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    Man Kiw Chapter 09 Solutions Quizzes

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    janellennui
    This document summarizes an economics chapter about international trade. It provides an example of how free trade benefits a country called Autarka by allowing it to import cheaper wool suits from neighboring countries. With trade, consumer surplus increases and total surplus increases for Autarka. It also discusses arguments for and against imposing a tariff on wool suit imports, with free trade advocates arguing countries are better off without barriers to trade.

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    Man Kiw Chapter 09 Solutions Quizzes

    Uploaded by

    janellennui
    292 views2 pages
    This document summarizes an economics chapter about international trade. It provides an example of how free trade benefits a country called Autarka by allowing it to import cheaper wool suits from neighboring countries. With trade, consumer surplus increases and total surplus increases for Autarka. It also discusses arguments for and against imposing a tariff on wool suit imports, with free trade advocates arguing countries are better off without barriers to trade.

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    This document summarizes an economics chapter about international trade. It provides an example of how free trade benefits a country called Autarka by allowing it to import cheaper wool suits from neighboring countries. With trade, consumer surplus increases and total surplus increases for Autarka. It also discusses arguments for and against imposing a tariff on wool suit imports, with free trade advocates arguing countries are better off without barriers to trade.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    292 views2 pages

    Man Kiw Chapter 09 Solutions Quizzes

    Uploaded by

    janellennui
    This document summarizes an economics chapter about international trade. It provides an example of how free trade benefits a country called Autarka by allowing it to import cheaper wool suits from neighboring countries. With trade, consumer surplus increases and total surplus increases for Autarka. It also discusses arguments for and against imposing a tariff on wool suit imports, with free trade advocates arguing countries are better off without barriers to trade.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    N. Gregory Mankiw Principles of Economics Chapter 9.

    APPLICATION: INTERNATIONAL TRADE


    Solutions to Quick Quizzes
    1. 2. Since wool suits are cheaper in neighboring countries, Autarka would import suits if it were to allow free trade. Figure 1 shows the supply and demand for wool suits in Autarka. With no trade, the price of suits is 3 ounces of gold, consumer surplus is area A, producer surplus is area B + C, and total surplus is area A + B + C. When trade is allowed, the price falls to 2 ounces of gold, consumer surplus rises to A + B + D (an increase of B + D), producer surplus falls to C (a decline of B), so total surplus rises to A + B + C + D (an increase of D). A tariff on suit imports would reduce the increase in consumer surplus, reduce the decline in producer surplus, and reduce the gain in total surplus.

    Figure 1 3. Lobbyists for the textile industry might make five arguments in favor of a ban on the import of wool suits: (1) imports of wool suits destroy domestic jobs; (2) the wool-suit industry is vital for national security; (3) the wool-suit industry is just starting and needs protection from foreign competition until it gets started; (4) other countries are unfairly subsidizing their wool-suit industries; and (5) the ban on wool suits can be used as a bargaining chip in international negotiations. In defending free trade in wool suits, you could argue that: (1) free trade creates jobs in some industries even as it destroys jobs in the wool-suit industry and allows Autarka to enjoy a higher

    Chapter 9 standard of living; (2) the role of wool suits for the military is probably exaggerated; (3) government protection is not needed for an industry to grow on its own; (4) it would be good for Autarka to buy wool suits at a subsidized price; and (5) threats against free trade may backfire, leading to lower levels of trade and lower economic welfare for everyone.

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