The figure below shows the U.S. market for imported wine. For simplicity, we consider export supply curves to be flat. Chilean wine is available for $480 per barrel and French wine is available for $420 per barrel.
Suppose the United States has a tariff of $80 per barrel on imported wine. Then, the United States joins a trade bloc with Chile. What is the net effect of joining the trade bloc on U.S. well-being?
A. The national welfare increases by $250 billion.
B. The national welfare decreases by $800 million.
C. The national welfare increases by $50 million.
D. The national welfare decreases by $550 million.
Answer: D
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Everything else equal, if the dollar appreciates against the Chinese yuan:
A) China will stop trading with the U.S. B) China will export more to the U.S. and will import less from the U.S. C) the Chinese government will sell yuan in the foreign exchange market. D) China will import more from the U.S. and will export less to the U.S.
Suppose two types of consumers buy suits. Consumers of type A will pay $100 for a coat and $50 for pants. Consumers of type B will pay $75 for a coat and $75 for pants. The firm selling suits faces no competition and has a marginal cost of zero. If the firm can identify each consumer type and can price discriminate, what is the optimal price for a pair of pants?
A. Charge type A consumers $50, and type B consumers $75. B. Charge both types $150. C. Charge type A consumers $50, and type B consumers $50. D. Charge both types $75.