Answer the following statements true (T) or false (F)
1.Relatively low wages in Mexico make it impossible for U.S. manufacturers of labor-intensive goods to compete against Mexican manufacturers.
2.According to the infant-industry argument, temporary tariff protection granted to an infant industry will help it become competitive in the world market. When international competitiveness is achieved, the tariff should be removed.
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. With the tariff, 8 units are produced in Canada and quantity demanded is 12 units.
3.Refer to Exhibit 4.2. As a result of the tariff, the price of imported motorcycles equals $13,000 and imports total 4 cycles.
4.Refer to Exhibit 4.2. The tariff leads to an increase in Canadian consumer surplus totaling $11,000.
5.Refer to Exhibit 4.2. The tariff's redistribution effect equals $1,000.
1.False
2.True
3.True
4.False
5.True
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