Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 8, Problem 14Q
To determine
The reason for the area of part A and B to be considered as the
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Consider the New Zealand market for lemons.
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(?
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Because Zambia participates in international trade in the market for soybeans, it will import
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Now suppose the Zambian government decides to impose a tariff of $10 on each imported ton of soybeans. Under the tariff, the price Zambian consumers pay for a ton of soybeans becomes
, and Zambia will import
tons of soybeans.
Use the following graph to show the effects of the $10 tariff
Chapter 8 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- Show the effects of the $40 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. 680 Domestic Demand Domestic Supply 640 World Price Plus Tariff 600 560 520 CS 480 440 PS Pw 400 360 Government Revenue 320 280 0 15 60 75 30 45 90 105 120 135 150 DWL QUANTITY (Tons of soybeans) Complete the following table to summarize your results from the previous two graphs. Under Free Trade Under a Tariff (Dollars) (Dollars) Consumer Surplus Producer Surplus Government Revenue Based on your analysis, as a result of the tariff,…arrow_forwardConsider the market for sugar in the United States depicted in the figure to the right. Assume the world price of sugar is $0.04 per pound, and at that price the United States can buy as much sugar as it wants without causing the world price to rise. Now suppose a tariff imposed by the government completely eliminates trade. As a result of the tariff, consumers will be surplus, and producers will be off in terms of consumer off in terms of producer surplus. Use the traingle drawing tool to indicate the total loss of surplus for the United States as a result of the tariff by shading in domestic dead weight loss. Property label this shaded area. Carefully follow the instructions above, and only draw the required objects. Price of sugar (per pound) 0.36 0.32- 0.28- 0.24- 0.20 0.16 0.12- 0.08 0.04+ 0.00+ 0 Supply World Price Demand 4 12 16 20 24 28 32 36 40 Quantity of sugar (billion pounds per year) Oduarrow_forwardPart F. If home country imposes a specific tariff of $15 per unit of good Y imported, what is the tariff revenue? Show your work. Part G. Assume that instead of a specific tariff, an import quota will be used on good Y. What is the amount of the quota that will have identical effects (in terms of amount of good Y imports and the domestic price of good Y) as the specific tariff of $15? Explain your reasoning. Part H. Consider the use of import tariff vs. import quota in Home country that will result in the same amount of good Y imports and the domestic price of good Y. If quota rents are given to Foreign country, which policy, i.e., import tariff vs. import quota, is preferable by Home country on the basis of its effect on social welfare? Explain your reasoning.arrow_forward
- Consider the Bangladeshi market for oranges. The following graph shows the domestic demand and domestic supply curves for oranges in Bangladesh. Suppose Bangladesh's government currently does not allow the international trade in oranges. Lise the black point (plus symbol) to indicate the equilibrium price of a ton of oranges and the equilibrium quantity of oranges in Bangladesh in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium. Note: Select and drag a fill area point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region. 1580 Domestic Demand Domestic Supply 1470 No Trade Equilibrium 1360 A 1250 1140 Consumer Surplus 1030 920 Producer Surplus 810 700 500 480 35 70 105 140 175 210 245 290 315 350 QUANTITY (Thousands of…arrow_forwardSuppose Jordan is open to free trade in the world market for maize. Since Jordan is small relative to the international market, the demand for and supply of maize in Jordan have no impact on the world price. The following graph shows the domestic market for maize in Jordan. The world price of a ton of maize is Pw = $800. 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) 1280 1220 1160 1100 1040 980 920 860 800 740 680 0 Domestic Demand 25 50 Domestic Supply PIN 75 100 125 150 175 200 225 250 QUANTITY (Tons of maize) CS PS ? Because Jordan participates in international trade in the market for maize, it will import tons of maize. Q Searcharrow_forwardEconomics Questionarrow_forward
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