Chapter 8, Problem 14P

To determine

1. The gain/loss in the consumer surplus, with the elimination of the tariff
2. The gain/Loss in the producer surplus, with the elimination of the tariff
3. The gain/loss to the government, with the elimination of the tariff
4. The gain/loss to the economy as a whole with the elimination of the tariff.

Concept Introduction:

The elimination of tariff will help in trade creation and provide substantial benefits both to the developed as well as developing countries. Tariffs or Quotas discourage developing countries growth as well deters from attracting FDI (foreign direct investment). Trade expansion becomes stagnant.