Study Guide for Mankiw's Principles of Microeconomics, 7th
7th Edition
ISBN: 9781285864242
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 9, Problem 5CQQ
To determine
The policy which hurts consumers and helps producers and increases trade.
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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?
The nation of Textilia does not allow imports of clothing. In its equilibrium without trade, a T-shirt costs $20 and the
equilibrium quantity is 3 million T-shirts. One day, after reading Adam Smith's The Wealth of Nations while on vacation, the
president decides to open the Textilian market to international trade. The market price of a T-shirt falls to the world price of
$16. The number of T-shirts consumed in Textilia rises to 4 million, while the number of T-shirts produced declines to 1
million. If the domestic demand curve and domestic supply are both linear, the resulting increase in the total surplus in the
Textilian T-shirt market is about
Zero dollars
$6 million
$14 million)
$4 million
$12 million
$8 million
Which of the following is NOT a law that impacted U.S. tariffs?
A.
Food, Drug, and Cosmetic Act
B.
Smoot-Hawley Act
C.
McKinley Act
D.
Fordney-McCumber Act
Chapter 9 Solutions
Study Guide for Mankiw's Principles of Microeconomics, 7th
Ch. 9.1 - Prob. 1QQCh. 9.2 - Prob. 2QQCh. 9.3 - Prob. 3QQCh. 9 - Prob. 1CQQCh. 9 - Prob. 2CQQCh. 9 - Prob. 3CQQCh. 9 - Prob. 4CQQCh. 9 - Prob. 5CQQCh. 9 - Prob. 6CQQCh. 9 - Prob. 1QR
Ch. 9 - Prob. 2QRCh. 9 - Prob. 3QRCh. 9 - Prob. 4QRCh. 9 - Prob. 5QRCh. 9 - Prob. 6QRCh. 9 - Prob. 1PACh. 9 - Prob. 2PACh. 9 - Prob. 3PACh. 9 - Prob. 4PACh. 9 - Prob. 5PACh. 9 - Prob. 6PACh. 9 - Prob. 7PACh. 9 - Prob. 8PACh. 9 - Prob. 9PACh. 9 - Assume the United States is an importer of...Ch. 9 - Prob. 11PA
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- Write short notes on International Trade theoriesarrow_forwardWith free trade, for a world price of $4 per wrench, Spain is importing _________wrenches. If the world price is $4 per wrench, and the government of Spain imposes a tariff of $2, Spain produces ____________ and imports __________wrenches. If the world price is $4 per wrench, and the government of Spain imposes a tariff of $2, how much tariff revenue will the Spain’s government collect? _____arrow_forwardIf the U.S. did not trade what price would the good cost? If the world price was $200 what quantity would the U.S. produce? What quantity would be imported. What is consumer surplus at the world price? Producer surplus at the world price? Who benefits from the free trade and who gets hurt If the U.S. government puts a tariff on the good so now the price is $300 who benefits, who is hurt? What quantity will U.S. producers now produce? What happens to consumer surplus from $200 to $300? What does producer surplus do with the price going from $200 to $300? What does the government gain with the tariff? Who benefits from free trade overall? Who benefits from trade restrictions? Why is a tariff the most used trade restriction?arrow_forward
- The nation of Textilia does not allow imports of clothing. In its equilibrium without trade, a T-shirt costs $20, and the equilibrium quantity is 3 million T-shirts. After reading Adam Smith’s The Wealth of Nations while on vacation, the president decides to open the Textilian market to international trade. The market prices of a T-shirt falls to the world price of $16. The number of T-shirts consumed in Textilia rises to 4 million, while the number of T-shirts produced declines to 1 million. Illustrate the situation just described in a graph. Your graph should show all the numbers. Calculate the change in consumer surplus, producer surplus, and total surplus that results from opening trade. (Hint: Recall that the area of a triangle is ½ x base x height.)arrow_forwardPrice 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_forwardIn reference to tariffs, What is the reason that U.S. imposes tariffs? why the U.S. imposes tariffs on imports?arrow_forward
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