7. A graphical comparison of tariffs and quotas Borzia and Ardon 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 Borzia, the government decides to impose a tariff of $3,000 per rug; in Ardon, the government implements a quota of 20 million rugs. Assume that Borzia and Ardon 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 Do 20 D₁ XXX ☆ 50 60 70 30 40 QUANTITY (Millions of rugs) 80 S 90 100 (?

7. A graphical comparison of tariffs and quotas Borzia and Ardon 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 Borzia, the government decides to impose a tariff of $3,000 per rug; in Ardon, the government implements a quota of 20 million rugs. Assume that Borzia and Ardon 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 Do 20 D₁ XXX ☆ 50 60 70 30 40 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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Question

Suppose that in both countries, demand for rugs rises from Do to D₁.
Assuming Borzia 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 in
demand. Assuming Ardon maintains a quota of 20 million rugs, complete the second row of the table by calculating each of the values given this
increase in demand.
Country
Borzia (tariff = $3,000)
Ardon (quota = 20 million rugs)
Price
(Dollars)
True
O False
Quantity Demanded at New Price
(Millions of rugs)
Imports
(Millions of rugs)
True or False: The increase in demand helps domestic producers but hurts domestic consumers in Ardon.

7. A graphical comparison of tariffs and quotas
Borzia and Ardon 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 Borzia, the government decides to
impose a tariff of $3,000 per rug; in Ardon, the government implements a quota of 20 million rugs.
Assume that Borzia and Ardon 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
Do
D₁
X
0
P...
10
20
30
50 60 70 80
40
QUANTITY (Millions of rugs)
90
S
100
(?)

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