1) Explain the connection between the US trade deficit and financial capital flows.
2) Explain how comparative advantage determines the pattern of trade. Use an example to aid in your explanation.
3) Explain how the Stolper-Samuelson theorem indicates that free trade will (likely) worsen income inequality in the US, but (likely) narrow it for Mexico.
4) Show the effects on US welfare from each of the following events. a. Imposition of a tariff on a small, perfectly competitive market b. Imposition of a tariff on a small, imperfectly competitive market c. Imposition of a tariff on a large, perfectly competitive market
5) Show the effects on US welfare from each of the following events. a. Imposition of a quota on a small, perfectly competitive market b. Imposition of a quota on a small, imperfectly competitive market
6) If the US is a large importing country and imposes a tariff on the import of a good, what will the welfare effect on the exporting country be?
7) Assume that the US is a large country in the semi-conductor market. If the US is an exporter of the good and experiences a technological improvement, will the US always be better off? Show and explain why or why not.
8) National security demands have made it imperative for the US to close the toilet paper trade gap (just think what would happen in times of war if we couldn’t produce our own!). The government has decided to reduce our imports from 100 million units to 90 million units. As the supreme TP czar, which of the following policies should be chosen? Show and explain why. a. A production subsidy b. A consumption tax c. An import tariff
9) Show why in a competition between the Boeing and Airbus that autarky may be the preferred welfare situation to free trade. Explain how you draw this conclusion. 10) Explain why a VER is likely to generate lower welfare th
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