Homework (Ch 05)

1. Nontariff trade barriers

Identify which type of nontariff trade barrier is used in each scenario in the following table.

Scenario	Export Quota	Selective Quota	Tariff-Rate Quota	Global Quota	Export Subsidy	Domestic Production Subsidy	Domestic Content Requirement
The United States charges a tariff of 9.35¢ per kilogram for the first 30,393 tons of peanuts and a tariff of 20¢ per kilogram of peanuts in excess of that threshold.
The U.S. government makes a payment to domestic farmers of $1 on each bushel of peaches that is exported.
The United Kingdom permits 30,000 tons of peanuts to be imported each year.
Argentina voluntarily reduces textile exports to the Netherlands.
The United Kingdom and Argentina agree that the United Kingdom produces 76% of its iGadgets in Argentina and is allowed to export iGadgets to Argentina tariff-free.
The U.S. producers of automobiles, an import-competing good, receive $100 million from the U.S. government for their production of 250,000 autos.
The United Kingdom permits 30,000 tons of peanuts to be imported each year—14,000 tons must come from the Netherlands, and 16,000 tons must come from Argentina.

Points:

1 / 1

A voluntary export restraint agreement, or export quota, typically leads to a reduction of exports. The fact that Argentina cuts back on textile exports to the Netherlands implies that both sides have reached an orderly marketing agreement to tame the intensity of international competition. In the Netherlands, less competitive domestic producers can now participate in markets that would otherwise have been lost to Argentinian producers because the latter are able to produce and sell textile products at a lower price.

By imposing a global quota, but allocating specific import quotas to selected countries, the United Kingdom imposes a selective quota. Specifically, a global quota of 30,000 tons of peanuts is allocated to the Netherlands and Argentina. Although this type of import quota avoids the favoritism of the global quota, quotas of any type have a potential to foster a domestic monopoly of production and higher prices because, upon a realization that foreign producers cannot surpass their quotas, a domestic firm may raise its prices.

A tariff-rate quota is a two-tier tariff that displays both tariff-like and quota-like characteristics. It allows a specified number of goods to be imported at one tariff rate (the within-quota rate), whereas any imports above this level face a higher tariff rate (the over-quota rate). Tariff-rate quotas have also been used as temporary protection against surging imports of nonagricultural products, such as steel, brooms, stainless-steel flatware, and fish into the United States.

Whenever a country permits a specific number of units of a good to be imported each year, but it does not specify from where the product is shipped or who is permitted to import, it imposes a global quota. This has many adverse effects on international trade; the most visible is the favoritism toward merchants who are the first to capture a large portion of the business. For example, the merchants who import early in the year get their goods; those who import late in the year may not. Also, merchants discriminate against goods that are shipped from distant locations because of the long transportation time. In addition, smaller merchants without trade connections may be at a disadvantage relative to large merchants.

The $1 that the U.S. government pays to domestic farmers on each bushel of exported peaches is an export subsidy to encourage export sales. Unlike a domestic production subsidy, which is granted to producers of import-competing goods, an export subsidy goes to producers of the goods that are to be sold overseas. For example, to offset unfair trade practices or subsidies by competing exporters in foreign countries, the U.S. Export Enhancement Program gives U.S. exporters cash bonuses so that they can sell their products in targeted markets at prices below their production costs.

When U.S. producers of automobiles receive $100 million from the U.S. government for the production of 250,000 autos, they receive a domestic production subsidy. Its main goal is to encourage domestic producers of automobiles to increase their output and, thus, become more competitive in the domestic market. It should not be mistaken for the export subsidy, which assists producers of goods that are sold overseas.

A domestic content requirement is the minimum percentage of a product’s total value that must be produced domestically for the product to qualify for zero tariff rates. If the United Kingdom has reached such an agreement with Argentina, it not only can sell 76% of iGadgets tariff-free in Argentina, but also the remaining 24% of iGadgets. Note that the domestic content protection increases demand for domestic inputs, thus contributing to higher input prices, higher product prices, and loss of competitiveness of the home country.

2. Comparing tariffs, quotas, and subsidies

Which of the following statements correctly identify the difference in the revenue effect created by an import quota versus that of a tariff? Check all that apply.

The revenue effect of an import quota is essentially the same as that of an equivalent tariff.

Tariffs always generate revenue for the government, whereas a quota’s revenue is uncertain.

Quotas always generate revenue for the government, whereas the tariff’s revenue is uncertain.

Unlike tariffs, quotas do not generate government revenue unless importers are charged a licensing fee.

Points:

1 / 1

Tariffs always generate revenue for the government, whereas a quota’s revenue is less certain. Although a quota may be as restrictive as an equivalent tariff, it may not generate the same revenue for the government as a tariff. A quota’s revenue effect, known also as a “quota rent,” generally accrues to domestic importers or foreign exporters depending on the degree of market power they possess.

If the government desires to capture the revenue effect, it could auction import quota licenses to the highest bidder in a competitive market.

3. Import quotas

Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan’s domestic market for apples, where

S_{K}

is the supply curve and

D_{K}

is the demand curve. The free trade world price of apples (

P_{W}

) is $200 per ton. Suppose Kazakhstan’s government restricts imports of apples to 80,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan’s welfare.

On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan’s supply curve including the quota

S_{K+Q}

. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of apples with a quota of 80,000 apples.

Points:

1 / 1

When imports are limited to 80,000 tons, the quantity of apples demanded in Kazakhstan at the world price (180,000 tons) exceeds the quantity supplied domestically plus the import quota (

20,000 tons + 80,000 tons = 100,000 tons

). Above the free trade price, the total supply of apples in Kazakhstan now equals Kazakhstan production plus the quota, resulting in a rightward shift of the

S_{K}

curve by 80,000 tons of apples. The new price of apples in Kazakhstan occurs where the

D_{K}

and

S_{K+Q}

curves intersect, or $400 per ton in this case. At this price, the quantity of apples demanded is 130,000 tons, which is the same as the quantity supplied domestically plus the import quota (

50,000 tons + 80,000 tons = 130,000 tons

In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus (PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quota rents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota’s consumption and protective effects.

Under free trade, the producer surplus in Kazakhstan’s market for apples was the area above the supply curve and below the price of $200. With the quota, the producer surplus is the area above the supply curve and below the price of $400. That is, the domestic producers are able to sell more apples at a higher price, which increases their surplus. Therefore, the increase in PS is shown as the area above $200, below $400, and above the supply curve.

Deadweight loss arises in Kazakhstan for two reasons:

1.	Protective Effect: Apples are produced in Kazakhstan at increasing unit costs. Graphically, this is the triangular area below the domestic supply curve, above the free trade price for apples, and between 20,000 and 50,000 tons of apples (which formerly was imported without the quota).
2.	Consumption Effect: Consumers enjoy fewer apples because they have to pay more for them. Graphically, this is the triangular area below the domestic demand curve, above the free trade price for apples, and between 130,000 and 180,000 tons of apples (which is no longer consumed).

The quota rents represent the profits received by the holders of the right to import apples to Kazakhstan. These quota licenses represent the right to buy apples at the world price ($200 per ton) and resell them in Kazakhstan at $400 per ton. The quota rents equal the price difference (the height of the tan rectangle) times the quantity of apples imported (the base of the tan rectangle):

$Quota Rent$	$=$	$(Price with Quota - Free Trade Price) \times Quota$
	$=$	$($400 per ton - $200 per ton) \times 80,000 tons$
	$=$	$$16,000,000$

The equivalent import tariff for Kazakhstan’s apple import quota is

$200

per ton of apples.

Points:

1 / 1

The equivalent tariff for an import quota is the tariff that would lead to the same domestic price and quantity of imports as the quota. In this case, if Kazakhstan’s government imposed a tariff of $200 per ton of apples, then the price would rise to

$200 per ton + $200 per ton = $400 per ton

, which is the same price as with the quota. At this price, the quantity of apples demanded is 130,000 tons, and the quantity supplied by domestic producers is 50,000 tons, so the imports are

130,000 tons - 50,000 tons = 80,000 tons

, which is the same as the import quota.

If Kazakhstan’s government auctions off the quota licenses in a well-organized, competitive auction, Kazakhstan experiences a deadweight loss of

$8,000,000

. (Hint: Select a shaded region to see its area. Be sure to adjust for the units on the quantity axis.)

Points:

1 / 1

In a well-organized, competitive auction, the Kazakhstan government collects revenues equal to the value of the quota rents; that is, the government receives the same amount from auctioning the licenses as it would from the equivalent tariff. Because the quota rents contribute to Kazakhstan’s welfare in the form of government revenue, the deadweight loss caused by the quota is equal to the efficiency losses in Kazakhstan’s production and consumption of apples:

$Deadweight Loss$	$=$	$Protective Effect + Consumption Effect$
	$=$	$(\frac{1}{2} \times (50,000 tons - 20,000 tons) \times ($400 per ton - $200 per ton)) + (\frac{1}{2} \times (180,000 tons - 130,000 tons) \times ($400 per ton - $200 per ton))$
	$=$	$$3,000,000 + $5,000,000$
	$=$	$$8,000,000$

4. A graphical comparison of tariffs and quotas

Borzia and Ardon are small countries that protect their economic growth from rapidly advancing globalization by limiting the import of rugs to 40 million. To this end, each country imposes a different type of trade barrier when the world price (

P_{W}

) is $2,000. In Borzia, the government decides to impose a tariff of $2,000 per rug; in Ardon, the government implements a quota of 40 million rugs.

Assume that Borzia and Ardon have identical domestic demand (

D_{0}

) and supply (

S

) curves for rugs as shown on the following graph. Under these conditions, the price of rugs is $4,000 per rug in each country.

Suppose that in both countries, demand for rugs rises from

D_{0}

D_{1}

Assuming Borzia keeps the tariff at $2,000 per rug, complete the first row of the following table by calculating each of the values given this increase in demand. Assuming Ardon maintains a quota of 40 million rugs, complete the second row of the table by calculating each of the values given this increase in demand.

Country	Price	Quantity Demanded at New Price	Imports
Country	(Dollars)	(Millions of rugs)	(Millions of rugs)
Borzia (tariff = $2,000)	4,000	90	60
Ardon (quota = 40 million rugs)	5,000	80	40

Points:

1 / 1

A tariff is a tax levied on a product when it crosses national boundaries. The most widespread tariff is the import tariff, which is a tax levied on an imported product. A quota is a limit on the import of a particular product. In this case, Borzia imposes a tariff, whereas Ardon chooses a quota.

In Borzia, a $2,000 tariff increases the price of rugs from $2,000 to $4,000. When demand for rugs rises from

D_{0}

D_{1}

, the price of rugs does not change, but the quantity demanded rises to 90 million rugs (far above the original 70 million rugs). This is because the tariff does not restrict the quantity of the imported product, and nothing prevents domestic consumers from buying more of the rugs at the price of $4,000 per rug. In this case, imports increase from 40 million rugs to

90 million rugs - 30 million rugs = 60 million rugs

In Ardon, however, the increase in demand leads to a different outcome because there is no limit on the extent to which the price can rise above $4,000, only on the import quantity. Therefore, with an import quota, an increase in demand induces an increase in the price of rugs. The price increase leads to a rise in domestic production and a fall in consumption of the rugs, while the level of imports remains constant. Hence, adjustment occurs in domestic prices rather than in the quantity of rugs imported. Specifically, the domestic price of rugs rises to $5,000, the point at which the increased production (40 million rugs) plus the fixed level of imports (40 million rugs) satisfy the domestic demand. So the new domestic quantity demanded equals 80 million rugs.

The following graphs summarize the economic situation for each country under their respective trade barriers when demand increases to

D_{1}

True or False: The increase in demand helps domestic producers but hurts domestic consumers in Ardon.

True

False

Points:

1 / 1

In Ardon, domestic producers enjoy a ceiling on imports. At the new price of $5,000 per rug, imports remain at 40 million rugs, which is the difference between 80 million rugs demanded and 40 million rugs supplied. Because Ardon chooses a quota, its domestic producers remain well protected—even under unfavorable market conditions—which is not enough of an incentive to stay competitive. The quota often results in a lower product quality and higher product prices. This benefits domestic producers but hurts domestic consumers who have to buy domestically produced rugs at a higher price than under an equivalent tariff. Therefore, this statement is true.

Which of the following explain why a quota is a more restrictive trade barrier than an equivalent tariff. Check all that apply.

A quota may prohibit consumers from switching to the imported good.

A quota limits the number of goods that can be imported into a country.

Importers who are willing to pay a higher price will get the product.

Points:

0.5 / 1

A quota is more restrictive than a tariff because it imposes an absolute limit on the imported good. Even if the domestic industry’s comparative disadvantage grows more severe, the quota prohibits consumers from switching to the imported good. Thus, a quota assures the domestic industry a ceiling on imports regardless of changing market conditions.

As a result, member countries of the World Trade Organization have decided to phase out import quotas and replace them with tariffs—a process known as tariffication.

5. Agricultural export subsidies in a small nation

The following graph shows the market for wheat in Canada, where

D_{C}

is the demand curve,

S_{C}

is the supply curve, and

P_{W}

is the free trade price of wheat. Assume that Canada is a relatively small producer of wheat, so changes in its output do not affect the world price of wheat. Also assume that Canada is currently open to free trade, and domestic consumers are able to purchase wheat at the world price with negligible transportation costs.

Suppose a subsidy of $40 per ton is granted to exporters in Canada, allowing them to sell their products abroad at prices below their costs. Assume that trade restrictions are also put in place in order to prevent domestic consumers from buying wheat abroad at the world price.

Use the grey line (star symbols) to indicate the world price of wheat plus the subsidy on the following graph. Then use the black point (plus symbol) to indicate the price of wheat in Canada and the quantity demanded at that price. Finally, use the tan point (dash symbol) to indicate the price of wheat received by Canadian producers with the subsidy and the quantity of wheat they will supply at that price.

Points:

0.6 / 1

The world price of wheat with the subsidy equals

$200 per ton + $40 per ton = $240 per ton

. Because Canadian farmers receive $240 for each ton of wheat exported, they won’t accept a price less than $240 for their domestic sales as well. Also, you were told to assume that new trade restrictions prevent consumers in Canada from buying imported wheat at a cheaper price. Thus, the price of wheat in Canada rises from $200 to $240. At this price, domestic consumers demand 300 tons of wheat, and domestic producers supply 900 tons of wheat. Therefore, 600 tons of wheat are now exported as a result of the export subsidy.

Export subsidies result in a welfare loss to the home country due to the protective and consumption effects. In order to determine the magnitude of these effects, you must compare the change in consumer and producers surplus against the cost of the subsidy.

On the previous graph, use the green quadrilateral (triangle symbols) to indicate the loss in consumer surplus due to the export subsidy. Then use the purple quadrilateral (diamond symbols) to indicate the gain in producer surplus as a result of the export subsidy.

Consumer surplus is the difference between a buyer’s willingness to pay and the price the buyer actually pays. Graphically, consumer surplus is the area above the price paid, below the domestic demand curve, and to the left of the quantity of wheat demanded at that price. Therefore, the loss in consumer surplus as a result of the export subsidy is the quadrilateral area representing the decrease in the quantity demanded as well as the increase in the price consumers pay on the wheat they now consume at a higher price.

Producer surplus is the difference between the price a seller actually receives for an item and the lowest price at which the seller would be willing to provide the item. Graphically, producer surplus is now the area below $240 per ton, above the domestic supply curve, and to the left of the quantity of wheat supplied by domestic producers at a price of $240. Therefore, the gain in producer surplus as a result of the export subsidy is the quadrilateral area representing the increase in the quantity supplied as well as the higher price producers receive on all wheat sold domestically as well as abroad.

The taxpayer cost of the export subsidy equals

$24,000

Points:

1 / 1

Using all of the previous information, compute the value of deadweight loss in Canada as a result of the export subsidy.

$Deadweight Loss$	$=$	$Loss in Consumer Surplus + Cost of Subsidy - Gain in Producer Surplus$
	$=$	$6,000

Points:

1 / 1

The taxpayer cost of the export subsidy equals the per unit subsidy times the quantity of wheat exported:

$Taxpayer Cost$	$=$	$Per-Unit Subsidy \times Exports$
	$=$	$$40 per ton \times 600 tons$
	$=$	$$24,000$

Graphically, it is represented by the rectangular area with a height equal to the subsidy and a width equal to the quantity of imports:

Deadweight loss arises because of the increasing domestic cost of producing additional wheat (the protective effect) and the lost consumer surplus because the price has increased (the consumption effect). Therefore, deadweight loss is equal to the change in producer surplus plus the change in consumer surplus minus the amount of the subsidy since those funds come from domestic taxpayers:

$Deadweight Loss$	$=$	$Loss in Consumer Surplus + Cost of Subsidy - Gain in Producer Surplus$
	$=$	$$15,000 + $24,000 - $33,000$
	$=$	$$6,000$

The following graph shows the consumption and protective effects in the Canadian market for wheat in the presence of an export subsidy of $40:

6. Export subsidies versus production subsidies

Complete the following table by indicating whether each statement about domestic production subsidies and export subsidies is true or false.

Statement	True	False
When the government makes up the difference between a guaranteed minimum price and the lower price at which farmers actually sell their crop, this is a domestic production subsidy.
When the government provides a subsidy to farmers for every ton of wheat produced, this is an export subsidy.
A country’s domestic production subsidies have more impact on other countries than do its export subsidies.
Domestic production subsidies in a small country cause greater deadweight losses than do export subsidies.

Points:

0.5 / 1

When the government provides a subsidy to farmers for every ton of wheat produced, this is a domestic production subsidy. An export subsidy, on the other hand, is given only for units that are exported. There are several ways that a government can implement such subsidies, including guaranteeing a minimum price to farmers and subsidizing the purchase of the product.

Both export subsidies and domestic production subsidies increase the country’s exports. However, the effect of domestic production subsidies is smaller than that of export subsidies. Domestic production subsidies do not reduce domestic demand, whereas export subsidies subsidize a firm’s exports rather than its total production. This is true for both small and large countries. And since domestic production subsidies have less impact on the country’s exports, they also result in smaller deadweight losses and have less impact on other countries, compared to export subsidies.

6. Export subsidies versus production subsidies

Complete the following table by indicating whether each statement about domestic production subsidies and export subsidies is true or false.

Statement	True	False
When the government subsidizes farmers of an agricultural crop, this is a domestic production subsidy.
When the government subsidizes consumers of an agricultural crop, this is an export subsidy.
A country’s domestic production subsidies have more impact on the country’s exports than do export subsidies.
Export subsidies in a large country cause greater deadweight losses than do domestic production subsidies.

Points:

1 / 1

7. Forms of Dumping

Igrushka is a profit-maximizing firm that produces wooden dolls. In Russia, its home country, it enjoys unchallenged market power due to trade barriers that restrict competition. However, Igrushka also exports wooden dolls to France, where the market is highly competitive.

Given this scenario, which of the following statements is correct?

The consumer response to a change in price in Russia is greater than that in France.

Igrushka will maximize its revenue by being a nondiscriminating seller.

The demand that Igrushka faces for wooden dolls in Russia is less elastic than in France.

Points:

1 / 1

The market in Russia is protected by trade barriers. Thus, demand for toys in Russia is less elastic than in France, where the market is more competitive and consumers can more easily find a substitute for wooden dolls. Therefore, Igrushka benefits from charging a higher price in Russia and a lower price in France.

Suppose Igrushka realizes that it has an ability to become a monopolist in the market for wooden dolls in France and decides to resort topredatory dumping by temporarily reducing the prices charged in France to drive competitors out of business. This may encourage the French government to protect the interests ofFrench toy makers byimposing antidumping duties .

Points:

1 / 1

Igrushka may decide to engage in predatory dumping if it is confident that it can charge a cutthroat price to drive competitors in France out of business. Igrushka may even temporarily sell wooden dolls at a price below the cost of production. To be successful, predatory dumping has to be practiced on a massive basis to provide consumers with a sufficient opportunity for bargain shopping. Unlike sporadic dumping, predatory dumping does seek a monopoly position. And unlike persistent dumping, it stops when the producer succeeds in acquiring a monopoly position and then raises prices to match its market power. The new price must be high enough to offset any losses that occurred during dumping. The French government may grow concerned about predatory pricing for monopolizing purposes and retaliate with antidumping duties that eliminate the price differential.

8. International price discrimination

Giocattolo is an Italian firm, and it is the only seller of toy cars in Italy and Spain. Suppose that when the price of toy cars increases, Spanish children more readily replace them with toy motorbikes than Italian children. Thus, the demand for toy cars in Spain is more elastic than in Italy.

The following graphs show the demand curves for toy cars in Italy (

D_{I}

) and Spain (

D_{S}

) and marginal revenue curves in Italy (

{MR}_{I}

) and Spain (

{MR}_{S}

). Giocattolo’s marginal cost of production

(MC)

, depicted as the grey horizontal line in both graphs, is $8, and the resale of toy cars from Spain to Italy is prohibited. Assume there are no fixed costs in production, so marginal cost equals average total cost

(ATC)

Suppose that as a nondiscriminating seller, Giocattolo charges the same price of $18 per toy car in each of the two markets.

In the following table, complete the third column by determining the quantity sold in each country at a price of $18 per toy car. Next, complete the fourth column by calculating the total profit and the profit from each country under a single price.

Country	Single Price			Price Discrimination
	Price	Quantity Sold	Profit	Price	Quantity Sold	Profit
	(Dollars per toy car)	(Millions of toy cars)	(Millions of dollars)	(Dollars per toy car)	(Millions of toy cars)	(Millions of dollars)
Italy	18	11	110	24	8	128
Spain	18	6	60	16	8	64
Total	N/A	N/A	170	N/A	N/A	192

Points:

1 / 1

As a nondiscriminationg seller, if Giocattolo charges a price of $18 per toy car in both countries, then the quantity demanded in Italy is 11 million toy cars, and the quantity demanded in Spain is 6 million toy cars.

Profit equals total revenue minus total cost. You can compute the profit earned by selling toy cars in Italy in the following way:

$Profit from Italy$	$=$	$Total Revenue - Total Cost$
	$=$	$(Price \times Quantity) - (Price \times Average Total Cost)$
	$=$	$(Price - Average Total Cost) \times Quantity$
	$=$	$($18 per toy car - $8 per toy car) \times 11 million toy cars$
	$=$	$$110 million$

Similar calculations yield a profit of $60 million from selling toy cars in Spain. Therefore, Giocattolo’s total profit under a single price is

$110 million + $60 million = $170 million

Suppose that as a profit-maximizing firm, Giocattolo decides to price discriminate by charging a different price in each market, while its marginal cost of production remains $8 per toy.

Complete the last three columns in the previous table by determining the profit-maximizing price, the quantity sold at that price, the profit in each country, and total profit if Giocattolo price discriminates.

Profit is maximized at the output level where

MR = MC

. From the graph for Italy, you can see that

MR = MC

at a quantity of 8 million toy cars. At this quantity, consumers in Italy are willing to pay a price of $24 per toy car. This yields a profit of

($24 per toy car - $8 per toy car) \times 8 million toy cars = $128 million

Similarly, in Spain,

MR = MC

at a quantity of 8 million toy cars. At this quantity, consumers in Spain are willing to pay a price of $16 per toy car. This yields a profit of

($16 per toy car - $8 per toy car) \times 8 million toy cars = $64 million

Therefore, Giocattolo’s total profit under price discrimination is

$128 million + $64 million = $192 million

Giocattolo charges a lower price in the market with a relativelymore elastic demand curve.

Points:

1 / 1

Giocattolo charges a lower price in the market with a relatively more elastic demand curve. Buyers in countries with more elastic demand are more price sensitive, and therefore, reduce consumption in response to a higher price by more than consumers in countries with less elastic demand.

At any given price, Spanish buyers have a higher price elasticity of demand than Italian buyers, whose demand for toy cars is less elastic. Therefore, Giocattolo charges a lower price in Spain and a higher price in Italy.

True or False: Under price discrimination, Giocattolo is dumping toy cars into the Spanish market.

True

False

Points:

1 / 1

Dumping is defined as selling a product abroad at a price that is either lower than the price the firm charges in its domestic market or below the firm’s average total cost of producing the product. In this case, Giocattolo sells toy cars at $24 per toy car in the domestic market and at $16 in the Spanish market. Therefore, the firm is dumping toy cars into the export market, so this statement is true.

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Homework (Ch 05)

1. Nontariff trade barriers

2. Comparing tariffs, quotas, and subsidies

3. Import quotas

4. A graphical comparison of tariffs and quotas

5. Agricultural export subsidies in a small nation

6. Export subsidies versus production subsidies

6. Export subsidies versus production subsidies

7. Forms of Dumping

8. International price discrimination

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