International Trade Theory And Policy 12th Global Edition Paul Krugman ,Maurice Obstfeld ,Marc Melitz - Solutions

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Does immigration lower wages?LO.1
Which industries expand because of immigration?LO.1
Who gains when foreign companies move in?LO.1
Discovering Data Under Headlines: Brussels Resumes Policy Push to Share Out Refugees Across EU, there is a map showing persons seeking asylum in the European Union as of May 2015. In this question, you will be asked to update these figures to reflect the most recent data available. The source of
In the short-run specific-factors model, examine the impact on a small country following a natural disaster that decreases its population. Assume that land is specific to agriculture, and capital is specific to manufacturing, whereas labor is free to move between the two sectors.a. In a diagram
How would your answer to Problem 2 change if instead we use the long-run model, with shoes and computers produced using labor and capital?LO.1
According to part A of Table 5-1, what education level loses most (i.e., has the greatest decrease in wage) from immigration to the United States? Does this result depend on keeping the rental on capital constant? Explain why or why not.Suppose that computers use 4 units of capital for each worker,
Continuing from Problem 7, we now use the factor price insensitivity result to compare factor prices across countries in the Heckscher–Ohlin model.a. Illustrate the international trade equilibrium on the Home and Foreign production possibilities frontiers. Hint: You can refer to Figure 4-3 to see
Recall the formula from the application “The Effect of FDI on Rentals and Wages in Singapore.” Give an intuitive explanation for this formula for the rental rate. Hint:Describe one side of the equation as a marginal benefit and the other as a marginal cost.LO.1
Figure 5-14 is a supply and demand diagram for the world labor market. Starting at points A and A*, consider a situation in which some Foreign workers migrate to Home but not enough to reach the equilibrium with full migration (point B). As a result of the migration, the Home wage decreases from W
A housekeeper from the Philippines is contemplating immigrating to Singapore in search of higher wages. Suppose the housekeeper earns approximately $3,000 annually and expects to find a job in Singapore worth approximately $8,000 annually for a period of three years. Furthermore, assume that the
Why do some firms shift parts of their production to other countries?LO.1
Who can gain when firms shift their production abroad?LO.1
Do countries gain overall when their firms offshore to other countries?LO.1
Discovering Data What type of occupation would you like to pursue after graduation? To see what is available, go to the Bureau of Labor Statistics website at:http://www.bls.gov/ooh/.a. Find four occupations that you think fit the four categories shown in the horizontal axis of Figure
Consider an offshoring model in which Home’s skilled labor has a higher relative wage than Foreign’s skilled labor and in which the costs of capital and trade are uniform across production activities.a. Will Home’s offshored production activities be high or low on the value chain for a given
Consider the model of a firm that produces final goods using R&D and components as inputs, with cost data as follows:Components: Total costs of production = PC · QC = 200 Earnings of high-skilled labor = WH · HC = 20 Earnings of low-skilled labor = WL · LC = 80 Earnings of capital = R · KC =
Consider the model of a firm that produces final goods using R&D and components as inputs, with cost data as follows:Components: Total costs of production = PC · QC = 200 Earnings of high-skilled labor = WH · HC = 50 Earnings of low-skilled labor = WL · LC = 50 Earnings of capital = R · KC =
Read the following excerpt, and using what you have learned in this chapter, discuss how offshoring creates opportunities for the countries involved.Sudhakar Shenoy, chief executive of Information Management Consultants (IMC) in Reston, Virginia, makes an effective pitch for offshoring.Several
The quote from the 2004 Economic Report of the President at the beginning of the chapter generated a lot of controversy that year. The chairman of the Council of Economic Advisers, N. Gregory Mankiw, made the following additional comments in a speech while presenting the report: “Outsourcing is
Why might it be relatively easier for a developing country like India to export service activities through offshoring than to participate in the global economy by producing manufacturing components?LO.1
It is widely noted that even though China is the favored destination for manufacturing offshoring, it is far behind India in the business of offshored services.What differences between these two countries might account for this observation?LO.1
Chinese hourly manufacturing wages have increased by 12% per year on average since 2001, which is much higher than wage growth in developed or other developing countries. How will this wage growth in China affect its ability to serve as an offshoring location?LO.1
Can governments use trade policy to give home firms a strategic advantage in their markets?LO.1
Why would foreign firms dump their products by exporting them at a price below their costs?LO.1
Is there an argument for using infant industry protection, and has it worked in practice?LO.1
Discovering Data Figures A, B, and C (see the next page) are taken from Chad Bown: “The Pattern of Antidumping and Other Types of Contingent Protection”(World Bank, PREM Notes No. 144, October 21, 2009), and updated from Chad Bown, 2012, “Global Antidumping Database,” available at
Figure 9-1 shows the Home no-trade equilibrium under perfect competition (with the price PC) and under monopoly (with the price P M). In this problem, we compare the welfare of Home consumers in these two situations.a. Under perfect competition, with the price PC, label the triangle of consumer
Rank the following in descending order of Home welfare and justify your answers. If two items are equivalent, indicate this accordingly.a. Tariff t in a small country with perfect competitionb. Tariff t in a small country with a Home monopolyc. Quota with the same imports M in a small country, with
Refer to the prices of Japanese auto imports under the VER (Figure 9-5) and answer the following:a. What component of the price of imported automobiles from Japan rose the most over the period 1980 to 1985?b. Sketch how Figures 9-5 and 9-6 might have looked if the United States had applied a tariff
Suppose that the demand curve for a good is represented by the straight line P = 20 – 2Q Fill in the missing information in the following chart:Quantity Price Total Revenue Marginal Revenue 0 NA 12 34 56 78 910a. Draw a graph containing both the demand curve and marginal revenue curve.b. Is the
Suppose the Home firm is considering whether to enter the Foreign market. Assume that the Home firm has the following costs and demand:Fixed costs = $100 Marginal costs = $15 per unit Local price = $30 Local quantity = 40 Export price = $25 Export quantity = 20a. Calculate the firm’s total costs
Why is it necessary to use a market failure to justify the use of infant industry protection?LO.1
What is a positive externality? Explain the argument of knowledge spillovers as a potential reason for infant industry protection.LO.1
If infant industry protection is justified, is it better for the Home country to use a tariff or a quota, and why?LO.1
Why do wealthy countries subsidize their farmers?LO.1
Can countries control the export of their rare natural resources?LO.1
Why do countries subsidize their high-tech exports?LO.1
Discovering Data In Figure 10-8 we showed the value of Chinese exports of rare earth minerals, along with their average price and quantity sold, in three categories of exports. The source for the data in Figure 10-8 is the China Customs Statistics. In this problem, you will check the value of
Describe the impact of each of the following goals from the Hong Kong WTO meeting on (i) domestic prices and welfare of the country taking the action and (ii)world prices and welfare for the partner countries.a. Elimination of agriculture export subsidiesb. Reduction of agricultural tariffsc.
Explain why the WTO is more concerned with the use of direct export subsidies than production subsidies in achieving the same level of domestic support.LO.1
Boeing and Airbus are the world’s only major producers of large wide-bodied aircrafts. But the increasing cost of fuel and the changing demand in the airline industry increases the need for smaller regional jets. Suppose that both firms must decide whether they will produce a smaller plane. We
To improve national welfare, a large country would do better to implement an export subsidy rather than an import tariff. Is this true or false? Explain why.LO.1
Who gains and who loses when governments in Europe and the United States provide subsidies to Airbus and Boeing?LO.1
Provide reasons for countries to use export subsidies. Does your answer depend on whether firms compete under perfect or imperfect competition?LO.1
Why is the World Trade Organization needed?LO.1
Do all countries gain when a regional free-trade area is formed?LO.1
Does international trade help or harm the environment?LO.1
Discovering Data In Application: The Trans-Pacific Partnership, we summarized some of the provisions of TPP and the views of consumer and environmental groups. The text of the TPP agreement is available at:https://ustr.gov/tpp/#text. We will use that text to dig deeper into the agreement.a.
a. How is a customs union different from a free-trade area? Provide examples of each.b. Why do some economists prefer multilateral trade agreements over regional trade agreements?LO.1
Figure 11-2 shows the tariff game between Home and Foreign, both large countries.a. Redraw the payoff matrix for a game between a large and small country.b. What is/are the Nash equilibrium/equilibria, assuming that the large country applies an optimal tariff?c. What does your answer to (b) tell
Assume that Thailand and India are potential trading partners of China. Thailand is a member of ASEAN but India is not. Suppose the import price of textiles from India (PIndia) is 50 per unit under free trade and is subject to a 20% tariff. As of January 1, 2010, China and Thailand entered into the
Refer to the survey in Table 11-2 regarding consumers’ attitudes toward working conditions.a. Fill in the survey questions for yourself and at least five friends.b. Average your results, and compare them with those in Table 11-2. Are there any consistent differences in the answers from your
Using Table 11-3, explain why environmentalists have “lost the battle but won the war” in their dealings with the WTO. Refer to specific WTO cases in your answer.LO.1
Refer to Figure 11-4 when answering this question.a. Redraw Figure 11-4, panel (a), assuming that the production externality is positive so that the SMC curve lies below the supply curve. Label the area c that reflects the change in the cost of the externality that arises when trade is opened. Is
Articulate arguments for free trade that go beyond the conventional gains from trade. LO.1
Evaluate national welfare arguments against free trade. LO.1
Relate the theory and evidence behind “political economy” views of trade policy. LO.1
Explain how international negotiations and agreements have promoted world trade. LO.1
Discuss the special issues raised by preferential trade agreements. LO.1
Suppose demand and supply are exactly as described in Problem 3, but there is no marginal social benefit to production. However, for political reasons, the government counts a dollar’s worth of gain to producers as being worth $5 of either consumer gain or government revenue. Calculate the
Upon Poland’s entering the European Union, suppose it is discovered that the cost of automobile production in Poland is €20,000 while it is €30,000 in Germany.Suppose the EU, which has a customs union, has an X percent tariff on automobiles and the costs of production are equal to Y (valued
Give an intuitive explanation for the optimal tariff argument. LO.1
If governments make trade policies based on national economic welfare, is the problem of trade warfare still represented by a Prisoner’s Dilemma game as in Table 10-3? What is the equilibrium solution to the game if governments formulate policy in this way? Would they ever choose the strategy of
Recapitulate the case for protectionism as it has been historically practiced in developing countries and discuss import-substitution-led industrialization and the “infant industry” argument. LO.1
Summarize the basic ideas behind “economic dualism” and its relationship to international trade. LO.1
Discuss the recent economic history of the Asian countries, such as China and India, and detail the relationship between their rapid economic growth and their participation in international trade. LO.1
Trade policy in less-developed countries can be analyzed using the same analytical tools used to discuss advanced countries. However, the particular issues characteristic of developing countries are different from those of advanced countries. In particular, trade policy in developing countries is
Government policy to promote industrialization has often been justified by the infant industry argument, which says that new industries need a temporary period of protection against competition from established industries in other countries. However, the infant industry argument is valid only if it
Using the infant industry argument as justification, many less-developed countries pursued policies of import-substituting industrialization in which domestic industries are created under the protection of tariffs or import quotas. Although these policies succeeded in promoting manufacturing, by
Beginning about 1985, many developing countries, dissatisfied with the results of import-substitution policies, greatly reduced rates of protection for manufacturing.As a result, developing-country trade grew rapidly, and the share of manufactured goods in exports rose. The results of this policy
The view that economic development must take place via import substitution, and the pessimism about economic development that spread as import-substituting industrialization seemed to fail, have been confounded by the rapid economic growth of a number of Asian economies. These Asian economies have
Summarize the more sophisticated arguments for interventionist trade policy, especially those related to externalities and economies of scale. LO.1
Evaluate the claims of the anti-globalization movement related to trade effects on workers, labor standards, and the environment in light of the counterarguments. LO.1
Discuss the role of the World Trade Organization (WTO) as a forum for resolving trade disputes and the tension between the rulings of the WTO and individual national interests. LO.1
Discuss key issues in the debate over trade policy and the environment. LO.1
Some new arguments for government intervention in trade have emerged over the past quarter-century: The theory of strategic trade policy offered reasons why countries might gain from promoting particular industries. In the 1990s a new critique of globalization emerged that focused on the effects of
Activist trade policy arguments rest on two ideas. One is the argument that governments should promote industries that yield technological externalities. The other, which represents a greater departure from standard market failure arguments, is the Brander-Spencer analysis, which suggests that
With the rise of manufactured exports from developing countries, a new movement opposed to globalization has emerged. The central concern of this movement is with the low wages paid to export workers, although there are other themes as well. The response of most economists is that
An examination of cases suggests how difficult the discussion of globalization really is, especially when one tries to view it as a moral issue; it is all too easy for people to do harm when they are trying to do good. The causes most favored by activists, such as labor standards, are feared by
To the extent that globalization promotes economic growth, it has ambiguous effects on the environment. The environmental Kuznets curve says that economic growth initially tends to increase environmental damage as a country grows richer but that beyond a certain point, growth is actually good for
There is growing concern that globalization may allow highly polluting industries to move to pollution havens, where regulation is looser. There is little evidence that this is a major factor in actual location decisions, at least so far. But that may change if serious climate-change policies are
A recent concern, driven by growth in Chinese exports, is that rapid, large changes in international trade may cause severe losses to geographically concentrated groups of workers and their communities, so that the adverse effects are more serious than economists had previously realized. LO.1
What were some of the reasons for the decline in the import-substituting industrialization strategy in favor of a strategy that promotes open trade? LO.1
What are the disadvantages of engaging in strategic trade policy even in cases in which it can be shown to yield an increase in a country’s welfare? LO.1
What are the key assumptions that allow strategic trade policy to work in the Brander-Spencer example of Airbus and Boeing? LO.1
What is the main critique against the WTO with respect to environmental protection?How does the WTO justify its position on trade disputes that involve environmental issues? LO.1
Describe how the value of trade between any two countries depends on the size of these countries’ economies and explain the reasons for that relationship.LO.1
Discuss how distance and borders reduce trade.LO.1
Describe how the share of international production that is traded has fluctuated over time and why there have been two ages of globalization.LO.1
Explain how the mix of goods and services that are traded internationally has changed over time.LO.1
Equation (2-1) says that trade between any two countries is proportional to the product of their GDPs. Does this mean that if the GDP of every country in the world doubled, world trade would quadruple?LO.1
Explain how the Ricardian model, the most basic model of international trade, works and how it illustrates the principle of comparative advantage. LO.1
Demonstrate gains from trade and refute common fallacies about international trade. LO.1
Describe the empirical evidence that wages reflect productivity and that trade patterns reflect relative productivity. LO.1
Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2.a. Graph Home’s production possibility frontier.b. What is the opportunity cost of apples in terms of bananas?c. In the
“It has been all downhill for the West since China entered the world market; we just can’t compete with hundreds of millions of people willing to work for almost nothing.” Discuss. LO.1
Why do governments set the living standards of the people by setting the minimum wage? (Think about your answer to Problem 7.) LO.1
International immobility of resources is compensated by the international flow of goods. Justify the statement. LO.1
We have focused on the case of trade involving only two countries. Suppose that there are many countries capable of producing two goods and that each country has only one factor of production, labor. What could we say about the pattern of production and trade in this case? (Hint: Try constructing

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International Trade Theory And Policy 12th Global Edition Paul Krugman ,Maurice Obstfeld ,Marc Melitz - Solutions

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