Exhibit 4.2 In the Absence of International Trade,assume That the Equilibrium Price

question 34

True/False

Exhibit 4.2
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.
-Refer to Exhibit 4.2.The tariff's redistribution effect equals $7,000.

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Definitions:

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Annuities

Financial products that guarantee a fixed or variable stream of payments over time, often used for retirement savings or to generate steady income during retirement.

Effective Annual Rate

The interest rate on a loan or financial product restated from the nominal rate as an annual rate, taking compound interest into account.

Compounded Value

Refers to the result of reinvesting the interest or earnings of an investment, causing it to grow exponentially over time.