The nation of Cologne is “large,” but unable to affect world prices. It imports chocolate at the price of $20 per box. The demand curve is: D=700-10P. The supply curve is : S=200+5P. Determine the free trade equilibrium. Then calculate and graph the following effects on an import quota that limits imports to 50 boxes: The increase in the domestic price. The quota rents. The consumption distortion loss. The production distortion loss. If tariffs are already in place as a trade policy, why might a country choose to apply also nontariff barriers as another way to control the amount of trade that they conduct with other countries? Suppose workers involved in manufacturing are paid less than all other workers in the economy. What would be the effect on the real income distribution within the economy if there were a substantial tariff levied on manufactured goods?
The nation of Cologne is “large,” but unable to affect world prices. It imports chocolate at the price of $20 per box.
The demand curve is: D=700-10P. The supply curve is : S=200+5P. Determine the free trade equilibrium. Then calculate and graph the following effects on an import quota that limits imports to 50 boxes:
- The increase in the domestic price.
- The quota rents.
- The consumption distortion loss.
- The production distortion loss.
If tariffs are already in place as a trade policy, why might a country choose to apply also nontariff barriers as another way to control the amount of trade that they conduct with other countries? Suppose workers involved in manufacturing are paid less than all other workers in the economy. What would be the effect on the real income distribution within the economy if there were a substantial tariff levied on manufactured goods?
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