In a two countries, two commodities and two factors of production model, and under the assumption of constant foreign exchange rate and income, suppose that Nation 2 which is a small nation imposes an ad-valorem tariff on its importable commodity X. Show on a figure by partial equilibrium analysis; a) The consumption, production, trade, revenue and distribution of income effects of the tariff. b) The welfare effect of the tariff as a whole.
In a two countries, two commodities and two factors of production model, and under the assumption of constant foreign exchange rate and income, suppose that Nation 2 which is a small nation imposes an ad-valorem tariff on its importable commodity X. Show on a figure by partial equilibrium analysis; a) The consumption, production, trade, revenue and distribution of income effects of the tariff. b) The welfare effect of the tariff as a whole.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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