ECNS 201 PRINTOUT
8th Edition
ISBN: 9781337096553
Author: Mankiw
Publisher: CENGAGE L
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Question
Chapter 9, Problem 3QR
To determine
The changes in consumer, producer and total surplus due to importing.
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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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- For all questions, consider this graph: Save Price 8 7 6 5 4- 3 2 0 Tariff Domestic supply Domestic demand 10 20 30 40 50 60 70 80 World price Quantity Initially, this small nation doesn't trade. Calculate its consumer surplus before any trade occurs, carefully following all numeric instructions.arrow_forwardThe united states is a big exporter of animals feeds, corn ,meat, fruits, vegetables and other agriculture commodities.Explain how foreign trade affects the domestic supply of such products.arrow_forwardAnalyze the Economic Effects of Tariffs and Quotas. Give examples.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_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
- What is the effect of placing tariffs on products imported into the U.S. from other countries? Are there any problems with this?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_forwardWhat are tariffs? Why do governments impose tariffs on imported goods?arrow_forward
- Price P1 P3 Y V P2 U D Quantity Q1 Q4 Qs Q3 Figure 4 Domestic market for a good Figure 4 shows a country's domestic market for a good. There is perfect competition. The supply curve, S, is the domestic producers' supply curve for the good. D is the domestic consumers' demand curve. With free trade, the price in the domestic economy equals the world price, P2. However the domestic government has imposed a tariff on imports that has raised the price of the good in the domestic economy from P2 to P3. Which area or areas of the diagram show the government's tariff revenue? Select one answer. Select one: O Z O w plus Y ох O X plus Z Narrow_forwardAssume the United States is an importer of televisions and there are no trade restrictions. US consumers buy 1 million televisions per year, of which 400,000 are produced domestically and 600,000 are imported,a. Suppose that a technological advance among Japanese television manufacturers causes the world price of televisions to fall by $100. Draw a graph to show how this change affects the welfare of U.S. consumers and U.S. producers and how it affects total surplus in the United States.b. After the fall in price, consumers buy 1.2 million televisions, of which 200,000 are produced domestically and 1 million are imported. Calculate the change in consumer surplus, producer surplus, and total surplus from the price reduction. c. If the government responded by putting a $100 tariff on imported televisions, what would this do? Calculate the revenue that would be raised and the deadweight loss. Would it be a good policy from the standpoint of U.S. welfare? Who might support the policy?d.…arrow_forwardThe world price of wine is below the price that would prevail in Canada in the absence of trade. Assume that Canadian imports of wine are a small part of total world wine production. The following graph shows the Canadian market for wine under free trade. Use the green triangle (triangle symbol) to shade consumer surplus when Canada is open to trade. Then use the purple triangle (diamond symbol) to shade producer surplus in this case. Price of Wine Domestic Demand Quantity of Wine Domestic Supply World Price Consumer Surplus Producer Surplus (?)arrow_forward
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