Quiz 9

Explain how a US tariff on foreign trucks would affect each group in the economy. Helps sales because products are artificially cheaper Hurts sales because the increased costs are passed on to consumers Benefits from increased revenue and support from US producers, but risks causing harm to the economy Hurt by higher prices and decreased competition/variety :: Domestic Producers (FORD) :: Foreign Producers (Volkswagen) :: Domestic Consumers (US consumers) :: US Government

12. If the free trade price is lIP and this country imposes a trade tariff of $3, what will be the resulting net welfare loss to the economy? a)$3 b)$27 C)$13.5 d)$40.5 e)$9 13. if the free trade price is IP and this country imposes an import quota of 6 units, what will be the welfare loss to this economy?    a)$3 b)$27 c)$13.5 d)$40.5 e)$18

Suppose there are 2 countries that have the following supply and demand equations in autarky Country A Demand: Q = 80 - 4P Supply: Q = 2P - 4 Country B Demand: Q = 32 - 2P Supply: Q = 8P - 8 a) Given the information above which country would be the importer? (Enter A, B) b)What would be the Free Trade Price? c)What would be the Free Trade quantity traded? d) If the importing country imposes a tariff equal to $2 per unit, what would be the new price in the importing country?

Question 14 The US decides to impose a tariff on Avocados of $0.75 each Under Free Trade you have the following information: World and US Price: $1 per Unit Domestic Consumption Domestic Production: 25 Billion Units 1 Billion Units Under a Tariff you have the following information: New US Price: $1.75 per Unit 21 Billion Units 5 Billion Units (a) How much does the government gain in tariff revenue? Domestic Consumption: Domestic Production: (b) How much do domestic producers gain? (c) How much do consumers lose? (d) What is net national or "dead weight" loss?

Suppose that when a country opens to free trade in a good, the price of that good rises from $10 to $15.  As a result, the domestic quantity supplied rises from 1,000 to 1,020 and the domestic quantity demanded falls from 1,000 to 500.  What are the gains from trade?  Assume linear domestic supply and demand curves.

Vietnam has a policy of free trade in motorcycles which are sold in world markets at a price of 10,000 per motorcycle. Under free trade, Vietnam produces 100,000 motorcycles and imports 100,000 motorcycles. To provide some protection to the domestic industry, Vietnam imposes an import tariff of $1500 per motorcycle. With this tariff in place, production in Vietnam rises by 5,000 motorcycles and consumption drops by the same amount. Calculate the effects of the tariff on: a. Consumer Surplus b. Producer Surplus c. Government Revenues d. Overall Welfare e. If the tariff imposed by the Vietnamese had led to small reduction in world prices of, say, 250 dollars, how, qualitatively, would the welfare calculations (a), (b), (c) and (d) above change?

Suppose that the United States currently both produces kumquats and imports them. The U.S. government then decides to restrict international trade in kumquats by imposing a quota that allows imports of only six million pounds of kumquats into the United States each year. The figure shows the results of imposing the quota. Fill in the following table (enter all numeric responses rounded to the nearest penny for prices and as whole numbers for quantities). Without With Quota Quota World price of kumquats S U.S. price of kumquats $ Quantity supplied by U.S. million firms Quantity demanded million million million million 교차 Quantity imported million Area of consumer ▼ surplus Area of domestic ▼ ▼ producer surplus Area of deadweight loss V Price ($ per lb.) $1.75 1.50- of A C D HI B E J K 15 16 Q (millions of lbs.) Sus Du.s. 880

Trade restrictions affect the overall welfare of an economy, since they change the price consumers pay for a good and the quantity produced and consumed domestically. 33.7

International trade can have big effects on domestic markets. For both an import good and an export good (in other words, address each bulleted item below twice—once for import and once for export), describe how opening up to international trade affects the following: supply or demand for the particular good, the competitiveness of that good’s market, and how the change in competitiveness affects equilibrium price and quantity. Stepping away from the import/export examples, describe how opening up to trade specifically affects a domestic monopoly. Include an explanation, using game theory, of how even a single additional competitor can lead to a market outcome similar to perfect competition

"Imports destroy jobs; exports create them.  The average American is hurt by imports and helped by exports."  Do you agree or disagree with this statement?  can import tariffs and quotas reduce the benefits of trade?

Price P1 D 01 Quantity The graph above shows domestic supply and demand with trade in a SMALL country. With trade, this country can purchase at the world price, Pw. Suppose that this country imposes a $5 per unit tariff on this good. Which of the following is true? O There will not be deadweight losses due to this tariff, since it is a small country. The domestic price will rise by $5. O Consumers will be better off. Producers will not increase domestic production.

Question 35 wer Suppose in an economy with a tariff on the import of sugar, if the domestic demand for sugar decreases, then which of the following is true? The figure is for reference. In the figure D₁ represents domestic demand, S₁ represents domestic supply, S2 represents supply with free trade, and S3 represents supply with tariff imposed. (c) Tariff-restricted trade D₁ S₁ PRICE (dollars per unit) ▬▬▬▬ C 0 qd qt 93 92 QUANTITY (units per year) The price paid by consumer will stay the same and import of sugar will increase. The price paid by consumers will increase and import of sugar will increase. The price paid by consumer will decrease and import of sugar will decrease. The price paid by consumers will stay the same and import of sugar will decrease. S₂

Consider two countries, home and foreign and a single good, Y. Assume that home country imports good Y from foreign country. The import demand curve for good Y in home country is given by: MD = 170 – 2PY and the export supply curve for good Y in Foreign country is given by: EX = PY – 40. Free Trade Price: $70 30 Units of Good Y are traded under free trade If a tariff of $15 is imposed by the home country on each unit of good Y imported, foreign exporters receive a price of $85.    a) If home country imposes a specific tariff of $15 per unit of good Y imported, what is the price of good Y that Home consumers pay? Show your work. b) If home country imposes a specific tariff of $15 per unit of good Y imported, how many units of good Y are traded now? Show your work. c) If home country imposes a specific tariff of $15 per unit of good Y imported, what is the tariff revenue? Show your work. d) Assume that instead of a specific tariff, an import quota will be used on good Y. What is the…