Question

THE WELFARE EFFECTS OF A TARIFF The diagram that follows describes the demand and supply conditions for a nation that both produces and imports autos. As the diagram indicates the government has just disrupted free trade by imposing a tariff on imported autos. 1. Calculate the dollar value of each of the following: (a) The consumer's surplus before the tariff (b) The consumer's surplus in autarchy (c) The consumer's surplus after the tariff (d) The producer's surplus before the tariff (e) The producer's surplus in autarchy (f) The producer's surplus after the tariff (g) the redistribution effect (also known as rent) (h) the protective effect G) the terms of trade effect (k) the revenue effect () the consumption effect (m) The quantity of imports before the tariff (n) The dollar value of imports after the tariff (o) The deadweight loss of the tariff (p) What is the value of the lariff 150 90 70 b 5 D 30 320 340 350 3 60 390 Price (Dollars)

Answer 1

a) CS before the tariff=g+e+a+b+c+d+f

= 0.5*390*(150-50)

= 19500

b) CS in autarky = g

= 0.5*350*(150-90)

= 10500

c) CS after the tariff = g+e+f

= 0.5*360*(150-70)

= 14400

d) PS before the tariff

= 0.5*320*(50-30)

= 3200

e) PS in autarky

= 0.5*350*(90-30)

= 10500

f) PS after the tariff

= 0.5*340*(70-30)

= 6800

As per HOMEWORKLIB RULES, more than four parts are answered.