Essay on Example

1156 WordsOct 22, 20145 Pages
Part 1: Answer the following questions. Use formulas and show calculations as well as final answers. a. Does the United States have a comparative advantage in wingdings? Explain. b. Discuss the effect of the tariff on the number of imports. c. How did the imposition of the tariff change consumer surplus? d. How did the imposition of the tariff change producer surplus? e. What is the overall result of the tariff in terms of welfare? A. The US does not have a comparative advantage in wingdings because the world price is below their equilibrium domestic price of $10. It is cheaper to import wingdings than it is to produce them. If the US had a comparative advantage in wingdings, we would export them. Comparative advantage is…show more content…
Part 2: Allowing free trade between countries can be beneficial, but it also imposes costs. Use the ITT Tech Virtual Library to research the costs and benefits of allowing free trade. Discuss aspects of free trade that some may consider unfair. For example: a. Distribution of costs and benefits of free trade. In other words, does everyone share in the gains and the costs equally? b. Competing with different labor restrictions (or lack thereof), such as slave or child labor. c. Differences in environmental standards. In the following basic demand and supply model free trade allows countries to specialize in producing the goods in which they have the lowest opportunity cost. This lowers the price of the good in other countries, as those countries can import it from the lower-cost countries. Generally, consumers in a country benefit from the lower prices, but producers lose revenue because they produce less and at a lower price in equilibrium (and the government gets less tax revenue if there was a tariff in place before free trade). Overall, the total surplus is greater, but not everyone shares in the benefits and costs equally. Manual labor (manual labor in American English) or manual work is physical work done by people, most especially in contrast to that done by machines, and also to that done by working animals. It

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