1. Andorra is a small country, incapable of affecting world prices. It imports peanuts at theworld price of 10 cents per sack. Andorra's demand for peanuts is given by: D = 400– 10P.Andorra's supply curve for peanuts is: S = -20 + 5P. Determine the equilibrium underfree trade.a) Calculate and show in a diagram the following effects of a quota that limits the importof peanuts to 60 sacks.· The increase in the domestic price.· The quota revenue.· The loss due to production distortion.· The loss due to consumption distortion.b) Could the Government of Andorra have achieved the same trade result using a tariff?

At equilibrium; D = S 400 – 10 P = -20 + 5 P P = 28…

Answered: 1. Andorra is a small country,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where SK is the supply curve and D is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government restricts imports of apples to 200,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of apples with a quota of 200,000 apples.
If an economy formerly in autarky opens to trade, and discovers that there is excess supply of a good from the world market, then they would expect to see domestic consumers buying __________ of a good, domestic producers selling __________, and at a __________ price. a. more; less; higher b. more; more; higher c. more; less; lower d. less; more; higher e. less; more; lower
09
Suppose Home’s demand and supply functions for wheat are D=110-2P and S=20+20P and Foreign’s demand and supply functions for wheat are D*=80-2P and S*=40+2P a. Derive Home’s import demand and Foreign’s supply schedule and prices of wheat in absence of trade. b. Now, Home and Foreign opens up to trade. Find the equilibrium under free trade. What is the world price of wheat and what is the volume of trade? c. Suppose Home imposes a specific tariff of 0.5 on wheat imports. Determine the effect of tariff on the price of wheat in each country, the quantity supplied and demanded in each country and volume of trade. d. Determine the effect of tariff on the welfare of Home consumers, Home government and Home import-competing producers.
a. In the absence of trade, what is the equilibrium price and equilibrium quantity? b. The government opens the wheat market to free trade and U.S enters the Turkish market, pricing wheat at $40 per ton. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will be imported from U.S? c. The government imposes a $10 per ton tariff on all imported wheat. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will now be imported from U.S? d. How much revenue will the Turkish government receive from the $10 per ton tariff?
3. Import quotas Kazakhstan is a grape producer, as well as an importer of grapes. Suppose the following graph shows Kazakhstan's domestic market for grapes, where Sx is the supply curve and Dx is the demand curve. The free trade world price of grapes (Pw) is $800 per ton. Suppose Kazakhstan's government restricts imports of grapes to 120,000 tons. The world price of grapes is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 120,000 grapes. PRICE (Dollars per ton) 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0 --‒‒‒‒‒‒ 0 40 SK DK Pw 80 120 160 200 240 280 320 360 400 QUANTITY (Thousands of tons) SK+Q Price…
When a tariff is imposed on a good, the price to consumers _____ and the amount imported _____.
E1 Kazakhstan is a “small” country that cannot affect world prices. Their demand for coffee is given by D : QD = 400–10P and their supply of coffee is given by S : QS = 50 + 5P. The world price of coffee is $10. a) If Kazakhstan engage in free trade, determine whether Kazakhstan imports or exports coffee, and in what quantity. Suppose Kazakhstan imposes an import quota on coffee of 50 units. b) Determine the price of coffee in Kazakhstan. c) Determine the size (numerically) of the quota rents. d) Determine the overall effect on welfare in Kazakhstan (again, with a numerical value) of the quota, relative to free trade. [Hint: it might be VERY helpful to draw an accurate graph, or use a graphing program to help you identify and calculate the relevant areas you are looking for]
3. Welfare effects of a tariff in a small country Suppose Bolivia is open to free trade in the world market for wheat. Because of Bolivia's small size, the demand for and supply of wheat in Bolivia do not affect the world price. The following graph shows the domestic wheat market in Bolivia. The world price of wheat is Pw = $250 per ton. 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). (? Domestic Supply 490 Domestic Demand 480 CS 430 400 370 PS 340 310 280 250 220 190 + O 20 40 60 80 100 120 140 180 180 200 QUANTITY (Tons of wheat) If Bolivia allows international trade in the market for wheat, it will import tons of wheat. Now suppose the Bolivian government decides to impose a tariff of $60 on each imported ton of wheat. After the tariff, the price Bolivian…
What is the effect of placing tariffs on products imported into the U.S. from other countries? Are there any problems with this?
Suppose Country X exports good A and imports good B. And, Country Y exports good B and imports good A. When country Y imposes an import tariff, what happens to the terms of trade in these countries and what is the impact of this on economic welfare (assume no other factor determines economic welfare).
The effect of imposing a tariff on a specific imported good is to the domestic price of the good and the domestic production of the good. Select one: a. increase; increase b. decrease; increase c. decrease; decrease d. decrease; to leave unaffected.

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