Homework (Ch 06) Suppose there are only two producers of aircraft in the world, AirCraft in the United States and AirEur

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Homework Ch 06 Suppose There Are Only Two Producers Of Aircraft In The World Aircraft In The United States And Aireur 1 (254.92 KiB) Viewed 12 times

Homework (Ch 06) Suppose there are only two producers of aircraft in the world, AirCraft in the United States and AirEurope in the European Union. The following hypothetical payoff matrices show the profits (in millions of dollars) for each company. In the absence of subsidies, if only one company makes aircraft, it receives a profit of $90 million. If both companies decide to produce, they each lose $2 million. When a company decides not to produce, it earns zero profit. AirCraft Suppose that the European Union considers aircraft a strategic industry and AirCraft AlrEurope Produce Not Produce Produce -2-2 Not Produce 0,90 Fill in the cells of the following payoff matrix to reflect the $9 million subsidy. Produce Nat Produce True 90,0 0,0 False With a $9 million subsidy, regardless of whether AirCraft produces or not, AirEurope 2. Basic facts about the WTO Produce AirEurope Not Produce True or False: Because AirEurope will enter the market if given a $9 million subsidy, AirCraft should also produce in this industry. Europe a $9 million subsidy if it produces. According to GATT, regional trade agreements: Cannot be formed YOU produce if it wants to maximize its profit. The World Trade Organization (WTO) was built on the basis of the General Agreement on Tariffs and Trade (GATT) and, thus, inherited many of its features. Still, the WTO proved to be a very distinct institution. Indicate whether each property in the following table is a unique property of the WTO compared to GATT. Property Acts as a provisional treaty Acts as a membership organization Includes side agreements Administers a unified package of agreements Brings trade in services, intellectual property, and investment into the multilateral trading system Unique Property of WTO Yes No O O O 0 Ⓡ O O Can be formed even if the duties with outside parties are more restrictive than prior to the formation Can be formed if the duties with outside parties are not more restrictive than prior to the formation O Can be formed only as free-trade areas and not as customs unions Grade It Now 000 Save & Continue