Assume that, when there is no trade of the product, cotton is sold in the US...
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Assume that, when there is no trade of the product, cotton is sold in the US domestic market for $0.84 per pound and $0.72 per pound on the world market. At these prices US supply is 9.6 billion pounds of cotton, and the world supply is 119 billion pounds of cotton. At the "no-trade" price, assume US demand for cotton is 9.4 billion pounds and world demand for cotton is 105 billion pounds a. If cotton becomes a tradeable commodity, is the US likely to become a net importer or net exporter of cotton? Explain briefly (3 points) b. Using the values provided in part "a", draw a graph that shows the domestic (US market) for cotton in a "no-trade" situation. On the graph show consumer surplus and producer surplus (3 points) a. Duplicate the graph in part "b", but this time show what happens if the US government imposes a tariff of $0.08 per pound on imported cotton. You do not need to have a number for new quantities, just indicate with words/letters. Make sure you show the new consumer and producer surpluses as well as any revenues collected by the government and any deadweight losses. You do not need "numbers" here, just show me areas. (3 points) Assume that, when there is no trade of the product, cotton is sold in the US domestic market for $0.84 per pound and $0.72 per pound on the world market. At these prices US supply is 9.6 billion pounds of cotton, and the world supply is 119 billion pounds of cotton. At the "no-trade" price, assume US demand for cotton is 9.4 billion pounds and world demand for cotton is 105 billion pounds a. If cotton becomes a tradeable commodity, is the US likely to become a net importer or net exporter of cotton? Explain briefly (3 points) b. Using the values provided in part "a", draw a graph that shows the domestic (US market) for cotton in a "no-trade" situation. On the graph show consumer surplus and producer surplus (3 points) a. Duplicate the graph in part "b", but this time show what happens if the US government imposes a tariff of $0.08 per pound on imported cotton. You do not need to have a number for new quantities, just indicate with words/letters. Make sure you show the new consumer and producer surpluses as well as any revenues collected by the government and any deadweight losses. You do not need "numbers" here, just show me areas. (3 points)
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a If cotton becomes a tradeable commodity the US is likely to become a net exporter of cotton This i... View the full answer
Related Book For
International Business
ISBN: 9781292274157
8th Edition
Authors: Simon Collinson, Rajneesh Narula, Alan M. Rugman
Posted Date:
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