ECON MACRO
5th Edition
ISBN: 9781337430401
Author: William A. McEachern
Publisher: Cengage Limited
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Question
Chapter 4, Problem 4.7P
A
To determine
The way in which the tax credits that were offered for the expenditures on home insulation would affect the world oil
B
To determine
The way in which the completed Alaskan oil pipeline would affect the world oil price.
C
To determine
The way in which the removal of the ceiling on the price of oil would affect the world oil price.
D
To determine
The way in which the discovery of oil in the North Sea would affect the world oil price.
E
To determine
The way in which the popularity of sport utility vehicles and minivans would affect the world oil price.
F
To determine
The way in which the decline in the use of nuclear power would affect the world oil price.
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Country C imports 80,000 metric tons of steel from Country U and produces domestically 80,000 metric tons per year. The world price of steel is $500 per metric ton. Assuming linear schedules, research analysts estimated the price elasticity of domestic supply to be 0.50 and the price elasticity of domestic demand to be -0.25 in the current market equilibrium. Country C imposes an import duty of $150 per metric ton that caused the world price to fall by 10%.
(a) Summarise and analyse the quantity of steel produced, consumed and imported in Country C. Analyse and discuss the welfare gain from trade in Country C. Show your answers of the steel market with a proper diagram.
(b) Analyse the effects of the consumer surplus, producer surplus, government revenue and deadweight loss in the Country C steel market with the tariff. What are the terms of trade of the Country C steel market after the tariff was imposed? Explain the welfare effects of both countries.
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