Question

Effects of Free Trade and Restrictions Use the graph below to answer the following questions:

The graph above shows the demand and supply of wrenches for the country of Spain.

1. If trade is avoided, Spain consumes _____ wrenches at a price of _____ per wrench.

2. With free trade, for a world price of $4 per wrench, Spain is producing _____wrenches.

3. With free trade, for a world price of $4 per wrench, Spain is consuming _______ wrenches.

4. With free trade, for a world price of $4 per wrench, Spain is importing _________wrenches.

5. If the world price is $4 per wrench, and the government of Spain imposes a tariff of $2, Spain produces ____________ and imports __________wrenches.

6. 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? _____

Answer 1

Ans. 1) Spain consumes 9 wrenches at a price of $7.5 per wrench.

2) 4 wrenches.

3) 15 wrenches

4) 11 wrenches

5) Spain produce 6 wrenches and imports 6 wrench.

6) Tariff revenue would be $12.

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