Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
Question
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Chapter 10, Problem 7QE

(a)

To determine

Impact of lifted quota in the economy.

(b)

To determine

Benefit to the US consumers.

(c)

To determine

Effects of revenue of foreign cloth sellers in the US.

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Vietnam has a policy of free trade in motorcycles which are sold in world markets at a price of 10,000 per motorcycle. Under free trade, Vietnam produces 100,000 motorcycles and imports 100,000 motorcycles. To provide some protection to the domestic industry, Vietnam imposes an import tariff of $1500 per motorcycle. With this tariff in place, production in Vietnam rises by 5,000 motorcycles and consumption drops by the same amount. Calculate the effects of the tariff on: a. Consumer Surplus b. Producer Surplus c. Government Revenues d. Overall Welfare e. If the tariff imposed by the Vietnamese had led to small reduction in world prices of, say, 250 dollars, how, qualitatively, would the welfare calculations (a), (b), (c) and (d) above change?
Answer d and e only
What will a tariff and an import quota do to the quantity of imports and the domestic price? reduce the quantity of imports and lower domestic price increase the quantity of imports and raise domestic price increase the quantity of imports and lower domestic price reduce the quantity of imports and raise domestic price
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