Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 9, Problem 4PA
Subpart (a):
To determine
The arguments against and for imports and international trade.
Subpart (b):
To determine
The arguments against and for imports and international trade.
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Students have asked these similar questions
International trade:
If Germany (which is a large country) imposes an import tariff on textile imports, we can conclude that:
(a)The world price of textile rises, and Germany imports less.
(b)The world price of textile stays constant, and Germany imports less.
(c)The world price of textile falls, and Germany imports less.
(d)The world price of textile stays constant, and Germany imports the same as before.
Explain your answer clearly. Limit your explanation to 200 words.
The supply and demand for wheat in the small country Tinyland are: Qs = P and Qd = 400 – P,
respectively. The world price of wheat is Pw = 100.
a. Suppose the government imposes an import quota on wheat Q = 100.
Find the price of wheat in Tinyland.
Find the tariff per unit that generates the same volume of trade as the quota.
Next suppose that instead of a quota or a tariff, the government levies a
specific (per unit) consumption tax on wheat. Find the price of wheat in
Tinyland when the tax is equal to the tariff you found in part ii and the quantity
of wheat imported.
NB: In contrast to a tariff, which is levied on all units produced abroad (imported),
i.
ii.
a consumption tax is levied on all units sold in the domestic market regardless of
where they were produced.
b. Which of these three policies, i.e., quota, tariff, and consumption tax, do consumers and
producers prefer? Give precise answers by evaluating the welfare of each group.
Assuming that the government allocates quota…
Consider 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)
Odu
Chapter 9 Solutions
Essentials of Economics (MindTap Course List)
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