Assume South Park is initially closed to trade. Domestic supply and demand for winter hats is given by the following equations: D = 60 – 4P, S = 2P – 6. | %D a. Suppose South Park opens up to trade and the world price for winter hats is $6. What happens to domestic production and consumption? What is the quantity imported? b. Suppose the mayor of South Park imposes a $3 tariff on winter hat imports. What effect does the tariff have on the welfare of consumers, producers and the government in South Park? What is the net welfare effect of the tariff?

Assume South Park is initially closed to trade. Domestic supply and demand for winter hats is given by the following equations: D = 60 – 4P, S = 2P – 6. | %D a. Suppose South Park opens up to trade and the world price for winter hats is $6. What happens to domestic production and consumption? What is the quantity imported? b. Suppose the mayor of South Park imposes a $3 tariff on winter hat imports. What effect does the tariff have on the welfare of consumers, producers and the government in South Park? What is the net welfare effect of the tariff?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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