According to the data in Figure B above, given a tariff of $120 per unit, what is the change in the country's producer surplus relative to free trade? A. 9600. B. 6000. C. 4800. D. 3600. Based on the data in Figure B above, what is the amount of efficiency loss resulting from imposing a $120 tariff? A. - 10800. B.-7200. C. -3600. D. 0. P 5 с 450 Domestic Supply 300 240 a b C d 120 20 20 Imports before the tariff 40 50 70 110 Imports after the tariff World Price + tariff World Price Domestic Demand Q
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- 4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Guatemala. The world price (Pw) of soybeans is $550 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 830 Domestic Demand Domestic Supply 795 760 725 O 690 655 620 585 Pw 550 515 480 30 60 06 120 150 180 210 240 270 300 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)35 30 Domestic demand 25 20 15 10 Domestic supply 10 20 30 40 50 60 Quantity (thousands per month) This represents the domestic market for widgets. Free trade is allowed and the current world price is $12. Consider that the government decides to impose a tariff of $2 on widgets. As a result, consumer surplus, in thousands, is equal to $60 $120 $196 $280 Price ($)S=20+20P and D = 100-20P are Home's supply and demand curves for wheat. * S = 40 + 20P and D = 80-20P are Foreign's supply and demand curves for wheat. With free trade the price of wheat is $ (Enter your response rounded to the nearest penny.) Suppose home imposes a specific tariff of $0.50 on wheat. Home consumers will now pay $ and foreign's export price is $ (Round your responses rounded to the nearest penny.) Now assume that foreign is a much larger country. Specifically, Foreign's demand curve for wheat is D = 800-200P. Its supply curve is S = 400 + 200P. * With free trade the price of wheat is $ (Round your response rounded to the nearest penny.) Suppose Home imposes a specific tariff of $0.50 on wheat. Home consumers will now pay $ (Round your response rounded to the nearest penny.) $ In which case does the tariff create the greatest terms of trade gains? When Home is and foreign's export price is
- Consider the pharmaceutical market in the US. The demand is Q = 200 - 2P Q P while supply is 2 40s Q P. The free trade price is 25. A) Calculate consumer surplus, producer surplus, total surplus, and imports under free trade. Illustrate all of these on a fully labelled graph. B) Suppose that the US puts a tariff of 6 on pharmaceuticals. When it does this, the free trade prices falls to 24. Calculate consumer surplus, producer surplus, tariff revenues, total surplus and deadweight loss under the tariff. Illustrate all of these on a fully labelled graph. C) Is the country better off under the tariff or free trade? How do you know?A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is Qs = 50+ 5P The demand curve is Qd = 400-10P In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $. (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit $. (Round your answer to the nearest penny) c. Why does the production subsidy produce a greater gain in welfare than the tariff? O A. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OB. The production subsidy more directly addresses the externality. C. The $5.00 production subsidy increases production more than the $5.00 tariff. D. Both A and B O E. All of the above d. The optimal production subsidy is $ (Round your answer to the nearest penny.)The following graph shows the domestic supply of and demand for soybeans in Honduras. The world price (Pw) of soybeans is $530 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 890 Domestic Demand Domestic Supply 850 810 770 730 690 650 610 570 Pw 530 490 50 100 150 200 250 300 350 400 450 500 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)
- The following graph shows U.S. demand for and domestic supply of a good. Suppose the world price of the good is $1.00 per unit and a specific tariff of $0.50 per unit is imposed on each unit of imported good. In such a case, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by the area Figure 19.2 Price per unit a $2.00 1.50 1.00 Quantity (units) 35 50 65 75 85 O h O c+g O c O c+h O gHomework (Ch 09) 4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Colombia. The world price (Pw) of soybeans is $545 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the worl price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domes suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 860 Domestic Demand Domestic Supply 825 790 755 O 720 685 650 615 580 Pw 545 510 90 120 150 180 210 240 270 300 30 60 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)The cost of producing cars in Canada is $30,000, while the cost of producing cars in Mexico is $22,000, while in the U.S. it costs $18,000. Canada currently imposes a 50% tariff on all automobile imports. a) If Canada enters into a customs union with Mexico, will this lead to trade diversion or trade creation? b) If the tariff rate was originally 100%, would Canada entering into a customs union with Mexico lead to trade diversion or trade creation? c) If the tariff rate was originally 100%, and the cost of producing cars in the U.S. was $12,000, would Canada entering into a customs union with Mexico lead to trade diversion or trade creation?
- suppose the supply from China is described by Qs=0.01P-1 and the domestic (American) demand is.Qd-11-0.1P The quantities are in millions of phones and the prices are in $/phone. If the U.S. federal government only cared about its own residents' welfare then it would make sense to ignore producer surplus since those benefits accrue to producers in China. The U.S. is considering imposing a small tariff of $t in order to push down the price producers receive and capture more surplus for America. Fill in the table below to find the surplus for America (consumer surplus + tariff revenue) for different sized tariffs. tariffAmerica's surplus $0 $1250 million $100 $1462.5 million $200$____ million $300$ $400$ $500$1562.5 million million millionQD = 100 – 2p QS = 2p – 20 Find the domestic market equilibrium. Graph the impact of opening to international trade with a world price of 48, clearly labelling the new consumer surplus and producer surplus. Find the exact numerical amounts of consumer surplus, producer surplus, government revenue, and total welfare, for the case of autarky and the case of international trade. What would happen if the government imposed a tariff of 20/unit in this market? Explain.Suppose Russia can produce automobiles relatively cheaply, but they have poor gas mileage and create a great deal of air pollution. The U.S. government, concerned about the quality of air, would like to see fewer Russian automobiles and more cleaner-running American automobiles on the road. What is the nature of the market failure that would justify the U.S. government taking some action against the importation of Russian automobiles? Explain why imposing a tariff is a second-best policy to employ in this case and what policy choice would be more efficient if: i) US carries out its own solution; ii) the two countries governments cooperate.