4. Effects of a tariff in a large nationThe following graph shows the domestic market for oil in the United States, where Sp is the domestic supply curve, and Dp is the domestic demandcurve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the worldprice of oil. Under free trade, the United States faced a total supply schedule of Sp+w, which shows the quantity of oil that both domestic and foreignproducers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $240 per barrel of oil and aquantity of 9 million barrels. At this price, the United States imports 6 million barrels of oil.Suppose the U.S. government imposes a $60-per-barrel tariff on oil imports.On the following graph, use the tan line (rectangle symbol) to draw the new total supply schedule including the tariff (SD+W+T). Then use the greypoint (star symbol) to indicate the new market equilibrium price and quantity as a result of the tariff.PRICE (Dollars per barrel)4203903603303002702402101801501200DD1SD+W2 3 45678QUANTITY OF OIL (Millions of barrels)9Sp10SD+W+TEquilibrium Under TariffDomestic Revenue EffectTerms-of-Trade EffectDeadweight Loss The tarrif's revenue effect (the import tariff multiplied by the quantity of oil imported) can be broken into two components:• Domestic revenue effect• Terms-of-trade effectOn the previous graph, use the green rectangle (triangle symbols) to indicate the domestic revenue effect of the tariff. Then use the purple rectangle(diamond symbols) to indicate the terms-of-trade effect.Now consider the effect of the tariff on welfare in the United States. On the previous graph, use the black triangles (plus symbols) to indicate thedeadweight loss caused by the tariff.True or False: National welfare in the United States increases as a result of a $60-per-barrel tariff on oil imports.TrueFalse

A tariff is a levy or duty imposed by the government on goods that are imported or exported. This is…

The tarrif's revenue effect (the import tariff multiplied by the quantity of oil imported) can be broken into two components: • Domestic revenue effect • Terms-of-trade effect On the previous graph, use the green rectangle (triangle symbols) to indicate the domestic revenue effect of the tariff. Then use the purple rectangle (diamond symbols) to indicate the terms-of-trade effect. Now consider the effect of the tariff on welfare in the United States. On the previous graph, use the black triangles (plus symbols) to indicate the deadweight loss caused by the tariff. True or False: National welfare in the United States increases as a result of a $60-per-barrel tariff on oil imports. O True Falco

The tarrif's revenue effect (the import tariff multiplied by the quantity of oil imported) can be broken into two components: • Domestic revenue effect • Terms-of-trade effect On the previous graph, use the green rectangle (triangle symbols) to indicate the domestic revenue effect of the tariff. Then use the purple rectangle (diamond symbols) to indicate the terms-of-trade effect. Now consider the effect of the tariff on welfare in the United States. On the previous graph, use the black triangles (plus symbols) to indicate the deadweight loss caused by the tariff. True or False: National welfare in the United States increases as a result of a $60-per-barrel tariff on oil imports. O True Falco

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consider countries A, B, and Cc. The distance between A and B is 1600 kilometers and between A and C, it is 700 kilometers. Country A's GDP is approximately equal to $6 trillion, country B $5 trillion, and country C $2 trillion. Use the gravity equation and compute the ratio of the expected volume of trade between A and C over the expected volume of trade between A and B. Assume that the distance elasticity is equal to 1.5.
1. a) An import tariff will government revenue, and producer surplus, overall domestic national welfare. A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease b) An export subsidy will government revenue, and C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on consumer surplus,, producer surplus, overall domestic national welfare. A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease consumer surplus, C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on c) An import quota will government revenue, and A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease C) increase; decrease; have no…
Below is a domestic supply and demand graph for cotton. Label the free trade equilibrium point (FTE). Assume a tariff is placed on imported cotton that eliminates all imports. 1. Label the tariff equilibrium point (TE). 2. Shade in the lost gains from trade (LGT) because of this tariff. Lost gains from trade are also called deadweight loss. 3. Shade in the area representing the wasted resources (WR) created as a result of the restriction on imported cotton. Price per pound (cents) 120 115 110 105 100 95 90 85 80 75 domestic demand amount of cotton: VE 22 domestic supply 70 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 Quantity (billion lbs) Incorrect TE world supply At the free trade equilibrium point, how much cotton does the United States grow and produce? LGT WR billion lbs
Kazakhstan is a grape producer, as well as an importer of grapes. Suppose the following graph shows Kazakhstan's domestic market for grapes, where SK is the supply curve and Dk is the demand curve. The free trade world price of grapes (Pw) is $800 per ton. Suppose Kazakhstan's government restricts imports of grapes to 120,000 tons. The world price of grapes is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 120,000 grapes. PRICE (Dollars per ton) 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0 0 40 80 120 160 200 SK 240 10 0² W 280 320 360 400 SK+Q Price with Quota A Change in PS Quota Rents DWL ?
Before the North American Free Trade Agreement (NAFTA) gradually eliminated import tariffs on goods, the autarky price of tomatoes in Mexico was below the world price and in the United States was above the world price. Similarly, the autarky price of poultry in Mexico was above the world price and in the United States was below the world price. Draw diagrams with domestic supply and demand curves for each country and each of the two goods. As a result of NAFTA, the United States now imports tomatoes from Mexico and the United States now exports poultry to Mexico. How would you expect the following groups to be affected? a. Mexican and U.S. consumers of tomatoes. Illustrate the effect on consumer surplus in your diagram. b. Mexican and U.S. producers of tomatoes. Illustrate the effect on producer surplus in your diagram. c. Mexican and U.S. tomato workers. d. Mexican and U.S. consumers of poultry. Illustrate the effect on consumer surplus in your diagram. e. Mexican and U.S.…
Economic Use the graph below and the following information to answer the next question. The world price of soybeans is five dollars per bushel and the importing country is small enough to not affect the real price. Suppose the government puts a tariff of one dollars per bushel on soybean imports how much revenue will the government raise from a one dollar per bushel tariff on soybean imports.
4. [A Monetary Surprise] Consider an economy in which the demand for money is of the form M₁ = = P₁Y for t = 0, 1,2,..., where output is 150, the money velocity is 1.5. The money supply is 100 for t = 0, 1. In period 2, the central bank surprises people and announce that money supply will grow at 2 percent forever, that is, Mo = 100, M₁ = 100, M₂ = (1.02) M₁, M3 (1.02) M₂, and so on. (a) What is the inflation rate in period 1, 7? What is real money balance in period 1, ? What is the expected inflation in period 2, given the information available in period 1, E172? (b) What is the inflation rate in period 2, m₂? What is real money balance in period 2, 2? What is expected inflation in period 3, given the informa- tion available in period 2, E273? (c) What is the inflation rate in period 3, 73? What is real money balance in period 2, ? (d) Compare E₁₂ and 7₂. B
10. Problems and Applications Q10 Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel. Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph. Price of Steel (Dollars perton) 100 90 2 2 2 2 2 2 - 60 40 30 20 10 Demand 0 100 200 300 400 500 600 700 Quantity of Steel (Tons) Supply 800 900 1000 Triangle Polygon
Price $22 $16 Home market S 10 14 22 I 26 D Quantity pw + 1 PW Who gains and who loses from the tariff in Home? To find out, determine the changes in consumer surplus (CS), producer surplus (PS) and tariff revenue as the country moves from free trade to the tariff equilibrium. Show the changes in the diagram and calculate the numerical values of them. (Ctrl)
Please help me answer each part of the questions in detail. Thank you
Answer the question using 3 step approach 8. What happens to the domestic market when the government allows the importation of more units of rice but with a tariff?
Consider two countries, Home and Foreign. In the figure below, the import demand ("IDHome") curve depicts Home's demand for Foreign's flash drives, and the import supply curve ("ISForeign") depicts Foreign's supply of flash drives to Home. Assume Home is a "large" country that levies a tariff against Foreign imports of flash drives, thereby shifting the relevant supply curve from ISForeign to ISForeign +t. For the following questions, please refer to the figure below. P $30 28 26 24 22 20 18 16 15-- 14 12 10 8 6 4 2 0 2 4 ISForeign +t 6 8 10 12 14 16 18 20 22 22 24 26 28 ISForeign IDHome 30 Q With free trade, Home's consumer surplus equals $112.50 and Foreign's producer surplus equals $112.50. With a tariff of $ 12 per flash drive, Home's consumer surplus equals $72, Foreign's producer surplus equals $ 36, Home's tariff revenue equals $72, and Home's deadweight loss equals $45. Of the Home's tariff revenue, $36 comes from Foreign's producers, and the rest comes from Home's consumers.…