Reference no: EM132396912

1) If Cloth is relatively labor intensive in production in the UK and Steel is relatively capital intensive in production, what happens to the wage/rental ratio when the UK imposes an import tariff on cloth? What theorem is useful for arriving at your answer? Are the results different in the short run vs. the long run? Explain.

2) Country A has Demand and Supply for good X as a function of the price ratio of X and Y given by:

Qd = 10 - 1/2(Px/Py) and Qs = 1/2(Px/Py).

a) Graph (plot) the demand and supply of X.

b) Find the autarky price ratio in country A.

c) Next to a), graph (plot) the excess demand for X.

d) Calculate the equation for the excess demand for X.

e) What is another name for the excess demand?

3) Illustrate the redistributive, production, revenue, and consumption effects of the imposition of a tariff on good X by a small country. What is the net welfare effect on the country imposing the tariff and on the world?

4) Do 3) for a large country. What are the crucial differences?