In a two countries, two commodities and two factors of production model, and under the assumption of constant foreign exchange rate and income, suppose that Nation 2 which is a small nation imposes an ad-valorem tariff on its importable commodity X. Show on a figure by partial equilibrium analysis; a) The consumption, production, trade, revenue and distribution of income effects of the tariff. b) The welfare effect of the tariff as a whole.

In a two countries, two commodities and two factors of production model, and under the assumption of constant foreign exchange rate and income, suppose that Nation 2 which is a small nation imposes an ad-valorem tariff on its importable commodity X. Show on a figure by partial equilibrium analysis; a) The consumption, production, trade, revenue and distribution of income effects of the tariff. b) The welfare effect of the tariff as a whole.

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 1CQQ

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In a two countries, two commodities and two factors of production model, and under the assumption of constant foreign exchange rate and income, suppose that Nation 2 which is a small nation imposes an ad-valorem tariff on its importable commodity X. Show on a figure by partial equilibrium analysis; a) The consumption, production, trade, revenue and distribution of income effects of the tariff. b) The welfare effect of the tariff as a whole.
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