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Exam 11: Pushing Exports

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Question 21

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Persistent dumping can occur if a profit maximizing firm faces a _____ demand in the home market and sells its good in a _____ international market.

A) relatively elastic; less competitive
B) relatively inelastic; less competitive
C) relatively inelastic; highly competitive
D) relatively elastic; highly competitive

E) C) and D)
F) B) and C)

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Question 22

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Consider firm X belongs to country A and firm Y belongs to country B. Suppose that it is technologically feasible for both firms to produce good Z. Also assume that if they do, then they will be the only suppliers of good Z in the world. Now, both the firms have to decide simultaneously whether to produce good Z or not. Figure (a) shows the payoffs of both firms if their respective governments do not provide them with export subsidies. Figure (b) shows the payoffs when the government of country B grants an export subsidy to firm Y, but the government of country A does not. From Figure (a) , we can correctly infer that:

A) it is optimal for firm X not to produce if firm Y does not produce.
B) both firms can decide to produce since they can anticipate that the other firm will not produce.
C) it is optimal for firm Y not to produce no matter what firm X does.
D) both the firms will suffer losses if they produce simultaneously.

E) B) and D)
F) B) and C)

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Question 23

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Firms that are participating in persistent dumping will sell less in the foreign market and charge a higher price than in the home market.

If markets are competitive, policies that restrict imports are usually harmful to the importing country while policies that encourage exports are usually beneficial to the exporting country.

Country X imports rice from the world market. Which of the following policy instruments, if adopted by its government, may result in a switch from rice being imported to being exported?

The demand and supply functions of the food grains in country X are as follows: Q_D = 150 - 0.6P Q_S = -40 + 0.5P where Q_D and Q_S are in millions of tons and P is the price per ton. The world price of grain is $200 per ton. The figure given below illustrates the demand and supply functions of food grains in country X. a.In a situation of free trade, how much food grains would be produced, consumed, and traded in country X? b.As a response to alleged unfair foreign practices, the U.S.farmers successfully lobby for a $20 export subsidy per ton of the grains exported.Assuming that country A is a "small country" in the world grain markets, and that imports of food grains are banned, illustrate the impact of the export subsidy on domestic prices, consumption, production, and exports of grain by this country.Also indicate the welfare effects on producers and consumers.Calculate the cost of the subsidy to the government, and the overall change in welfare in country A.

The figure given below represents the U.S. market for steel imports from Korea. The Korean government provides an export subsidy of $25 per ton, and Korean firms use the subsidy to reduce their export price to the United States to $375 per ton. Suppose the United States imposes a countervailing duty on the imports of steel at the rate of $25 per ton. What is the amount of revenue collected by the U.S. government on account of this countervailing duty?

Antidumping duties increase overall economic well-being in a country by protecting the domestic import-competing firms.

Explain when strategic export subsidies could be good for a country. Consider firm X belongs to country A and firm Y belongs to country B. Use a duopolistic market structure where both firms are dominant players in the world market. Discuss the differences between the game in which no subsidies are given and the game in which only one firm receives a subsidy. Create a hypothetical matrix in this context to aid your explanation.

For developed countries, more price supports and subsidies are provided to agriculture worldwide than to any other sector of the economy.

A price support on agricultural products is a minimum domestic price set by the government. The government outlaws transaction below the price support, but usually has no commitment to buy any amounts that farmers cannot sell at this price.

An export subsidy can be good for a country if:

In early 2011, nearly half of all antidumping duties in effect in the United States were on _____.

The figure given below represents the domestic market for wheat in a small country. Imports of wheat are prohibited. At a world price of $160 per bushel, the country produced _____ bushels of wheat and exported _____ bushels of wheat.

The figure given below represents the U.S. market for steel imports from Korea. The Korean government provides an export subsidy of $25 per ton, and Korean firms use the subsidy to reduce their export price to the United States to $375 per ton. What is the cost of the export subsidy to the Korean government?

Firms that are engaging in persistent dumping need to be able to prevent resale between the foreign and domestic markets.

While the U. S. government investigates few claims of dumping, nearly all of the claims are upheld by the International Trade Commission.

A firm maximizes profits by charging a lower price to foreign buyers if:

Which of the following is said to occur when a firm with market power uses price discrimination between markets to increase its total profit?

Which of the following is NOT a way in which the safeguard policy is better than antidumping policies?