In our Cournot-Stackeberg duopoly game of export subsidy, which of the following is CORRECT? a. Suppose the Home government offers its optimal positive sH for its Home firm given that the Foreign government has no subsidy for its Foreign firm. The Foreign government will respond to this sH>0 by offering its own sF to its Foreign firm and the Home government will respond by further increasing its sH to its Home firm. b. Consumers of the product will support both the Home and Foreign governments in their decision to subsidize their own firms. In fact, for the consumers, the higher the subsidy, the better off they are. c. For the world as a whole, including the firms and the consumers, the subsidy game will result in overproduction, over-consumption and a drop in the world's total surplus. Hence, both countries practicing free trade is the best outcome for the world as a whole. d. All of the answers above are correct. Question 35 Questions \#35 to \#41 are based on an export subsidy game in an international context, described below: Not yet answered Marked out of 2.00 There are three economies, H,F and the rest of the world (ROW). All assumptions and notations are the same as those in our lecture notes. Import Demand from the ROW: P=50xy MC=ATC=15 Case \#1: Bilateral subsidies (ES, ES), that is, each firm receives an export subsidy (ES) from its own government. The Nash equilibrium level of subsidies is sH=sF= a. 5 b. 7 c. 8 d. 6 Question 36 Case \#1: Bilateral subsidies (ES, ES), that is, each firm receives an export subsidy (ES) from its own Not yet government. answered Marked out of The total surplus in the world, which is defined as the sum of the consumer surplus enjoyed by the ROW, the welfare of H and the welfare of F, is equal to Flag question a. 588 b. 733 C. 411 d. 662 Cases \#2 and \#3: Unilateral ES - (ES, FT) or ( FT,ES), that is, only one firm receives an export subsidy from its own government. If H cheats and offers has an export subsidy to its own firm while F offers no export subsidy, the optimal sH= a. 9.25 b. 10.25 c. 7.75 d. 8.75 Cases \#2 and \#3: Unilateral ES - (ES, FT) or (FT, ES), that is, only one firm receives an export subsidy from its own government. The total surplus in the world, which is defined as the sum of the consumer surplus enjoyed by the ROW, the welfare of H and the welfare of F, is equal to Please keep all values to four decimal places. a. 727.3333 b. 848.5657 c. 939.1786 d. 574.2188 Case \#4: No ES - (FT, FT), that is, neither country offers an ES to its own firm and both engage in free trade (FT). The total surplus in the world, which is defined as the sum of the consumer surplus enjoyed by the ROW, the welfare of H and the welfare of F, is equal to Please keep all values to four decimal places. a. 544.4436 b. 722.2222 c. 633.3348 d. 885.1111 From the perspective of H and F, the Nash equilibrium of (ES, ES) is a prisoner's dilemma because their joint welfare could have increased by if they could both resist the temptation to cheat on each other. a. 76.2222 b. 62.3333 c. 21.4375 d. 55.1250 The world as a whole prefers (ES, ES) because compared to ( FT,FT ), total surplus (TS) rises by The logic behind this increase in TS is because the a. 72.3086; the ES was paid solely by the taxpayers in H and F but not by the consumers in the ROW b. 47.4692; the deadweight loss from a duopoly falls as price falls and quantity supplied rises c. 43.5564; the deadweight loss from a duopoly falls as price falls and quantity supplied rises d. 55.5556; the ES was paid solely by the taxpayers in H and F but not by the consumers in the RoW Question 42 Focus exclusively on our "At-Home Readings": Not yet answered Which of the following is CORRECT about the WTO's stance on the subsidies provided by the US to Boeing and Marked out of the EU to Airbus? 2.00 a. The WTO views tax breaks and government loans as unfair subsidies and the offending party could be penalized under its regulations. b. The WTO allows the US to impose tariffs (import taxes) on EU goods for Airbus' violations but only if those EU goods are related to the EU aircraft industry. c. Once the WTO has allowed the US to impose a certain amount of tariffs on EU goods for Airbus' violations, the EU cannot negotiate with the US to lower the tariff amount. d. All of the answers above are correct. Focus exclusively on our "At-Home Readings": Boeing filed complaints with the US government against Bombardier and claimed that Bombardier's sale of its CSeries aircraft to Delta Airlines was "unfair". What is CORRECT about this set of complaints? a. According to Boeing, Bombardier received subsidies from the Canadian federal and provincial governments to produce the CSeries and such planes compete with Boeing's 737 aircraft. As a result of such subsidies, Boeing lost over US\$230 billion in lost 737 sales. b. Boeing claimed that because of the subsidies from the Canadian federal and provincial governments, Bombardier was able to sell the CSeries to Delta Airlines at below-cost and the US government preliminarily agreed to impose a 400 per cent tariff on the CSeries planes. c. Delta Airlines was unlikely to support Boeing's complaints because the complaints could result in much higher aircraft prices for Delta and Boeing was not even competing for the Delta purchase contract that Bombardier won. d. All of the answers above are correct. Question 44 Focus exclusively on our "At-Home Readings" and class discussion: Not yet answered Google is being investigated by the US Department of Justice (DOJ) for alleged anti-competitive conduct regarding its search engine. Which of the following is CORRECT? a. Google has been paying large sums of money to Apple, Samsung and other companies to advertise its Google search engine in their devices as the safest and fastest search engine in the global market. b. Google arguably has a global search market share of 87% and its lawyers and economists are likely to argue that this share is based on a market definition that is too broad. c. The DOJ has to prove that Google's arrangements with Apple and Samsung steered consumers away from the rival search engines, such as Bing and Ecosia, rather than consumers choose Google search for its superior performance and algorithms. d. All of the answers above are correct. Focus exclusively on our "At-Home Readings": A study published by the International Monetary Fund (IMF) acknowledged the rise in the market power of large firms but explained this rise as the result of the large firms' superior performance rather than their potential anticompetitive practices. The Brookings Institution has questioned the IMF's study. Which of the following is CORRECT about the IMF's study and the Brooking's criticisms? a. The IMF study focused mainly on mark-ups (P>MC) and HHl 's as the measurements of market power and ignored other measurements such as merger activities and overlapping ownerships of large companies. b. The IMF study found that market power of large firms has risen more in Europe than in the US and that large firms in both regions use broadly the same technologies. Because European courts, on average, enforce stronger anti-trust regulations than the US courts, the rise in market of large firms cannot be due to their anti-competitive behavior. c. The IMF's explanation for the rise in market power is inconsistent with the observed slowing aggregate productivity growth even as new technologies, led by the digital revolution, have boomed. d. All of the answers above are correct. Question 46 Which of the following is CORRECT about the effects of globalization or opening an economy? Not yet answered a. From the Auto Pact case study, small economies, such as Canada's, are likely to benefit from globalization through larger demands and economies of scale. b. Economic theory suggests that globalization will increase the income gap in low-income, labour-abundant countries and actual data support this prediction. c. A domestic monopoly in a closed economy has to face global competition when this economy opens its market to the world. As a result, the market power of this monopoly will decrease because of the competitive pressure coming from the firms around the world. d. All of the answers above are correct