please show work, Thank you Trade Policy (Total 62 points) 1. (16 points) Consider a small...
(a) Home Market (b) Import Market Price Price Deadweight loss due to the tariffb+d S, S2 D2D Quantity Imports FIGURE 8-5 Effect of Tariff on Welfare The tariff increases the price from PW to pW+ t. As a result, consumer surplus falls by (a + b+ c+ ). Producer surplus rises by area a, and government revenue increases by the area c. Therefore, the net loss in welfare, the deadweight loss to Home, is (b + a), which is measured...
4. Consider a large country importing a good from the world market. The government of this country decides to impose import tariff equal to t. In response to this tariff, foreign exporting firms decide to pay some of the tariff burden and transfer only some of the tariff to the consumers in the importing country. The two graphs below show the effect of the import tariff in the home market and in the world market. Let Pw is the initial...
E-H ONLY. THERE ARE THREE PICTURES updated figure 2 roblem 2: Trade Policy. demand for cars in Home is q 30 - P and the supply of cars in Home is q -P. The demand for cars in Foreign is q 20-P and the supply of cars in Foreign is q P. a) Calculate the equilibrium price and quantity in each country under isolation. b) Who is the importer of cars and who is the exporter? c) Write the import...
1. Small Country Policy Analysis with a Positive Externality. The home country imports steel at a constant world price of 2. Home demand and supply for steel are shown in the top panel of Diagram 1 on the next page. Suppose there is a positive externality associated with steel production, and the marginal social benefit is shown in the bottom panel of Diagram 1. a) Find the values of P, D, Q, consumer surplus, and producer surplus in free trade....
Price So 1 Po PwT Pw 4 5 9 10 6 7 11 12 13 14 Do Qi 2 0 04 Qs Qantity The graph above depicts the domestic market for good X. Domestic demand and supply are represented by DD and So respectively. The domestic price is Po and the world price is Pw. The price Pw-T, represents the world price plus a tariff. If the domestic country's government wanted to maximize total surplus then O the government should...
1. Suppose Home is a small country. Use the graphs below to answer the questions. a. Calculate Home consumer surplus and producer surplus in the absence of trade. b. Now suppose that Home engages in trade and faces the world price, P* = $6. Determine the consumer and producer surplus under free trade. Does Home benefit from trade? Explain. c. Concerned about the welfare of the local producers, the Home government imposes a tariff in the amount of $2 (i.e....
The U.S. (Home country) and Japan (Foreign country) are trading with each other in the auto industry. Both are large countries in this market for cars. The U.S. imports cars from Japan. The U.S. demand curve for cars is given by: D =210 – 30P The U.S. supply curve for cars is given by: S = 30+ 30P Japan’s demand curve for cars is given by: D* = 50 – 10P Japan’s supply curve for cars is given by: ...
GW7 Social welfare with tariff small country Px D-imports S-exports with tariff 200 S-exports 200 300 Qx millions 100 Qx millions Equation for inverse demand in domestic market Px = Equation for inverse supply in domestic market Px = Equation for inverse import demand in international market Px = At World price = 200, social welfare = With a 20 dollar tariff, consumer surplus = With a 20 dollar tariff, producer surplus = With a 20 dollar tariff, govt. revenue...
Consider a situation where the Basic Tariff Model holds for a country that imports Commodity S. Initially, the country has trade with tariffs on Commodity S. It then changes its policy and gets rid of the tariff on Commodity S and allows trade of S at the world price. Answer the following assuming there is/was no foreign retaliation. (a) What happens to the price of S in the country? (b) What happens to the amount of domestic production of S...
Paradise is a small country that under free trade imports roses at $2.00 a dozen. Its domestic demand curve and domestic supply curve for roses are as follows: D = 100 - 10 P S = 10 + 10 P Calculate the equilibrium quantity imported under free trade. Under free trade: M = _________ If the government imposes a tariff of $1.00 on roses show graphically and calculate the impact of this tariff Graph: Under tariff: Domestic...