Problem Set 953
 

1. Consider the following domestic policy actions 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 policies. Also assume that none of the policies correct for market imperfections or distortions. Use the following notation:
+ the variable increases For example, a production subsidy applied by a large country to an importcompeting industry will lower the domestic market price of the import good, therefore a  is placed in the first box of the table.


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