Question 1

In what sense can a tariff can be considered as equivalent to a quota? Illustrate an equivalency of these two alternative trade policies in terms of their effects on domestic consumers and produces.

 a. In what sense is a tariff not equivalent to a quota? Introduce a market condition when a tariff and a quota resulting in same level of import are not equivalent.

 b. Illustrate non- equivalency of these two alternative trade policies in terms of their effects on domestic consumers and produces.

Question 2

Explicit export subsidies, mainly used by developed countries, have been shown to seriously disrupt global food markets.

 a. Use a suitable diagram (assuming one developed country exporter and one developing country importer) to show how elimination of such export subsidies might impact on the global price and trade volume, and welfare in the exporting country.

 b. Using your findings from (a), explain how the elimination of export subsidies could be expected to impact on consumer and producer welfare in developing countries that are net importers of food.