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The European Union feels pressure to protect their sport shoe manufacturers from US competition. They can choose from imposing a tariff or forbid any import of shoes from outside the EU or do nothing i.e. continue with free trade.?
The protectionist demands a total ban on imports to protect the important European shoe industry and if that is not possible at least impose a tariff to raise the European price to EUR 75 from the current price of EUR50.
The three different choices lead to the following result according to industry analysts:?
With Free Trade With a tariff of EUR 25With no trade (trade is banned)
European price per pairEUR 50EUR 75EUR 100
Exporters price per pairEUR 50EUR 50No export
Consumption in millions of pairs800700500
Domestic production in millions of pairs400450500
Import in millions of pairs4002500
Q Calculate the European Unions gains or losses from the tariff compared to free trade: (effect on total welfare)??
Q Calculate European Unions gains or losses from the total ban on imports compared to free trade: (effect on total welfare)?
Q Draw the curve for tariff and free trade (mark everything thoroughly)
Q Draw the curve for ban on trade compared to free trade (mark everything thoroughly)
Paper#9210722 | Written in 27-Jul-2016Price : $22