Michael Parkin
ISBN #9780133872279
12th Edition
839 Questions
Homework Questions
The chapter on international trade explains how comparative advantage forms the fundamental basis for trade between nations, allowing each country to specialize in what it produces most efficiently. The examples of the U.S. T-shirt and airplane markets show that free trade increases total surplus, though it redistributes gains among consumers, producers, and governments. Trade restrictions such as tariffs and import quotas, while sometimes politically popular to protect industries, lead to higher prices for consumers, a reallocation of surplus, and the creation of deadweight losses. Political factors, including rent seeking and lobbying by concentrated interest groups, further complicate trade policy decisions.
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Use the following data to work. Wholesalers buy and sell roses in containers that hold 120 stems. The table provides information about the wholesale market for roses in the United States. The demand schedule is the wholesalers' demand and the supply schedule is the U.S. rose growers' supply. Wholesalers can buy roses at auction in Aalsmeer, Holland, for $\$ 125$ per container. a. Without international trade, what would be the price of a container of roses and how many containers of roses a year would be bought and sold in the United States? b. At the price in your answer to part (a), does the United States or the rest of the world have a comparative advantage in producing roses?
Use the following data to work. Wholesalers buy and sell roses in containers that hold 120 stems. The table provides information about the wholesale market for roses in the United States. The demand schedule is the wholesalers' demand and the supply schedule is the U.S. rose growers' supply. Wholesalers can buy roses at auction in Aalsmeer, Holland, for $\$ 125$ per container. If U.S. wholesalers buy roses at the lowest possible price, how many do they buy from U.S. growers and how many do they import?
Use the following data to work. Wholesalers buy and sell roses in containers that hold 120 stems. The table provides information about the wholesale market for roses in the United States. The demand schedule is the wholesalers' demand and the supply schedule is the U.S. rose growers' supply. Wholesalers can buy roses at auction in Aalsmeer, Holland, for $\$ 125$ per container. Draw a graph to illustrate the U.S. wholesale market for roses. Show the equilibrium in that market with no international trade and the equilibrium with free trade. Mark the quantity of roses produced in the United States, the quantity imported, and the total quantity bought.
Use the information on the U.S. wholesale market for roses in Problem 1 to a. Explain who gains and who loses from free international trade in roses compared to a situation in which Americans buy only roses grown in the United States. b. Draw a graph to illustrate the gains and losses from free trade. c. Calculate the gain from international trade.
Use the information on the U.S. wholesale market for roses in Problem 1 to work. If the United States puts a tariff of $\$ 25$ per container on imports of roses, explain how the U.S. price of roses, the quantity of roses bought, the quantity produced in the United States, and the quantity imported change.