1.
Reference: Ref 19-4 (9-4)
(Figure: Foreign Trade with a Tariff) Refer to the figure. A $1
tariff results in:
a. an increase in imports of 80 million units.
b. a decrease in imports of 80 million units.
c. an increase in imports of 100 million units.
d. a decrease in imports of 100 million units.
2. In 1845, French economist Frédéric Bastiat famously compared tariffs to blocking out the sun since both low-priced imports and free sunlight discourage domestic industry. What part of the trade diagram best describes the encouragement of domestic industry if Bastiat's “blockade” was taken seriously?
a. deadweight loss
b. fall in consumer surplus
c. fall in producer surplus
d. wasted resources
3.Figure: Foreign Trade 2
Reference: Ref 19-9 (9-9)
(Figure: Foreign Trade 2) Refer to the figure. What is the dollar
value of wasted resources as a result of prohibiting trade in this
market?Group of answer choices
a. $30,000
b. $5,000
c. $2,500
d. $22,500
1) b. a decrease in imports of 80 million units. Before tariff imports are (240 - 60) = 180 and after tariff imports are (200 - 100) = 100. Hence imports are reduced to 80 million
2) c. $2,500. Without trade, domestic quantity is 1000 units but after trade domestic quantity is 800 units. This results in a trade gain of 0.5*(50 - 25)*(1000 - 800) = $2500. These gains are lost when trade is not allowed.
1. Reference: Ref 19-4 (9-4) (Figure: Foreign Trade with a Tariff) Refer to the figure. A...
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Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. 1 Price Domestic Supply - -- 90 80+ 70+ 60+ Domestic Demand 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 Quantity 27. Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. With trade and a tariff, consumer surplus is a. $75,000 and...