(a) Suppose that country A wishes to restrict its imports of good X to 900 units per month, which is a reduction from the current quantity of imports. Assume that A also produces good X domestically. In this context, illustrate and explain why the following statement is either True or False.
"The reduction in imports to 900 units per month will have identical effects on product price in A, quantity produced in A, and welfare in A whether the reduction is accomplished by the imposition of an import tariff by country A or by country A's officials persuading foreign governments to 'voluntarily' restrict their exports to A to 900 units per month."
(b) Suppose that country A wishes to expand its home production of good Y (as well as Imployment in country A's Y industry) by 10 percent, and country A is an importer of good Y.In this context, illustrate and explain why the following statement is either True or False.
"The 10 percent increase in home output and employment in the Y industry will be associated with identical effects on product price,quantity of imports of good Y, and welfare in country A whether the 10 percent increase is accomplished by the imposition of an import tariff or by the granting of a subsidy for production and employment to home producers of good Y."

Question

Quizplus · Accepted Answer

The Answer of (a) Suppose that country A wishes to restrict its imports of good X to 900 units per month, which is a reduction from the current quantity of imports. Assume that A also produces good X domestically. In this context, illustrate and explain why the following statement is either True or False.
"The reduction in imports to 900 units per month will have identical effects on product price in A, quantity produced in A, and welfare in A whether the reduction is accomplished by the imposition of an import tariff by country A or by country A's officials persuading foreign governments to 'voluntarily' restrict their exports to A to 900 units per month."
(b) Suppose that country A wishes to expand its home production of good Y (as well as Imployment in country A's Y industry) by 10 percent, and country A is an importer of good Y.In this context, illustrate and explain why the following statement is either True or False.
"The 10 percent increase in home output and employment in the Y industry will be associated with identical effects on product price,quantity of imports of good Y, and welfare in country A whether the 10 percent increase is accomplished by the imposition of an import tariff or by the granting of a subsidy for production and employment to home producers of good Y."

(A) Suppose That Country a Wishes to Restrict Its Imports