Refer to Figure 9-17. When the country moves from no trade to free trade, consumer surplus O increases by $1,200 and producer surplus increases by $600. increases by $1,200 and producer surplus decreases by $600.

Refer to Figure 9-17. When the country moves from no trade to free trade, consumer surplus O increases by $1,200 and producer surplus increases by $600. increases by $1,200 and producer surplus decreases by $600.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Protective Tariffs

A tariff is a kind of tax that is charged on exported and imported items. It means tariff is charged on both kinds of goods i.e., exported and imported. However, some goods may be exempted from this kind of tariff. Protective Tariffs refer to the charges which a country charged on imported goods to protect its domestic market. It also protects countries Industrialists in their Production. So, that their markets remain intact and do not get dumped by outside supply.

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76-
72 +
68 -
64-
60
56 +
52 +
48
40
36 +
32 +
28
24 +
20
16 +
200
12 +
8
4
+
4
Domestic Supply
World price + tariff
increases by $1,200 and producer surplus increases by $600.
increases by $1,200 and producer surplus decreases by $600.
O decreases by $1,350 and producer surplus increases by $450.
O decreases by $1,350 and producer surplus decreases by $450.
World Price
Domestic Demand
+
8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100 Quantity
Refer to Figure 9-17. When the country moves from no trade to free trade, consumer surplus

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Step 1: Define consumer surplus and producer surplus.

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Step 2: Calculate the consumer surplus and producer surplus in case of no trade:

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Step 3: Calculate the consumer surplus and producer surplus in case of free trade:

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