In the Absence of International Trade, Assume That the Equilibrium

question 83

True/False

In the absence of international trade, assume that the equilibrium price and quantity of motorcycles in Canada is $14,000 and 10 units respectively. Assuming that Canada is a small country that is unable to affect the world price of motorcycles, suppose its market is opened to international trade. As a result, the price of motorcycles falls to $12,000 and the total quantity demanded rises to 14 units; out of this total, 6 units are produced in Canada while 8 units are imported. Now assume that the Canadian government levies an import tariff of $1,000 on motorcycles. With the tariff, 8 units are produced in Canada and quantity demanded is 12 units.
-Refer to Exhibit 4.2.As a result of the tariff, the price of imported motorcycles equals $13,000 and imports total 4 cycles.

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Definitions:

Efficiency

The property of a resource allocation of maximizing the total surplus received by all members of society.

Equality

The property of distributing economic prosperity uniformly among the members of society.

Decision Making

The cognitive process resulting in selecting a course of action among several alternatives.

Change Minds

The process of altering one's thoughts, opinions, or decisions based on new information or reconsideration.