Question 1: Vietnam is exporting coffee to Japan and importing steel from China. Describe what actions Vietnam would take if they apply these trade policies. What happens with the price of steel in Vietnam, the price of steel in China and Vietnam’s national welfare when Vietnam applies a steel export subsidy? Draw a graph showing the area of the change in Vietnam’s national welfare due to subsidy. 1. Export credit subsidies; 2. Import quota; 3. Import tariff; 4. Export subsidies. Question 2: Given that: Home’s demand curve: D = 100 - 20P, Home’s supply curve : S = 20 + 20P. Foreign’s demand curve: D* = 80 - 20P, Foreign’s supply curve: S* = 40 + 20P. 1. Derive MD curve of Home and XS curve of Foreign. 2. Find the price and volume traded of wheat equilibrium under free trade 3. Now Home imposes a specific tariff of 0.5 on each unit imported. What are the quantity supplied and quantity demanded of Foreign after tariff? Question 3: Look at the graph showing Home market of wine. Price before tariff (free trade) is 8, after tariff is 9. Calculate: 1. What is the change in Home consumer surplus? 2. What is the change in Home producer surplus? 3. What is the change in Home government revenue? 4. What is the overall effect on Home welfare? 5. What is the difference between the effect on tariff over national welfare of a large import country and a small import country? Question 4: Bluesky-07 vessel costs $2,000,000, shipping a $500,000 shipment of Rivery Co., Ltd. During transportation, Bluesky-07 got shallow-draught. To save the vessel, the captain decided to throw away some boxes valued $65,000. Besides, cost of repairing the vessel is $34,600. Miscellaneous costs are $400. At the POD, the captain asked for common loss contribution. 1. Is the request for common loss contribution reasonable? Hint: Calculate the common lost cost of vessel, common lost cost of shipment and decide the amount of money they have to pay. 2. Analyse and calculate the common lost cost of vessel, common lost cost of shipment and decide who has to pay within 3 situations below: a. Situation 1: at (port of destination) POD, due to unloading process, Rivery company loses 10,000$ more. b. Situation 2: at POD, Rivery company receives shipment and detect additional 10,000$ loss of their shipment c. Situation 3: at Port of Loading, Rivery saw the products being wet, it costs $10,000. Question 5: Company A imports 1000 motorbikes from overseas with FOB price is 2000 USD/item to Cat Lai port. The shipment bears shipping cost of 20USD/item. Company A buys ICC A for the shipment with ratio 0.18%, with insured value of 110% CIF price. How much does company A have to pay for the insurance company? Question 6: In October 2014, company X had following transactions: 1. Export a shipment of 500 items A with FOB price 10$/item. Exchange rate is 21,000 VND/USD. 2. Import a shipment of product B with CIF term, total value 30,000$. Exchange rate is 21,500 VND/USD. 3. Import 5,000 items C with FOB price 8$/item, marine freight is 1$/item, insurance 1$/item. Exchange rate is 22,000 VND/USD. 4. Export 10,000 items D with CIF price 5$/item, total freight & insurance is 5,000 VND/item. Exchange rate is 21,500 VND/USD. 5. Import material E to assemble in representative of company Y (Korean company) as per assembly contract. Total CIF value is 300,000,000 VND. Calculate import export tax that company X has to pay, knowing that tax rate of A is 2%, B & E is 10%, C is 15%, D is 2%. 1. Export tax = 500 * $10 * 21,000 VND * 2% = 2,100,000 VND 2. Import tax = $30,000 * 21,500 VND * 10% = 64,500,000 VND 3. Import tax = 5,000 * ($8 + $1 + $1) * 22,000 VND * 15% = 165,000,000 VND 4. Export tax = (10,000 * $5 * 21,500 VND - 10,000 * 5,000 VND) * 2% = 20,500,000 5. Assembly for foreign company → no tax Question 7: Actual price of a shipment is 5,500 USD and the seller wants to review the price due to changing in labour cost and material cost. Material cost accounts for 40% of the price, cost of wage paying for workers accounts for 35% of the price, the rest for fixed cost. At the time of reviewing, both material cost and labour cost increase by 8%. What is the reviewed price?
