EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Chapter 9, Problem 3QR
To determine
The changes in
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Your textbook discusses the benefits of cheaper imports on pages 171-173. Draw a graph that shows the effects on consumer and producer surplus (gain or loss) that result from a country importing a good.
The US, the domestic country, is currently operating a price of $14 per hammer.
The US and China are not engaging in international trade. A new treaty is signed, and the world price and domestic price of the product are now $10 per unit. The US producers claim that this new treaty will harm them. The world price of hammers is $10 per hammer before and after the treaty.
A. Calculate the consumer surplus before international trade is allowed. Show your work.
A. Calculate the consumer surplus after international trade is allowed. Show your work.
C. Will the producers in the domestic economy support or argue against opening up to international trade? Briefly explain and support your answer.
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0
150
$1500
$625
$2800
$865
Price of
Calculators
$27
12
7
2
300 400
Domestic
Supply
Domestic
Demand
World
Price
Quantity of
Calculators
The figure above shows the domestic market for calculators in Haiti. What is the change in
total surplus in Haiti because of trade?
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- Analyze the Economic Effects of Tariffs and Quotas. Give examples.arrow_forwardVietnam has a policy of free trade in motorcycles which are sold in world markets at a price of 10,000 per motorcycle. Under free trade, Vietnam produces 100,000 motorcycles and imports 100,000 motorcycles. To provide some protection to the domestic industry, Vietnam imposes an import tariff of $1500 per motorcycle. With this tariff in place, production in Vietnam rises by 5,000 motorcycles and consumption drops by the same amount. Calculate the effects of the tariff on: a. Consumer Surplus b. Producer Surplus c. Government Revenues d. Overall Welfare e. If the tariff imposed by the Vietnamese had led to small reduction in world prices of, say, 250 dollars, how, qualitatively, would the welfare calculations (a), (b), (c) and (d) above change?arrow_forwardIdentify and explain who will make and lose money from this tariff. Identify the people and organizations that will benefit from the tariff. Identify the people and organizations that will suffer because of the tariff. How will the tariff impact your company?arrow_forward
- Georgia and Moldova are famous for their quality of wine and the United Kingdom decides to start importing from them. There is an 5£ tariff on imported wine. Considering the graph below, where does the UK buy its wine from and how much does it cost on the domestic market? Price per bottle £10 £7 Moldovan price £5 Georgian price UK demand for imported wine Quantity (millions of bottles per year) 10 15 22 Suppose the UK joins a trade bloc with Moldova and maintains its 5£ tariff on wine from outside the bloc. a) What will the new domestic price be? b) How much do consumers gain/lose? c) How about the government? d) Is there trade creation or trade dıversion or both? e) How much does the UK gain/lose?arrow_forwardCan someone answer d,e, and f?arrow_forwardYou have just been put in charge of trade policy for Malawi. Coffee is a recent crop that is growing well and the Malawian export market is developing. As such,Malawi coffee is aninfant industry.Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you enact? Explain.arrow_forward
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