Question

Suppose that Brazil imports semiconductors from the United States. The free market price is $23.00 per semiconductor. If the tariff on imports in Brazil is initially 12%, Brazilians pay per semiconductor. One of the accomplishments of the Uruguay Round that took place between 1986 and 1993 was significant across-the-board tariff cuts for industrial countries, as well as many developing countries. Suppose that as a result of the Uruguay Round, Brazil reduces its import tariffs to 6%. Assuming the price of semiconductors is still $23.00 per semiconductor, consumers now pay the price of $ per semiconductor. in Brazil and Based on the calculations and the scenarios presented, the Uruguay Round most likely_ in the United States.

Answer 1

The answer to FILL IN THE BLANKS are a follows:

1. $25.67 ( $23 + 12% tariffs)

2. $24.38 ( $23 + 6% tariffs)

3. Benefits producers

4. Benefits producers

The key to answer of last 2 fill in the blank lies in the mututal benefit theory of trade. The producers in USA are able to produce more due to untapped market in Brazil, and further due to declined net price (due to lower tariff), demand is likely to increase, since, Brazil import from USA only. Hence, USA's producers are at benefit. The producers in Brazil, now pay a lower price due to decline in tariff. Hence, they too are better-off