Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 20, Problem 2WNG
(a)
To determine
The level of imports at ‘Pw’.
(b)
To determine
The level of import at ‘Pw+T’.
(c)
To determine
The loss in
(d)
To determine
The gain in
(e)
To determine
The revenue received as a result of tariff.
(f)
To determine
The net loss to society as a result of tariff.
(g)
To determine
The net benefit to society moving from tariff to non-tariff.
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In the accompanying figure,
PW is the world price and PW + T is the world price plus a tariff. Identify the following:a. The level of imports at PWb. The level of imports at PW + Tc. The loss in consumers’ surplus as a result of a tariff d. The gain in producers’ surplus as a result of a tariffe. The tariff revenue received by the government as a result of a tariff f. The net loss to society as a result of a tariffg. The net benefit to society of moving from a tariff to no tariff
A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country’s government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $11 per T-shirt and domestic production rises to 15 million T-shirts per year. On average, each worker in the T-shirt industry produces 20,000 T-shirts. What would be the loss in consumer surplus for each job created (as a result of the quota)? SHOW ALL YOUR WORK. Find the decrease in consumer surplus. Find the increase in quantity supplied (change in production). Find the number of jobs created. Find the loss in consumer surplus per job created.
A big country with a good's demand described by P = 150 - 3Q and a good's supply described by P = 40 + 2Q implements a $8 tariff, which ultimately decreases the world price from $66 to $64.
(a) Calculate the total surplus under each scenario: no trade, free trade, and protected trade.
(b) Calculate the distortion loss that is created by the tariff.
(c) Suppose the tariff led to an increase in the current account, while primary budget deficit and private saving both increased as well. What happened to the economy's investment?
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Similar questions
- From the Work It Out Effects of Trade Barriers, you can see that a tariff raises the price of imports. What is interesting is that the price rises by less than the amount of the tariff. Who pays the rest of the tariff amount? Can you show this graphically?arrow_forwardDescribe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is economy in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?arrow_forwardquestion 17 Consider a small open economy that produces computers and textiles.The world price of computers is greater than the country's autarky price of computers and the world price of textiles is less than the county's autarky price of textiles. With free trade a. There is excess supply of computers in the domestic economy, so computers are exported b. There is excess supply of textiles in the domestic economy, so textiles are imported c. There is excess demand for computers in the domestic economy, so computers are imported d. None of the other optionsarrow_forward
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