Suppo /lessonbuilder/item/1823274/group/14b1f64c-63c2-458c-9862-29bge836939f/Lessons/Problem%20Sets/ProblemS a. Explain why the Japanese producers would voluntarily continue these restrictions. b. Explain why an agreement to export only 100 000 cars to North America is better for the Japanese producers than a North American tariff that results in the same volume of Japanese exports. c. Who is paying for these benefits to the Japanese producers? 12. Before you leave to study abroad in France you change $1,000 into Euros. You only spend half of your money while you're gone, so when you return to the US you need to change your remaining Euros back to dollars. While you're gone, the dollar depreciated against the Euro. After you change your Euros back to dollars, will you have more, less, or exactly $500? 13. The Mexican Peso to USD exchange rate is 20.5 pesos per USD, and the yen to USD exchange rate is 112 yen per USD. a. How many pesos can you buy with one dollar? b. What is the pesos per yen exchange rate? c. The price of a Big-Mac is V390 in Japan and $5.04 in the US. If purchasing power parity was satisfied, and the price of a burger in Japan were held constant, what would the price of a burger in the US be? 14. True/False/Uncertain: If the exchange rate rises, there is a leftward shift in the demand curve for US dollars, and if the expected future exchange rate falls, there is a movement upward along the demand curve for US dollars.Reciprocal Dumping Problem Consider two countries (Country 1 and Country 2) and two firms (Firm 1 and Firm 2) that produce a homogeneous product. Firm 1 is from country 1 (i.e. produces in country 1 and its owners are from country 1) and Firm 2 is from country 2 (i.e. produces in country 2 and its owners are from country 2). Firms sell both at home and abroad. Both markets have identical demands given below: pi= 100- q1 and p2= 100- q2 (where p's and q's denote the price and total quantities in each country). Assume that the marginal costs of production are MC1 = 10, MCz=10 and that transport costs in either direction are 6 dollars per unit. (i.e. T = 6). Assume firms choose quantities in both markets simultaneously. (1) Calculate the NE in quantities (you need to calculate the amounts each firm would sell in each market.) (2) Are firms dumping their products in each other's markets? Justify (3) Calculate Total Welfare for Country 1Reciprocal Dumping Problem Consider two countries (Country 1 and Country 2) and two firms (Firm 1 and Firm 2) that produce a homogeneous product. Firm 1 is from country 1 (i.e. produces in country 1 and its owners are from country 1) and Firm 2 is from country 2 (i.e. produces in country 2 and its owners are from country 2). Firms sell both at home and abroad. Both markets have identical demands given below: pi= 100- q1 and p2= 100- q2 (where p's and q's denote the price and total quantities in each country). Assume that the marginal costs of production are MC1 = 10, MCz=10 and that transport costs in either direction are 6 dollars per unit. (i.e. T = 6). Assume firms choose quantities in both markets simultaneously. (1) Calculate the NE in quantities (you need to calculate the amounts each firm would sell in each market.) (2) Are firms dumping their products in each other's markets? Justify (3) Calculate Total Welfare for Country 14. For the following 15 cases, compare the dollar rates of return on dollar and euro deposits. Rate of Return Expected Difference Rate of Between Dollar Euro Dollar Dollar and Interest Interest Depreciation Euro Case Rate, Rs Rate, RE Against Eur Deposits (LOG 0.1 0.06 0,04 WN 0.1 006 111 0.12 0.1 0.18 0 0.15 0.15 0.15 015 0.12 10 015 0.18 11 012 12 0.2 13 02 14 0.2 0.12 15 0.2 0.18 MacBook Air 20 F3 F4 F5 F6 F7 FB % &1. Compute how many dollars it would cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds for the following exchange rates. Exchange Rate (Number of Dollars per Price of a Sweater One British Pound in British Pounds Price in Dollars 50 1.1 50 1.2 50 1.25 50 13 1.4 15 1.6 1.7 1.75 1.9 2 2. What is covered interest parity? You observe the following current rates: Spot exchange rate: $0.01/yen, Annual interest rate on 90-day U.S. dollar-denominated bonds: 4%. Annual interest rate on 90-day yen-denominated bonds: 4%. a. If uncovered interest parity holds, what spot exchange rate do investors expect to exist in 90 days? 3. Assume the U.S. interest rate is 10 percent, and the interest rate on euro deposits is $ percent, For the following exchange rates, find the forward exchange rates. MacBook ol1. Compute how many dollars it would cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds for the following exchange rates. Exchange Rate (Number of Dollars per Price of a Sweater One British Pound in British Pounds Price in Dollars 50 1.1 50 1.2 50 1.25 50 13 1.4 15 1.6 1.7 1.75 1.9 2 2. What is covered interest parity? You observe the following current rates: Spot exchange rate: $0.01/yen, Annual interest rate on 90-day U.S. dollar-denominated bonds: 4%. Annual interest rate on 90-day yen-denominated bonds: 4%. a. If uncovered interest parity holds, what spot exchange rate do investors expect to exist in 90 days? 3. Assume the U.S. interest rate is 10 percent, and the interest rate on euro deposits is $ percent, For the following exchange rates, find the forward exchange rates. MacBook olDomestic Supply + World Price New Consumer Surplus World Price Price of Wine New Producer Surplus Quantity of Wine lose win Because of this change in the world price, consumers , producers , and Canada as a whole is off. Grade It Now Cor MacBook Pro8. To fully understand how taxes affect economic well-being, what must we do? assume that economic well-being is not affected if all tax revenue is spent on goods and services for the Canadian public b. know the dollar amount of all taxes raised in the country each year C. compare the reduced welfare of buyers and sellers to the amount of government revenue raised d. compare the expenditures of the provincial governments with that of the federal govern- ment 5. At the equilibrium price, which buyers will purchase the good? a those who value the good at more than the price b. those who value the good at less than the price c. those who have the money to buy the good d. those who consider the good a necessity 6. Orange juice and apple juice are substitutes. Suppose bad weather sharply reduced the orange harvest. What would the impact be? a increase consumer surplus in the market for orange juice but decrease producer surplus in the market for apple juice b. increase consumer surplus in the market for orange juice and increase producer surplus in the market for apple juice c. decrease consumer surplus in the market for orange juice but increase producer surplus in the market for apple juice d. decrease consumer surplus in the market for orange juice and decrease producer surplus in the market for apple juice 7. What will result if production is moved from a high-cost producer to a low-cost producer? a lower total surplus b. higher total surplus c. lower producer surplus d. higher producer surplus but lower consumer surplus 15. What does the Laffer curve do? a It relates income tax rates to total income taxes collected. b. It relates income to unemployment It relates tax rates to deadweight welfare losses. It relates government welfare payments to the birth rate