Consider the pharmaceutical market in the US. The demand is Q = 200 - 2P Q P while supply is 2 40s Q P. Thefree trade price is 25. A) Calculate consumer surplus, producer surplus, total surplus, and imports under free trade.Illustrate all of these on a fully labelled graph. B) Suppose that the US puts a tariff of 6 on pharmaceuticals. When it doesthis, the free trade prices falls to 24. Calculate consumer surplus, producer surplus, tariff revenues, total surplus anddeadweight loss under the tariff. Illustrate all of these on a fully labelled graph. C) Is the country better off under the tariffor free trade? How do you know?

The objective of this question is to analyze the impact of free trade and tariffs on the…

Answered: Consider the pharmaceutical market in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that Estonia, which is a"small economy, and it can import plastic chairs at a price of 20 per unit The domestic supply curve of plastic chairs is the following: S=40+10P And the demand curve in Estonia for plastic chairs is: D=800-5P In addition, each unit of plastic chair production yields a marginal social benefit of 10. a) Calculate the total effect on welfare of a tariff of 15 per unit levied on imports. Only typed answer
Korea’s demand for computers isQK = 2, 000 − PkIts supply isQK = −200 + PkChina’s demand for computers isQC = 1, 000 − Pc Its supply isQC = Pc1. Suppose that Korea imposes a specific tariff of $100 on computerimports. Calculate the price of computers in each country and thequantity of computers supplied and demanded in each country. Alsocalculate the volume of trade.
Price Pi P₂ S3 S₂ P2 Ꭰ Quantity What does S3 most likely represent? Multiple Choice ○ U.S. supply under quota-restricted trade ☐ the result of a foreign country dumping this good on the U.S. market ○ production possibilities under conditions of free trade U.S. supply under tariff-restricted trade
Domestic demand for fidget spinners in the domestic economy is characterized by the equation P = 100 – 2Q, domestic supply is characterized by the equation Q = P10, and the world price is equal to 60. Then the export subsidy of 10 per unit will lead to a decrease in the world price by 10 increase domestic exports by 10 increase domestic exports by 15 change nothing
. The United States currently imports all of its coffee. The annual demand for coffee by U.S. consumers is given by the demand curve Qd = 150 − 10P, where Qd is quantity (in millions of pounds) and P is the market price per pound of coffee. Suppose the domestic supply is Qs = 10P −50. The U.S. coffee market is competitive. Suppose that the world price of coffee is $6. Congress is considering a tariff on coffee imports of $2 per pound. (a) Find the producer and consumer surplus if there was no trade. (b) Calculate the consumer and producer surplus after we engage in free trade. (c) If the tariff is imposed calculate the changes to consumer and producer surplus. (d) Other than lower prices, provide two benefits that can occur as a result of free trade.
Suppose firms incur transportation costs to sell their product abroad. How do transportation costs affect the prices that firms charge abroad? Suppose the price offered at home and in the export market is identical, but there are transport costs to ship the good abroad. Does dumping occur? How does an increase in the number of product varieties benefit an importing country? Explain how increasing returns to scale in production can be a basis for trade. Why is trade within a country greater than trade between countries? Why would you expect sellers of branded goods with high upfront research and development costs to be more interested in free trade than producers who do not incur any fixed costs? Focus attention on the Ricardian model, the Heckscher-Ohlin model, and the monopolistic competition model if trade. Consider the intra-industry trade index for each model. What value for the index does each models predict? Explain your answer.
S=20+20P and D = 100-20P are Home's supply and demand curves for wheat. * S = 40 + 20P and D = 80-20P are Foreign's supply and demand curves for wheat. With free trade the price of wheat is $ (Enter your response rounded to the nearest penny.) Suppose home imposes a specific tariff of $0.50 on wheat. Home consumers will now pay $ and foreign's export price is $ (Round your responses rounded to the nearest penny.) Now assume that foreign is a much larger country. Specifically, Foreign's demand curve for wheat is D = 800-200P. Its supply curve is S = 400 + 200P. * With free trade the price of wheat is $ (Round your response rounded to the nearest penny.) Suppose Home imposes a specific tariff of $0.50 on wheat. Home consumers will now pay $ (Round your response rounded to the nearest penny.) $ In which case does the tariff create the greatest terms of trade gains? When Home is and foreign's export price is
1. Given below are two groups’ (consumers, c, and a special interest group, i) true demands concerning a tariff on snack foods. Demand against (consumers): wtp($) = 80 + 2t Demand for (special interest): wtp($) = 50 - t Where t is the tariff rate. a. Graph the demand curves and explain how much tariff there will be if there were no free riding and all preferences were fully revealed. b. Now assume that “free riding” plagues the consumer group so that their revealed willingness to pay is given by: wtp($) = 30 + t . What are some causes of the “free riding”? Why is this not likely to happen to the producer group? c. Now what will be the equilibrium tariff rate? Graph this scenario in the same graph. d. Relate the outcome to a partial equilibrium tariff graph.
Lesson 12 Question 4
The aim of a tariff is to: (a) maximise total surplus. (b) protect domestic consumers. (c) protect domestic producers. (d) create deadweight loss.
Suppose New Zealand is open to free trade in the world market for maize. Since New Zealand is small relative to the international market, the demand for and supply of maize in New Zealand have no impact on the world price. The following graph shows the domestic market for maize in New Zealand. The world price of a ton of maize is Pw $800. = 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). PRICE (Dollars per ton) 1150 1100 1050 1000 950 900 850 800 750 700 650 0 Domestic Demand 5 Il a small country 10 15 Domestic Supply 20 25 30 35 QUANTITY (Tons of maize) Pw 40 45 50 CS PS Because New Zealand participates in international trade in the market for maize, it will import Use the following graph to show the effects of the $50 tariff. tons of maize. Now suppose the New…
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