5. A graphical comparison of tariffs and quotasAlagir and Ertil are small countries that protect their economic growth from rapidly advancing globalization by limiting the import of rugs to 20 million.To this end, each country imposes a different type of trade barrier when the world price (Pw) is $2,000. In Alagir, the government decides to impose atariff of $3,000 per rug; in Ertil, the government implements a quota of 20 million rugs.Assume that Alagir and Ertil have identical domestic demand (Do) and supply (S) curves for rugs as shown on the following graph. Under theseconditions, the price of rugs is $5,000 per rug in each country.10000( )80008000700080005000400030002000100000Pu10Do20D₁XX✩XX30 40 50 60 70QUANTITY (Millions of rugs)80S90 100(?) Assuming Alagir keeps the tariff at $3,000 per rug, complete the first row of the following table by calculating each of the values given this increase indemand. Assuming Ertil maintains a quota of 20 million rugs, complete the second row of the table by calculating each of the values given thisincrease in demand.CountryAlagir (tariff$3,000)Ertil (quota 20 million rugs)TruePrice(Dollars)● FalseTrue or False: The increase in demand hurts domestic producers but helps domestic consumers Ertil.Quantity Demanded at New Price(Millions of rugs)Which of the following explain why a tariff is aA tariff does not limit the domestic price increase.Tariffs allow for some degree of competition.Imports(Millions of rugs)restrictive trade barrier than an equivalent quota. Check all that apply.A foreign producer may offset the tariff by the price reductions.

Import tariffs and quotas are one type of trade restriction that a govt imposes on its economy. It…

5. A graphical comparison of tariffs and quotas Alagir and Ertil are small countries that protect their economic growth from rapidly advancing globalization by limiting the import of rugs to 20 million. To this end, each country imposes a different type of trade barrier when the world price (Pw) is $2,000. In Alagir, the government decides to impose a tariff of $3,000 per rug; in Ertil, the government implements a quota of 20 million rugs. Assume that Alagir and Ertil have identical domestic demand (Do) and supply (S) curves for rugs as shown on the following graph. Under these conditions, the price of rugs is $5,000 per rug in each country. PRICE (Dollars per rug) 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 0 P 10 D₂ 20 D₁₂ ☆ 30 40 50 60 70 QUANTITY (Millions of rugs) 80 S 90 100 (?)

5. A graphical comparison of tariffs and quotas Alagir and Ertil are small countries that protect their economic growth from rapidly advancing globalization by limiting the import of rugs to 20 million. To this end, each country imposes a different type of trade barrier when the world price (Pw) is $2,000. In Alagir, the government decides to impose a tariff of $3,000 per rug; in Ertil, the government implements a quota of 20 million rugs. Assume that Alagir and Ertil have identical domestic demand (Do) and supply (S) curves for rugs as shown on the following graph. Under these conditions, the price of rugs is $5,000 per rug in each country. PRICE (Dollars per rug) 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 0 P 10 D₂ 20 D₁₂ ☆ 30 40 50 60 70 QUANTITY (Millions of rugs) 80 S 90 100 (?)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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