Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134421315
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 20, Problem 4.2P
(a)
To determine
Identify the
(b)
To determine
Identify the domestic price, domestic supply, domestic demand, and the value of imports.
(c)
To determine
Identify the changes in domestic price, domestic supply, domestic demand, and imports due to the imposition of the tariff.
(d)
To determine
Calculate the value of government revenue after the imposition of the tariff.
(e)
To determine
Identify the impact of tariff.
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A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount:
World price of wine (free trade): $20 per bottle
Domestic production (free trade): 500,000 bottles
Domestic production (after tariff): 600,000 bottles
Domestic consumption (free trade): 750,000 bottles
Domestic consumption (after tariff): 650,000 bottles
Draw a demand and supply curve for the country’s wine market to show the effects of the tariff.
Find the change in consumer surplus, producer surplus, and government revenue resulting from the tariff.
The following graph represents Canada's domestic supply and demand for coffee.Assume that Brazil is the only country producing and selling coffee in the world market.
B) The government opens the market to free trade, and Brazil enters the market, pricingcoffee at $1 per pound.
i. What will happen to the domestic price of coffee?ii. What will be the new domestic quantity supplied and domestic quantity demanded?iii. How much coffee will be imported from Brazil?
The following graph shows the domestic market for oil in the United States, where SDSD is the domestic supply curve, and DDDD is the domestic demand curve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the world price of oil. Under free trade, the United States faced a total supply schedule of SD+WSD+W, which shows the quantity of oil that both domestic and foreign producers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $240 per barrel of oil and a quantity of 9 million barrels. At this price, the United States imports 6 million barrels of oil.
Suppose the U.S. government imposes a $60-per-barrel tariff on oil imports.
Chapter 20 Solutions
Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
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