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(a) Define “trade creation” in the context of the formation of a customs union. Then, using a demand/supply diagram of a (small) home country for a good that is produced at home and would be imported if there were no tariff, illustrate and explain how the formation of a pure trade-creating customs union can enhance the country’s well-being. What factors would be conducive to a greater rather than a smaller gain from the trade creation?
(b) Define “trade diversion” in the context of the formation of a customs union. Then, using a demand/supply diagram of a (small) home country for a good that is both produced at home and imported, illustrate and explain how the movement from a situation of a uniform tariff on imports of the good from all countries to a situation of a trade-diverting customs union with one particular country can affect consumer and producer surplus and government revenue in the home country. Why can we not be sure that welfare in the home country will rise? Under what general conditions would it be likely that this trade-diverting customs union would injure welfare in the home country?
Suppose a bank discovers its reserves will temporarily fall slightly short of those legally required. How might it remedy this situation through the Federal funds market? Now assume the bank finds that its reserves will be substantially and permanent..
The 16 overhead doors on your loading dock must be replaced now . The deluxe model costs $2,200 for each door and will last for six years. The standard model costs $1,600 for each door and will last for four years. The deluxe model is aluminium so it..
A cost analysis is to be made to determine what, if anything, should be done in a situation offering three "do-something" and one "do-nothing" alternatives. Use a 10-year analysis period for the four mutually exclusive alternatives. At the end of Yea..
Brenda owns a construction company that employs bricklayers and other skilled tradesmen. Her firm’s MRP for bricklayers is $22.25 per hour for each of the first seven bricklayers, $18.50 for an eighth bricklayer, and $17.75 for a ninth bricklayer. Gi..
Elucidate the Total Cost also the firm total profits. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.
Assume that a country’s real growth is 2 percent per year, while its real deficit is rising 5 percent a year. Can the country continue to afford such deficits indefinitely?
Consider a country with an economic structure consistent with the assumptions of the classical model. Suppose that businesses in this nation suddenly anticipate higher future profitability from investments they undertake today.
Between January and December 1994, U.S. unemployment fell from 6.7 percent to 5.4 percent of the labor force. The Federal Reserve, the nation's monetary-policymaking authority, took active measures beginning in February 1994 to raise short-term inter..
The provincial Department of Transportation pays Happy Ferry Company to transport cars across a bay that effectively splits the largest city in the province. Happy Ferry Company has submitted a bid of $5 million per year (to be paid to them by the pr..
q1. consider a firm using a single variable input labor and a single fixed input capital. please explain what will
Analyze the content from Ma & Adams on China, in terms of the microeconomic concepts that you are studying from the Parkin textbook. Try to identify specific key principles and theories which bear upon the allocation of resources and distribution of ..
Country X has an $8000 billion GDP and a population of 200 million. Country Y has a $6000 billion GDP and a population of 150 million. Which of the following is true? Full employment is: If the GDP deflator is now 125, we may conclude that since the ..
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