Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 20, Problem 10P
To determine
To illustrate:
The effect ofthetariff on domestic price, domestic quantity purchased, the domestic quality produced, the level of import,
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What will a tariff and an import quota do to the quantity of imports and the domestic price?
reduce the quantity of imports and lower domestic price
increase the quantity of imports and raise domestic price
increase the quantity of imports and lower domestic price
reduce the quantity of imports and raise domestic price
Vietnam has a policy of free trade in motorcycles which are sold in world markets at a price of 10,000 per motorcycle.
Under free trade, Vietnam produces 100,000 motorcycles and imports 100,000 motorcycles. To provide some protection
to the domestic industry, Vietnam imposes an import tariff of $1500 per motorcycle. With this tariff in place, production
in Vietnam rises by 5,000 motorcycles and consumption drops by the same amount. Calculate the effects of the tariff on:
a. Consumer Surplus b. Producer Surplus c. Government Revenues d. Overall Welfare e. If the tariff imposed by the
Vietnamese had led to small reduction in world prices of, say, 250 dollars, how, qualitatively, would the welfare
calculations (a), (b), (c) and (d) above change?
Chapter 20 Solutions
Exploring Macroeconomics
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