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Assume perfect competition. Yoland is a small country that takes world price of corn as given. Its domestic supply and demand for corn is given by the following:

Demand: D = 36-3P
Supply: S = 3p-9

a. Assume initially that Yoland does not open to trade. What is the autarky equilibrium price and quantity?

b. Suppose Yoland decides to engage in trade. Determine the quantity demanded, the quantity supplied, and import given the world price of \$6 per bushel of corn.

c. If the government of Yoland imposes a tariff in the amount of \$1 (i.e., t=\$1), what is the new domestic price? What is the amount imported?

#### Solution Preview

a. Assume initially that Yoland does not open to trade. What is the autarky equilibrium price and quantity?
D=36-3P
S=3P-9
In equilibrium D=S, Put D=S
36-3P=3P-9
6P=45
P=\$7.5 per bushel

D=36-3*P=36-3*7.5=13.5
S=3P-9=3*7.5-9=13.5

Equilibrium price=7.5
Equilibrium ...

#### Solution Summary

Solution determines the equilibrium quantities in absence and in presence of international trade.

\$2.19
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## International Trade Liberalization and the Environment

Does free trade harm the environment?

Environmentalists argue that trade liberalization harms the environment. The decisions of the World Trade Organization (WTO) in particular have been the subject of much criticism. Carbaugh has described environmentalists' three primary assertions (Carbaugh, 2004):

Trade liberalization leads to a "race to the bottom" in environmental standards.
Trade liberalization conflicts with morally-conscious environmental policies.
Trade liberalization encourages trade in products that create global pollution ("pollution havens").
Proponents of trade liberalization argue that freer trade might actually improve the quality of the environment. For example, the international environmental policy of the U.S. and other industrial nations is based on the "polluter-pays principle." This approach is intended to give producers the incentive to develop more pollution-control techniques (Carbaugh, 2004).

In this project, you will recreate and evaluate the arguments and counter-arguments for all three of the environmentalists' assertions described above.

Part 1: Recreate the arguments/counter-arguments
Recreate the arguments for and against the three assertions noted above (six arguments total). Approach this assignment as an exercise in critical thinking; your goal is to represent the arguments as accurately and as thoroughly as possible. For each argument and counter-argument, present the following information:

The party you represent