Question

Suppose that the United States is currently open to trade and does not impose any trade restrictions on imports or exports. It is known that the world price for soybeans is above the market clearing price that would exist domestically in the United States in the absence of trade, and that the world price of washing machines is below the market clearing price that would exist domestically in the United States in the absence of trade.

Dena has just been elected as the first female President of the United States. President Dena is trying to understand the implications of the current trade policy and whether she should institute changes to this policy. She decides to hire three internationally renowned economists (Rachel, Conrad, and Xiaosheng) to help her. Each economist provides the following piece of input. Based on the information provided, identify whether each of the following would be true or false and briefly explain your reasoning.

1. Rachel states that imposing a tariff on imported soybeans will increase domestic employment in the U.S. soybean industry but will have an even larger negative impact on net benefits to consumers of soybeans in the U.S.
2. Conrad states that restricting both imports and exports will cause domestic consumer surplus in the soybean market in the U.S. to increase, domestic producer surplus in the washing machine market in the U.S. to increase, and domestic employment in the washing machine industry in the U.S. to also increase.
3. Xiaosheng states that imposing a tariff on imported washing machines will increase domestic producer surplus in the U.S. washing machine industry but will have an even larger negative impact on net benefits to consumers of washing machines in the U.S

Answer 1

Rachel states true about soybeans as the production of soybeans would increase the employment in domestic country but he gives no reasons of increasing price of washing machines.

Cornad suggests import restrictions of soybeans which would increase employment but would not decrease prices and export restrictions of washing machines would rise the prices till the prices returns to equilibrium.

Xiaoshing states true that imposing tariff on imported goods will increase producer surplus and would increase the prices till prices reach till equilibrium , but will also have a larger impact on net benefits to consumers of machines.

Pls upvote