Exam 2 (Take home)
- Theoretical questions(4 questions @15 points each = 60 points)
- Define tariffs, summarize its history, discuss 7 types of tariffs and,analyze the impacts of tariffs on international trade.
- Explain non-tariffs barriers to trade and discuss 6 most common NTB.
- Evaluate thearguments for and against protection and state which one (free market or protectionism) is more beneficial to a country.
- State and discuss six forms of imperfect competition and seven distinct trade fairness principles.
- Practicum questions(4 questions @10 points each = 40 points)
- Suppose that the United States currently imports Tennis racquets without tariff, with the results shown in the first column of numbers below. Congress is thinking of imposing a tariff of $20 per racket and has asked you to estimate the gains and losses to different groups. Your findings are shown in the right-hand column below.
|Situation with $20
tariff on bats
|U.S. domestic price of rackets||$60||$75|
|World price of rackets||$60||$50|
|U.S. production of rackets per year||200,000||250,000|
|U.S. imports of rackets per year||300,000||200,000|
|U.S. consumption of rackets per year||500,000||450,000|
- What is the gain or loss to U.S. tennis racquets buyers from the tariff?
- What is the gain or loss to U.S. tennis producers from the tariff?
- What is the government revenue from the tariff?
- What is the net gain or loss for the U.S. as a whole?
- Two countries, Haiti and the Dominican Republic, produce rum and beer. Each island has a labor force of 2400 and the weekly productivity of each worker (in hundreds of cases) is as follow
Haiti 2 4
Dominican Republic 3 9
- Which county has an absolute advantage in the production of Rum? Beer?
- Which country has a comparative advantage in the production of Rum? Beer?
- Sketch the production possibility frontier (PPF) of both countries
- Both countries want to produce an equal amount of cases of Rum and Beer. How should they allocate their workers to the two sectors? Show your table of production and graph it on the PPF
- Can specialization and trade move both countries beyond their PPF? How many (equal) cases will both countries end up with?
- 3. Due to operating cost already high, the firm Carlo & You Energy Drink Inc. (an oligopoly) seeks your advice on whether to advertise or not and provides you with the following information:
Advertising Non- Advertising
P Q TR MR P Q TR MR
22 3 22 0
21 4 21 1
20 5 20 1
18 5 18 2
15 8 15 3
14 9 14 4
13 10 13 5
- Find the total revenue and marginal revenue in both situations.
- With a $16 unit cost, what is the firm’s profit maximizing production?
- The radio advertisement costs $600 a month (30 days), find the firm’s profit per case of energy drink (hint: consider daily advertisement cost)
- Should the firm advertise or not? Explain your rationale.
- Let the market for Tennis racquets be:
Quantity demanded & market price quantity supplied & market price
0 100 0 40
25 80 15 50
40 50 25 80
- What is the total purchase of tennis racquets? Why?
- What is the consumer surplus? Why?
- What is the increase in consumer surplus when the market price drops to $ 50?
- What is the increase in producer surplus when the market jumps to 80?
- Deduce and explain the total surplus
Extra credits(10 points)
Consider a hypothetical example of trade between the United States (a developed country) and Brazil (a developing country) is as follow
|U.S. Exports ($b) to Brazil||U.S. Imports ($b) from Brazil|
|Lotion & Powder||80||65|
- the total trade ( TT) between the US and Brazil
- the net trade (NT)
- the intra industry trade (IIT)
- the intra industry trade share
Required: All work must be typewritten. The theoretical questions can beresearched and paraphrased (put in your own words) since this is not a copy and paste exercise. Credit must be given to your sources of information and a work cited section must be provided. The practicum responses mustshow the work not just the answer.