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International Trade Assignment (ONLY COMPLETE QUESTIONS #2, 3) 1) Consider a simple world in which there are two Continue the analysis of Atlantis and Beltran
International Trade Assignment (ONLY COMPLETE QUESTIONS #2, 3) 1) Consider a simple world in which there are two Continue the analysis of Atlantis and Beltran countries, Atlantis and Beltran, each producing two trading at the rate of 1 unit of food for 1 unit of goods, food and cloth. The production possibility cloth. frontier for each country is given in the table below. a) Assuming a constant opportunity cost in each country, complete the table. b) What is the opportunity cost of food in Atlantis? If Atlantis consumes 600 units of food and 5) Suppose the shirtmakers in country A of problem 4 of cloth? 100 units of cloth, how much food and cloth will are concerned about foreign competition and, as a c) What is the opportunity cost of food in Beltran? be consumed by Beltran? result, the government of country A imposes a tariff of cloth? )Given the consumption quantities and the pro- of $9 per shirt. Using Figure 36.1, answer the fol- d) Draw the production possibility frontiers on sep- fuction quantities from problem 2(d). how lowing questions: arate graphs. much food and cloch will Atlantis and Beltran a) What will happen to the price of a shirt in coun- import and export try A? 4) Figure 36.1 gives the import demand curve for b) What is the price the exporter will actually shirts for country A, labelled D, and the export sup- receive? ply curve of shirts for country B, labelled S. c) How many shirts will be imported by country A? a) What is the price of a shirt under free trade d) What is the revenue from the tariff? Who cap- Atlantis Beltran b) How many shirts will be imported by country A? tures it? Food Cloth Food Cloth 6) Suppose that instead of a tariff, country A imposes a Junits [units] units (units] quota of 4 million shirts per year. Again, use Figure 0 500 36.1 to answer the following questions: 800 Figure 36.1 a) What will be the price of a shirt in country A? 200 400 100 800 b) What price will the exporter actually receive? 400 200 c) How many shirts will be imported by country A? 800 300 d) What is the difference between the total amount 800 400 NN Price (dollars per paid by consumers and the total amount 1,000 received by exporters - the "excess profit?" Who captures it? (2) Suppose that Atlantis and Beltran engage in trade. @In which good will each country specialize? b) If 1 unit of food trades for I unit of cloth, what will happen to the production of each good in each country? If 1 unit of food trades for 1 unit of cloth, draw 10 the consumption possibility frontiers for each country on the corresponding graph from prob- lem 1(d). d Before trade, if Atlantis consumed 600 units of food, the most cloth it could consume was 200 units. After trade, how many units of cloth can be consumed if 600 units of food are consumed
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