Suppose Home is a large country whose supply and demand curves are given by the left of the following figures. Domestic Market International Market Price Supply $10 Demand 12 14 12 16 Assume that the world price under the free trade was $6 and the government imposed an import tariff of $5 which was shared by domestic consumers and foreign exporters. 1. With the new tariff home consumers need to pay $ 11 for the goods, foreign exporters receive $ 6 from selling the goods and paying tariff. 2. Under the free trade, consumer surplus was $ 14 and producer surplus was $ 3. With $5 tariff, consumer surplus is $ 9 and producer surplus is $ 11 and government tariff revenue is $ 4. With tariff, the terms of trade gains is $ 50 and total deadweight loss is $ 5. In this case, imposition of tariff increases country's total welfare by s 5

Suppose Home is a large country whose supply and demand curves are given by the left of the following figures. Domestic Market International Market Price Supply $10 Demand 12 14 12 16 Assume that the world price under the free trade was $6 and the government imposed an import tariff of $5 which was shared by domestic consumers and foreign exporters. 1. With the new tariff home consumers need to pay $ 11 for the goods, foreign exporters receive $ 6 from selling the goods and paying tariff. 2. Under the free trade, consumer surplus was $ 14 and producer surplus was $ 3. With $5 tariff, consumer surplus is $ 9 and producer surplus is $ 11 and government tariff revenue is $ 4. With tariff, the terms of trade gains is $ 50 and total deadweight loss is $ 5. In this case, imposition of tariff increases country's total welfare by s 5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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