International Trade Theory and Policy
by Steven M. Suranovic

Trade 90

Trade 90

Trade Problem Set 90 2-11

1. Suppose there are two “large” countries, the US and China.  Assume that both countries produce and consume clothing.  The US imports clothing from China. Consider each trade policy action listed along the top row of the following Table.  In the boxes indicate the effect of each policy on the variables listed in the first column.  Use a partial equilibrium, perfect competition model to determine the answers.  You do not need to show your work.   Use the following notation:  

                                    +    the variable increases
                                    -     the variable decreases
                                    0    the variable does not change
                                    A   the variable change is ambiguous (i.e. it may rise, it may fall)



Elimination of a
US import quota
on clothing imports

Increase in an
import tariff
on clothing imports
to the US

Chinese implementation of
an export tax or
export restraint


US Domestic Consumer Price





US Domestic Consumer Welfare



US Domestic Producer Welfare



US National Welfare



Chinese Producer Welfare



Chinese Consumer Welfare



Chinese National Welfare





International Trade Theory and Policy - Chapter 90: Last Updated on 3/28/08