ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Consider a small country imposing a tariff of $2/unit in imported corn (Policy A). Suppose the country was importing 300 units and this policy resulted in a decline of imports to 250 units.
a. Draw the XS and MD before and after the policy is imposed. Label the level of imports.
b. Suppose the government decides to double the tariffs and as a result the imports decrease to 200 units (Policy B). Show this on your graph and label the new level of imports.
c. Suppose the government adjusts the policy so that there is a tariff of $2/unit is imposed up to a quota of 100 units and then the tariff rate doubles to $4/unit for any imports above that level (Policy C). Show this on your graph and label the new level of imports.
d. Under which policy are imports the highest?
e. Under which policy is government revenue the highest?
f. Under which policy is domestic price the highest?
g. Under which policy is world price the highest?
h. Can you think of reasons why Policy C may be preferable to a quota at 100 units
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