3 In the Pure Specific Factors model with two sectors, Cars (C) and Wheat (W), Capital (K) is specific to C and Land (A) is specific to W....

Is trade Good or Bad for the US? When a country trades, are there going to...

Is trade Good or Bad for the US? When a country trades, are there going to be Winners and Losers? Can the US be the winner for all transactions? Why? How? Are the Federal Reserve and the President/Congress (Fiscal Policy makers) complements to each other or in competition with each other? Or Both? What is the Goal of the Fed and the goal for the President/Congress.

Suppose the world price for a good is lower than the domestic price without trade. Explain...

Suppose the world price for a good is lower than the domestic price without trade. Explain the two sources of deadweight loss arising from a tariff. IMPORTANT: I know that the two sources of deadweight loss arising from tariffs are inefficent production and lost transactions. However, I don't know why that is. Could you please explain to me why inefficent production and lost transactions are the two sources of deadweight loss arising from tariffs when the world price for a...

Subjects