International Trade Theory and Policy
by Steven M. Suranovic

Trade 90

Trade 90

Trade Problem Set 90 2-4

1. Consider the following trade policy actions (each applied by the domestic country) listed along the top row of the following Table. In the empty boxes, use the following notation to indicate the effect of each policy on the variables listed in the first column. Use a partial equilibrium model to determine the answers and assume that the shapes of the supply and demand curves are "normal". Assume that none of the policies begin with, or result in, prohibitive trade policies. Also assume that none of the policies correct for market imperfections or distortions. 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)

I

VER by a Large Exporting Country initially in free trade

II

VER by a Small Exporting Country initially in Free Trade

Domestic Market Price

 

Domestic Industry Employment

   

Domestic Consumer Welfare


 
 

Domestic Producer Welfare


 
 

Domestic Government Revenue

   

Domestic National Welfare


 
 

Foreign Price


 
 

Foreign Consumer Welfare


 
 

Foreign Producer Welfare


 
 

Foreign National Welfare


 
 

 

International Trade Theory and Policy - Chapter 90: Last Updated on 1/06/08