Question

1. To protect American jobs, the US government may decide to cut US imports of bulldozers by 60%. It could do so by either: -Imposing a tariff high enough to cut bulldozer imports by 60% -Persuading Komatsu and other foreign bulldozer makers to set up a voluntary export restraint arrangement to cut their exports of bulldozers to the US by 60%. a. Which of these two policies would be less damaging to the United States as a whole? Please explain. (6 points) b. Which of these two policies would be less damaging to foreign bulldozer manufacturers? Please explain. (6 points) c. Which of these two policies would be most beneficial for the United States' government? Please explain. (6 points)

Answer 1

answer:

Imposition of tariff to decrease the import of bulldozers resulted into deadweight loss in the economy. Deadweightloss reduces the net welfare of the U.S.

uics wonel frice after C. C C. Quanlit

On the other hand, VER is a trade restriction on the quantity of good that an exporting country is allowed to export. Under this type, Komatsu and other foreign bulldozer makers decreases its exports by 60%. It does not resulted in the deadweight loss for the U.S economy while help domestic producers to develop.

So, persuading VER would be less damaging to the U.S. and economy as a whole.

An import tariff would increase the price of domestic product that is imported, reduce the amount of imports demanded by consumers and hence the foreign bulldozer manufacturers will experience a reduction in their income.

Voluntarytr export restraint is a mutual agreement between Nations to voluntarily reduce the amount of exports in each other's market. With reduced Exports, these manufacturers will increase the supply in the domestic economy and will experience A reduction in the price but their revenue can be increased because they are not paying any import duty on the amount of goods exported. Handsome voluntary export restraint is more beneficial for foreign bulldozer manufacturers.