EBK EXPLORING ECONOMICS
7th Edition
ISBN: 9780100544772
Author: Sexton
Publisher: YUZU
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Chapter 28, Problem 11P
To determine
To show:
The effect on domestic price, domestic quantity purchased, the domestic quality produced, the level of import, consumer surplus,
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When a country allows trade and becomes an importer of a good, which of the following is NOT a consequence?
The price received by domestic producers of the good decreases.
The gains of domestic consumers of the good exceed the losses of domestic producers of the good.
The gains of domestic producers of the good exceed the losses of domestic consumers of the good.
The price paid by domestic consumers of the good decreases.
A small country imports T-shirts. With free
trade at a world price of $10, domestic
production is 10 million T-shirts and
domestic consumption is 42 million T-shirts.
The country's government now decides to
impose a quota to limit T-shirt imports to 20
million per year. With the import quota in
place, the domestic price rises to $12 per T-
shirt and domestic production rises to 15
million T-shirts per year. The quota on T-
shirts causes domestic consumers to
A) gain $7 million.
B) lose $7 million.
C) lose $70 million.
D) lose $77 million
Based on the information from the previous graph, absent international trade total surplus is $
The following graph shows the same domestic supply and demand curves for melons in Bangladesh. Now, suppose that the Bangladeshi government
changes its stance on international trade, deciding to allow free trade in melons. The horizontal black line (Pw) represents the world price of melons at
$500 per ton. Assume that Bangladesh's entry into the world market for melons has no effect on the world price and there are no transportation or
transaction costs associated with international trade in melons. Also assume that domestic suppliers will satisfy domestic demand as much as possible
before any exporting or importing takes place.
Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond-symbol) to
shade in the area representing producer surplus.
PRICE (Dollars per ton)
660
Domestic Demand
Domestic Supply
620
580
540…
Chapter 28 Solutions
EBK EXPLORING ECONOMICS
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Similar questions
- A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country’s government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $11 per T-shirt and domestic production rises to 15 million T-shirts per year. On average, each worker in the T-shirt industry produces 20,000 T-shirts. What would be the loss in consumer surplus for each job created (as a result of the quota)? SHOW ALL YOUR WORK. Find the decrease in consumer surplus. Find the increase in quantity supplied (change in production). Find the number of jobs created. Find the loss in consumer surplus per job created.arrow_forwardDepict on graph and briefly explain economic consequences of export tariff: for domestic exporters; for domestic consumers; for government budget; for national economic welfare as a whole.arrow_forwardRefer to the diagram below, where Sd and Dd are the domestic supply and demand for a product, Pt is the domestic price with a tariff, and Pc is the world price of that product. Open this image in a program or approximate this drawing on paper and color in the area that represents gains from trade if the country imposes a tariff .arrow_forward
- US imports of sugar are subject to a quota. Although rounded up, the figures used in this exercise are close to reality. Thanks to the quota, US production of sugar is 6 million ton/year, instead of 5 million without the quota, and US consumption of sugar is 8 million ton/year, instead of 9 million without the quota. The US consumer pays $480/ton, whereas the world price is $280/ton. a) Easy: What is the volume of the quota? b) Easy: Why is the US price higher with the quota? c) Medium: Can you plot US supply and demand curves? Show graphically the impact of the quota for consumers and producers.arrow_forwardPlease help.arrow_forwardRefer to the diagram below, where Sd and Dd are the domestic supply and demand for a product, Pt is the domestic price with a tariff, and Pc is the world price of that product. Open this image in a program or approximate this drawing on paper and color in the area that represents gains from trade if no trade barriers exist.arrow_forward
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- 12. If the free trade price is lIP and this country imposes a trade tariff of $3, what will be the resulting net welfare loss to the economy? a)$3 b)$27 C)$13.5 d)$40.5 e)$9 13. if the free trade price is IP and this country imposes an import quota of 6 units, what will be the welfare loss to this economy? a)$3 b)$27 c)$13.5 d)$40.5 e)$18arrow_forwardPlease answer only question 3.4 and 3.5arrow_forwardWith the help of a graph, explain how imposition of an import tariff affects the tariff-levying country’s terms of trade. Who will be the gainers and losers from this tariff?arrow_forward
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