Assume the world price is pW- $5 and the country imposed a tariff of $4. 1. With the new tariff, home consumers need to pay $ I Select ] | for the goods, foreign exporters receive $ | Select) from selling the goods and paying tariff. 2. Based on the graph, the country's terms of trade gains from tariff e will be [ Select ] | the deadweight loss (b + d). Hence, with this import tariff, the total welfare of the country will I Select )
Assume the world price is pW- $5 and the country imposed a tariff of $4. 1. With the new tariff, home consumers need to pay $ I Select ] | for the goods, foreign exporters receive $ | Select) from selling the goods and paying tariff. 2. Based on the graph, the country's terms of trade gains from tariff e will be [ Select ] | the deadweight loss (b + d). Hence, with this import tariff, the total welfare of the country will I Select )
Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 8PA
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![Welfare Effect of Tariff (for large importing country)
Suppose Home is a large country whose supply and demand curves are given by the left of the following figure:
Domestic Market
International Market
Price
Price
15
X* + t
8
8
7
5
3
M
1
4 67 8 10 Quantity
Import
6
Assume the world price is pW = $5 and the country imposed a tariff of $4.
1. With the new tariff, home consumers need to pay $ I Select J
for the goods, foreign exporters receive $
[ Select )
from selling the goods and paying tariff.
2. Based on the graph, the country's terms of trade gains from tariff e will be Select )
the deadweight loss (b + d). Hence, with
this import tariff, the total welfare of the country will Select J](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F33f7303f-bebe-4c1a-a656-cd8e3df7de3e%2F0b7a6e78-2a75-46fa-9487-5a0dc94f4800%2F77m66c_processed.png&w=3840&q=75)
Transcribed Image Text:Welfare Effect of Tariff (for large importing country)
Suppose Home is a large country whose supply and demand curves are given by the left of the following figure:
Domestic Market
International Market
Price
Price
15
X* + t
8
8
7
5
3
M
1
4 67 8 10 Quantity
Import
6
Assume the world price is pW = $5 and the country imposed a tariff of $4.
1. With the new tariff, home consumers need to pay $ I Select J
for the goods, foreign exporters receive $
[ Select )
from selling the goods and paying tariff.
2. Based on the graph, the country's terms of trade gains from tariff e will be Select )
the deadweight loss (b + d). Hence, with
this import tariff, the total welfare of the country will Select J
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