This problem asks you to examine the welfare effects of opening trade between the two countries. Please draw new graphs (separate from question 5). a. b. C. d. نه Label the area in your graph that represents consumer surplus in Country A before trade. What is the $ value of consumer surplus? Label the area in your graph that represents producer surplus in Country A before trade. What is the $ value of producer surplus? Label the area in your graph that represents consumer surplus in Country A after the opening of trade with the ROW. What is the $ value of consumer surplus? Label the area in your graph that represents producer surplus in Country A after the opening of trade with the ROW. What is the $ value of producer surplus? How much does Country A gain or lose from trade? Country A consumers? Country A producers? (Give $ values.)

The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 34.6 and Table 34.7. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell? What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell? Sketch two supply and demand diagrams, one for each country, in the situation before trade. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade. If the Land of Submarines imposes an anti- dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country. Does your general answer change if the Land of Submarines imposes an import quota of 70?

Show graphically that for any tariff, there is an equivalent quota that would give the same result. What would be the difference, then, between the two types of trade barriers? Hint: It is not something you can see from the graph.

A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and quantity of flat screen TVS?