Jim Whitney Economics 311

Monday, March 19, 2012

First-best policy making with global markets

Example 1: An infant industry Example 2: Solar power Example 3: Oil

Brazilian steel market

Domestic solar power market

Domestic oil market

Complete the tables below to indicate the impact of each policy compared to free trade

Goal: produce Qs* of steel
Policy option: 1 2
Policy choice:    
DCS    
DPS    
DGovtRev    
DNW    
Goal: consume Qd* of solar power
Policy choice:  
DCS  
DPS  
DGovtRev  
DNW  
Goal: Cut dependency on imports to Qm=4
Policy choice:  
DCS  
DPS  
DGovtRev  
DNW