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21) The Metzler Paradox a special case of the optimum

Question : 21) The Metzler Paradox a special case of the optimum : 1925445

21) The Metzler Paradox is a special case of the optimum tariff concept. Discuss this assertion. Would the optimum tariff tend to be a high one or a low one in the case where this paradox exists? What conditions would be needed in the international markets for a country's exports for this paradox to exist? Why do you suppose empirical support for the existence of this paradox has not been forthcoming to date?

22) Some argue that tariffs always hurt the imposing country's economic welfare, and are typically designed to shift resources from one sector to another, protected or preferred one, within an economy. Find and discuss a counterexample to this argument.

23) The effective rate of protection is a weighted average of nominal tariffs and tariffs on imported inputs. It has been noted that in most industrialized countries, the nominal tariffs on raw materials or intermediate components or products are lower than on final-stage products meant for final markets. Why would countries design their tariff structures in this manner? Who tends to be helped, and who is harmed by this cascading tariff structure?

24) The two deadweight triangles are the Consumption distortion and Production distortion losses. It is easy to understand why the Consumption distortion constitutes a loss for society. After all it raises the prices of goods to consumers, and even causes some consumers to drop out of the market altogether. It seems paradoxical that the Production distortion is considered an equivalent burden on society. After all, in this case, profits increase, and additional production (with its associated employment) comes on line. This would seem to be an offset rather than an addition to the burden or loss borne by society. Explain why the Production distortion is indeed a loss to society, and what is wrong with the logic that leads to the apparent paradox.

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