Japanese officials are considering a new tariff on imported pork products from the United States in an attempt to reduce Japan’s reliance on U. S. pork. Due to political pressure, the U. S. International Trade Representative’s (ITR) office is also considering a new tariff on imported steel from Japan. Officials in both Japan and the United States must assess the social welfare ramifications of their tariff decisions. Reports from a reliable think tank indicate the following: If neither country imposes a new tariff, social welfare in Japan’s economy will remain at $ 10 billion and social welfare in the United States will remain at $ 50 billion. If both countries impose a new tariff, welfare in the United States declines $ 49.1 billion and welfare in Japan declines by $ 9.5 billion. If Japan does not impose a tariff but the United States does, projected welfare in Japan is $ 8.9 billion while welfare in the United States is $ 52.5 billion. Finally, if the United States does not impose a tariff but Japan does, welfare is projected at $ 48.2 billion in the United States and $ 11.4 billion in Japan. Determine the Nash equilibrium outcome when policy makers in the two countries simultaneously but independently make tariff decisions in a myopic (one- shot) setting. Is it possible for the two countries to improve their social welfare by “agreeing” to different strategies? Explain.
Answer to relevant QuestionsWhat is the value of a preferred stock that pays a perpetual dividend of $ 125 at the end of each year when the interest rate is 5 percent?Based on the best available econometric estimates, the market elasticity of demand for your firm’s product is 2. The marginal cost of producing the product is constant at $ 150, while average total cost at current ...You are the manager of a local sporting goods store and recently purchased a shipment of 60 sets of skis and ski bindings at a total cost of $ 25,000 (your wholesale supplier would not let you purchase the skis and bindings ...As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong ...Barnacle Industries was awarded a patent over 15 years ago for a unique industrial- strength cleaner that removes barnacles and other particles from the hulls of ships. Thanks to its monopoly position, Barnacle has earned ...
Post your question