Trade Problem Set 90 2-11

1. Suppose there are two “large” countries, the US and China. Assume that both countries produce and consume clothing. The US imports clothing from China. Consider each trade policy action listed along the top row of the following Table. In the boxes indicate the effect of each policy on the variables listed in the first column. Use a partial equilibrium, perfect competition model to determine the answers. You do not need to show your work. Use the following notation:

                                    +    the variable increases
                                    -     the variable decreases
                                    0    the variable does not change
                                    A   the variable change is ambiguous (i.e. it may rise, it may fall)

	I Elimination of a US import quota on clothing imports	II Increase in an import tariff on clothing imports to the US	III Chinese implementation of an export tax or export restraint
US Domestic Consumer Price	-
US Domestic Consumer Welfare
US Domestic Producer Welfare
US National Welfare
Chinese Producer Welfare
Chinese Consumer Welfare
Chinese National Welfare

International Trade Theory and Policy - Chapter 90: Last Updated on 3/28/08