1. Consider the following: Canada U.S. Rest of the World (ROW) PxC=$8 PXUS=$5 PxR=$4 (i) Tariff restrictions in effect: Suppose Canada imposes a tariff on its imports of good X. From whom would Canada import? What is the implicit maximum tariff rate so that trade could still exist?
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- The United States has historically imposed import tariffs on goods that include tobacco, canned tuna, steel, and aluminum. Suppose the market for tobacco is illustrated by the accompanying graph. a. As shown, the world price is $2 per pound. Suppose the U.S. imposes a tariff of $1 per pound. Adjust the price line labeled "World price with tariff" (at the top of the graph) to reflect this tariff. b. Use the letters and values in the graph to fill in the following table. Without tariff With import tariff Price Quantity demanded Quantity supplied Domestic consumer surplus Domestic producer surplus Government revenue Total economic surplus c. If the government decides to replace the tariff with a quota that will have the same effect on the market as the tariff, the quota should restrict imports to____________________( 1million pounds, 2 million…NoneUse the following graph, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product, to answer the next question. With a Pt−Pc per-unit tariff, per-unit revenue received by domestic and foreign producers respectively will be a. Pc and Pa. b. Pa and Pc. c. Pa and Pt. d. Pt and Pc.
- Suppose a large country A initially imposed a tariff on its imports and is now considering removing its tariff. Use a domestic-market graph to a) show the effect of country A’s tariff removal on the world’s price, country A’s import price, import quantity, consumer surplus, producer surplus, and government revenue. b) identify country A’s net welfare change as a result of its tariff removal. Is country A unambiguously better off? c) Use a different graph to show how foreign producers will be affected by country A’s tariff removal? d) What factor determines the level of optimal tariff for country A? Please make sure to graph fpr both parts "a" and "c"4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for oranges in Zambia. The world price (Pw) of oranges is $780 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 oranges and that there are no transportation or transaction costs associated with international trade in oranges. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 1275 Domestic Demand 1165 1110 1055 X 1000 945 890 I PRICE (Dollars per ton) 1220 835 780 725 " 0 40 Domestic Supply 80 120 160 200 240 280 QUANTITY (Tons of oranges) " Pw 320 380 400 (?)2. Welfare effects of a tariff in a small country Suppose Guatemala is open to free trade in the world market for oranges. Since Guatemala is small relative to the international market, the demand for and supply of oranges in Guatemala have no impact on the world price. The following graph shows the domestic market for oranges in Guatemala. The world price of a ton of oranges is Pw = $350. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). PRICE (Dollars per ton) 710 Domestic Demand Domestic Supply 670 630 590 550 510 470 430 28 8 8 8 8 8 8 8 390 350 P. 310 0 15 30 45 60 75 90 105 120 135 150 QUANTITY (Tons of oranges) CS PS Because Guatemala participates in international trade in the market for oranges, it will import tons of oranges. Now suppose the Guatemalan…
- The figure below shows the US domestic supply and demand for CD-ROM drives. The world price is $15 (per million CD-ROM drives). Price ($) 25 15 0 $25 b. $15 $10 3 a. U.S. market C. d. $0 6 9 SU.S. 12 Millions of CD-ROM drives Suppose the US implements a tariff on imports of CD-ROM drives. After the tariff is implemented, the US imports 3 million CD- ROM drives. What is the amount of the tariff? DU.S. Hint: What does it mean/ look like on the graph for the US to import 3 million units? Q3. Welfare effects of a tariff in a small country Suppose Ronduras is open to free trade in the world market for soybeans. Because of Honduras's small size, the demand for and supply of soybeans in Honduras do not affect the world price. The following graph shows the domestic soybeans market in Honduras. The world price of soybeans is Pw = $400 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). 1200 Domestic Demand Domestic Supply 1100 CS 1000 900 PS 800 700 600 500 400 300 200 100 120 140 160 180 200 20 40 60 80 QUANTITY (Tons of soybeans) PRICE (Dollars pe: ton)Economics Question
- Consider the case of the following large country (all prices are measured in euros, and quantities are measured in single units): – Domestic demand curve: P = 3600 –3Q – Domestic supply curve: P = 2Q – World free trade price of imports = 140 euros per unit – When the tariff is introduced, domestic prices rise by exactly one third of the amount of the tariff. Calculate the following. Also show your workouts, draw a diagram depicting the importing country market under free trade and with a tariff. With a 30 euro specific tariff: The change in consumers' surplus going from free trade to the tariff, in euros: __________________________________________________________________________________ The change in producers' surplus going from free trade to the tariff, in euros: __________________________________________________________________________________ The amount of tariff revenue, in euros: __________________________________________________________________________________ The change…Please explain/show steps as to how you arrived at your answer. Thank you.Carefully explain how the imposition of a tariff is different for a large country (that can affect the world price) than a small country. Show your work graphically and explain in words.