The following figure shows the domestie demand and supply curves for a good. With free trade, the price of the good in the domestic market is Ps. The govermment introduces a 5% tariff in the market which raises the domestic price to Pz. Figure 7-1 Price Supply Demand E Quantity o Figure 7-1. With the imposition of the tariff, the level of imports to the domestic market is

The following figure shows the domestie demand and supply curves for a good. With free trade, the price of the good in the domestic market is Ps. The govermment introduces a 5% tariff in the market which raises the domestic price to Pz. Figure 7-1 Price Supply Demand E Quantity o Figure 7-1. With the imposition of the tariff, the level of imports to the domestic market is

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 2SQP

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A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and quantity of flat screen TVS?
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Consideracompetitivemarketwheremarketdemandandthemarketsup- ply are given, respectively, byQD =1000−100P and QS =100P a)Findthecompetitiveequilibriumprice,quantity,andproducersurplus. (b) Suppose the government wants to help the consumers by imposing a price ceiling of Pc = 4. Find the market equilibrium price, quantity, and producer surplus. (c) Suppose now the producers are complaining, and the government de- cides to keep the price ceiling policy, but at the same time, the government will give a subsidy of s per unit to the producers. What is value of s that can make the producers as well off as before imposing the price ceiling (that is, producer surplus equals to the value in part (a))? Please express final numerical answers in decimal format
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