Exam (elaborations)

Solutions for Microeconomics, 17th Canadian Edition by Ragan (All Chapters included)

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Bow Valley College ( )

Complete Solutions Manual for Microeconomics, 17th Canadian Edition by Christopher T.S. Ragan ; ISBN13: 9780137324644...(Full Chapters included and organized in reverse order from Chapter 20 to 1)...1.Economic Issues and Concepts 2.Economic Theories, Data, and Graphs 3.Demand, Supply, and Price (...

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Uploaded on December 23, 2024
Number of pages 238
Written in 2023/2024
Type Exam (elaborations)
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Microeconomics, 17th Canadian
Edition by Christopher T.S. Ragan

Complete Chapter Solutions Manual
are included (Ch 1 to 20)

** Immediate Download
** Swift Response
** All Chapters included

,Table of Contents are given below

1.Economic Issues and Concepts
2.Economic Theories, Data, and Graphs
3.Demand, Supply, and Price (Shared with Macro)
4.Elasticity
5.Price Controls and Market Efficiency
6.Consumer Behaviour
7.Producers in the Short Run
8.Producers in the Long Run
9.Competitive Markets
10.Monopoly, Cartels, and Price Discrimination
11.Imperfect Competition and Strategic Behaviour
12.Economic Efficiency and Public Policy
13.How Factor Markets Work
14.Labour Markets and Income Inequality
15.Interest Rates and the Capital Market
16.Market Failures and Government Intervention
17.The Economics of Environmental Protection
18.Taxation and Public Expenditure
19.The Gains from International Trade
20.Trade Policy

,Solutions Manual organized in reverse order, with the last chapter displayed first, to ensure that all
chapters are included in this document. (Complete Chapters included Ch20-1)

_______________________

Chapter 20: Trade Policy
_______________________

Most introductory textbooks have a single chapter on international trade, which includes both the
simple theory of the gains from trade as well as some elementary aspects of trade policy. Given the
importance of trade and trade policy to Canada, however, we feel it is valuable to offer a more
thorough treatment. This separate chapter examines both the theory and practice of trade policy.
We offer some reasonable arguments in favour of protection as well as some invalid ones. We
review policies that raise import prices as well as policies that directly restrict quantities; we also
discuss how the levying of tariffs can sometimes lead to “tariff wars”, as happened in the 1930s
and may be happening again today. Finally, we discuss international trade agreements, such as the
WTO and NAFTA (and its renegotiation into the USMCA). We hope instructors will take the time
to cover some of the central themes in this chapter.

***

The chapter is divided into three sections. The first section deals with the theory of trade policy.
Here we review the case for free trade (which was made in detail in Chapter 19) and then examine
in detail the case for protectionism. We offer two general situations in which protection might
sensibly be pursued. First, when a small country’s objective is other than maximizing its national
income, trade protection might encourage industrial diversification or protect certain groups from
foreign competition. Second, even when the goal is to maximize national income, trade protection
may improve a country’s terms of trade, encourage infant industries, promote learning by doing, or
help the country to earn pure profits with “strategic” exports. We then discuss in detail four
commonly heard, but fallacious, arguments for protectionism. A box examines the connection
between recessions and protectionism, motivated by the global recession of 2008-09 and how it led
political leaders to commit to avoiding implementing protectionist measures.

The design of this section reflects our belief that it is very important for students to get a
balanced treatment of the cases for and against free trade. Too many textbooks present the
arguments (on either side) as if there is no sensible opposing view. We emphasize that there are
some conditions under which free trade may not be optimal, but they tend to be rather special
conditions; students should understand how special these conditions are.

The second section discusses methods of protection. We discuss policies that directly raise
prices, such as tariffs; we also discuss policies that directly reduce quantities, such as import
quotas. In the case of quotas, the newly created rents are received by the foreign producers and
their distributors, rather than by the domestic governments or producers. The long-lasting dispute
between Canada and the United States over softwood lumber offers an excellent example of the
choice between tariffs and quotas. We then examine trade-remedy laws and non-tariff barriers,
including dumping and countervailing duties. We end this section with a new discussion of the
confrontation of trade policy with climate policy—a brief description of the emerging issue of
“border carbon adjustments”.

, 230 Instructor’s Solutions Manual for Ragan, Microeconomics, Seventeenth Canadian Edition

The chapter’s final section discusses current trade policy. We examine the WTO, the various
types of regional trade agreements, and we also explain the effects of trade creation and trade
diversion. The final discussion in the section centres around NAFTA, and its successor agreement,
USMCA. We review the core elements of the agreement and briefly discuss the trade performance
following the agreement. Our overall discussion of Canadian free trade leads to a box on Canadian
wine—a surprising free-trade success story.

Answers to Study Exercises

Fill-in-the-Blank Questions

Question 1
a) comparative; specialize; comparative advantage
b) worse
c) lower
d) infant industry
e) invalid; exported
f) trade; employment

Question 2
a) increase; decrease; increase; fall
b) domestic producers; the government; domestic consumers; foreign producers
c) reduction; deadweight
d) increase; fall; increase
e) domestic producers; foreign producers; domestic consumers
f) reduction; deadweight

Question 3
a) trade creation
b) trade diversion; countries outside the group
c) national treatment; domestic; foreign

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Exam (elaborations)

Solutions for Microeconomics, 17th Canadian Edition by Ragan (All Chapters included)

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