For any country that allows free trade, the domestic price is equal to the world price. both producers and consumers in that country gain when domestic products are exported, but both groups lose when foreign products are imported. domestic quantity demanded is greater than domestic quantity supplied at the world price. domestic quantity demanded is equal to domestic quantity supplied at the world price.
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- The figure below shows the hypothetical domestic supply and demand for baseball caps In the country of Spaln. Domestic Supply and Demand for Baseball Caps Spain 10 9. 8. 1 10 20 30 40 50 60 70 80 90 100 Baseball caps (thousands per month) Suppose that the world price of baseball caps is €3 and there are no Import restrictions on this product. Assume that Spanish consumers are Indifferent between domestic and Imported baseball caps. Instructions: Enter your answers as whole numbers. a. What quantity of baseball caps will domestic suppliers supply to domestc consumers? 10 O thousand b. What quantity of baseball caps will be Imported? 80 thousand Now suppose a tariff of €2 is levied agalnst each Imported baseball cap. C. After the taniff is Implemented, what quantity of baseball caps will domestic suppliers supply to domestic consumers? 20 thousand d. After the tariff Is Implemented, what quantity of baseball caps will be Imported? 60 thousand Price (€ per cap)Consider a small country that exports steel. Suppose that a “pro-trade” government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad. How does this export subsidy (similar to a tariff) affect the domestic price of steel, the quantity of steel produced, the quantity of steel consumed, and the quantity of steel exported? How does it affect consumer surplus, producer surplus, and government revenue? Is it is a good policy from the standpoint of economic efficiency?Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad. With this export subsidy, the price paid by domestic consumers is$____per ton, and the price received by domestic producers is$____per ton. The quantity of steel consumed by domestic consumers (DECREASE, REMAINS UNCHANGED, INCREASE) , the quantity of steel produced by domestic producers (DECREASE, REMAINS UNCHANGED, INCREASE) , and the quantity of steel exported . (DECREASE, REMAINS UNCHANGED, INCREASE) , Under the export subsidy, consumer surplus is$________and producer surplus is$________. Government revenue (DECREASE OR INCREASE) by$____. As a result, total surplus (DECREASE , REMAINS UNCHANGED OR INCREASED) True or False: With the export subsidy, domestic producers will not sell any steel to domestic consumers.
- Suppose the government of the U.S. wants to protect the domestic sugar industry by restricting sugar imports. Suppose the U.S. produces sugar domestically according to the supply curve QS = P, and suppose the domestic demand for sugar is QD = 8 – P. The world price of sugar is $2. For price of sugar, the units are $/lb., and for quantity of sugar, the units are 1,000,000 Ibs./year.If a smaller country imports a good (electronics) from a larger country, is it beneficial for the smaller countryto impose quotas on the good coming from the larger country. Will this affect the consumers of electronics, the domestic producers of electronics and the government?The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. Quantity Supplied (Domestic) Price 12 $5 10 4 7 3 4 2 1 1 Multiple Choice Quantity Demanded With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers would be O (Domestic) 2 4 7 11 16 1 unit and 15 units, respectively. 4 units and 7 units, respectively. 7 units and 0 units, respectively. 4 units and 6 units, respectively.
- Price P1 D 01 Quantity The graph above shows domestic supply and demand with trade in a SMALL country. With trade, this country can purchase at the world price, Pw. Suppose that this country imposes a $5 per unit tariff on this good. Which of the following is true? O There will not be deadweight losses due to this tariff, since it is a small country. The domestic price will rise by $5. O Consumers will be better off. Producers will not increase domestic production.Consider two countries, home and foreign and a single good, Y. Assume that home country imports good Y from foreign country. The import demand curve for good Y in home country is given by: MD = 170 – 2PY and the export supply curve for good Y in Foreign country is given by: EX = PY – 40. Free Trade Price: $70 30 Units of Good Y are traded under free trade If a tariff of $15 is imposed by the home country on each unit of good Y imported, foreign exporters receive a price of $85. a) If home country imposes a specific tariff of $15 per unit of good Y imported, what is the price of good Y that Home consumers pay? Show your work. b) If home country imposes a specific tariff of $15 per unit of good Y imported, how many units of good Y are traded now? Show your work. c) If home country imposes a specific tariff of $15 per unit of good Y imported, what is the tariff revenue? Show your work. d) Assume that instead of a specific tariff, an import quota will be used on good Y. What is the…US imports of sugar are subject to a quota. Although rounded up, the figures used in this exercise are close to reality. Thanks to the quota, US production of sugar is 6 million ton/year, instead of 5 million without the quota, and US consumption of sugar is 8 million ton/year, instead of 9 million without the quota. The US consumer pays $480/ton, whereas the world price is $280/ton. a) Easy: What is the volume of the quota? b) Easy: Why is the US price higher with the quota? c) Medium: Can you plot US supply and demand curves? Show graphically the impact of the quota for consumers and producers.
- The figure below shows the hypothetical domestic supply and demand for baseball caps in the country of Spain. Domestic Supply and Demand for Baseball Caps Spain 10 Sa 8 X 2 1 0 10 20 30 40 50 60 70 80 90 100 Baseball caps (thousands per month) Suppose that the world price of baseball caps is €1 and there are no Import restrictions on this product. Assume that Spanish consumers are indifferent between domestic and Imported baseball caps. Instructions: Enter your answers as whole numbers. a. What quantity of baseball caps will domestic suppliers supply to domestic consumers? thousand b. What quantity of baseball caps will be imported? thousand Now suppose a tariff of €3 is levied against each Imported baseball cap. c. After the tariff is Implemented, what quantity of baseball caps will domestic suppliers supply to domestic consumers? thousand d. After the tariff Is Implemented, what quantity of baseball caps will be imported? thousand Price (€ per cap) 65 3₂12. If the free trade price is lIP and this country imposes a trade tariff of $3, what will be the resulting net welfare loss to the economy? a)$3 b)$27 C)$13.5 d)$40.5 e)$9 13. if the free trade price is IP and this country imposes an import quota of 6 units, what will be the welfare loss to this economy? a)$3 b)$27 c)$13.5 d)$40.5 e)$18a) What is a tariff ? Does a tariff have a result from an import quota? b) Suppose a tariff allowed an industry to create 200,000 jobs paying an average of $22,500 per year. Before the tariff consumers bought 3 billion units (60% imported) at a price of $30. After the tariff they bought 2.75 billion units (none imported) at a price of $36. How much did total consumer spending on the good increase and how much per new job? c) True or False and explain: Free trade allows countries to specialize in producing those goods in which they have the comparative advantage, which in turn, results in increased world production and income.
