International Trade - Theory and Policy, 2010a

2. Identify a trade policy that can potentially raise national welfare in each of the following
situations.
1. When a foreign monopoly supplies the domestic market with no import-competing
producers.
2. When a domestic negative production externality is caused by a domestic industry that
exports a portion of its production to the rest of the world.
3. When a positive production externality is caused by a domestic industry that competes with
imports.
4. When a domestic negative consumption externality is caused by domestic consumers in a
market in which the country exports a portion of its production to the rest of the world.
5. When a country is large in an export market.
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[1] See Paul Krugman, “Is Free Trade Passe?” Journal of Economic Perspectives 1, no. 2 (1987): 131–44.
[2] See Friedrich List, The National System of Political Economy, McMaster University Archive for the History of
Economic Thought,http://socserv2.socsci.mcmaster.ca:80/~econ/ugcm/3ll3/list/index.html.
[3] See John Stuart Mill, Principles of Political Economy, McMaster University Archive for the History of
Economic Thought,http://socserv2.socsci.mcmaster.ca:80/~econ/ugcm/3ll3/mill/index.html.
[4] See Robert Torrens, The Budget: On Commercial and Colonial Policy (London: Smith, Elder, 1844).
[5] See Frank Graham, “Some Aspects of Protection Further Considered,” The Quarterly Journal of Economics 37,
no. 2 (February 1923): 199–227.
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