EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
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Question
Chapter 9, Problem 2PA
To determine
The impact of tariff on automobiles.
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What would happen to U.S. economic welfare if the U.S. eliminated tariffs on solar panel imports?
A. U.S. economic welfare would increase because of the social gains from increased U.S. consumption of solar panels
B. U.S. economic welfare would decrease because the social gains from increased U.S. production of solar panels would be less than the social costs associated with increased U.S. consumption of solar panels
C. U.S. economic welfare would decrease because the social gains from increased U.S. consumption of solar panels would be less than the social costs inflicted on U.S. solar panel producers
D. U.S. economic welfare would increase because the social gains from increased U.S. production of solar panels would exceed the social costs associated with increased U.S. consumption of solar panels
1
Price
Price after trade
OA+B+C+E+G
OA+B
OA+B+C+D+E+F+G
○ C+0
C
G
A
Di
B
E
Supply
Imports after tariff
Refer to the graph above: Consider the economy depicted in the graph and assume there is international trade if the government imposed a tariff, what would the total surplus
be?
World Price + tariff
World Price
Demand
Quantity
Chapter 9 Solutions
EBK ESSENTIALS OF ECONOMICS
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- Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras In Thailand and Japan is described by the following functions: QsT=-5+14P QsJ=-10+14P QdT=60-P QdJ=80-P P is the price measured in a common currency used in both countries, such as the Thai Baht. Compute the equilibrium price (P) and quantities in each country without trade. Now assume that free trade occurs. The free-trade price goes to 56.36 Baht. Who exports and Imports cameras and in what quantities?arrow_forwardThe 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?arrow_forwardTrade has income distribution effects. For example, suppose that because of a government-negotiated reduction in trade barriers, trade between Germany and the Czech Republic increases. Germany sells house paint to the Czech Republic. The Czech Republic sells alarm clocks to Germany. Would you expect this pattern of trade to increase or decrease jobs and wages in the paint industry in Germany? The alarm clock industry in Germany? The paint industry in Czech Republic? The alarm clock industry in Czech Republic? What has to happen for there to be no increase in total unemployment in both countries?arrow_forward
- Suppose that Congress imposes a tariff on imported autos to protect the U.S. auto industry from foreign competition. Assuming that the United States is a price taker in the world auto market, show on a diagram: the change in the quantity of imports, the loss to U.S. consumers, the gain to U.S. manufacturers, government revenue, and the deadweight loss associated with the tariff. The loss to consumers can be decomposed into three pieces: a transfer to domestic producers, a transfer to the government, and a deadweight loss. Use your diagram to identify these three pieces.arrow_forward8. Which of the following would be a deadweight loss from a tariff? A) The shift of consumer surplus to government B) The increase in producer surplus c) The decrease in consumer surplus D) The decrease in consumer surplus due to a drop in consumption 3|Page 9. Use the graph below and the following information to answer the next question. The world price of soybeans is $2.00 per bushel, and the importing country is small enough not to affect the world price. 2.25 2.00 World price 60 70 130 140 Qimillions bushels Based on Figure above, suppose the government puts a tariff of $0.25 per bushel on soybean imports. How much will the tariff reduce imports? A) Imports will decrease by 10 million bushels. B) Imports will decrease by 20 million bushels. C) Imports will decrease by 60 million bushels. D) Imports will not change after the tariff.arrow_forwardUsing a domestic-market demand- and supply-curve graph, a. show the impact of tariff on a small country's import price, domestic demand, domestic supply, import quantity, consumer surplus, producer surplus, government revenue, and total welfare; b. Is the country unambiguously worse off as a result of the tariff? c. In the same graph, show how to achieve the same import quantity with an import quota; d. When would the tariff and the import quota lead to the same amount of welfare change? e. How would the answers to (a) and (b) change for a large country?arrow_forward
- Price P1 D 01 Quantity The graph above shows domestic supply and demand with trade in a SMALL country. With trade, this country can purchase at the world price, Pw. Suppose that this country imposes a $5 per unit tariff on this good. Which of the following is true? O There will not be deadweight losses due to this tariff, since it is a small country. The domestic price will rise by $5. O Consumers will be better off. Producers will not increase domestic production.arrow_forwardWhen a tariff is imposed on a good, the price to consumers _____ and the amount imported _____.arrow_forwardAssume a simple world in which the U.S. exports soft drinks and beer to France and imports wine from France. If the U.S. imposes large tariffs on the French wine, explain the likely impact on the values of the U.S. beverage firms, U.S. wine producers, the French beverage firms, and the French wine producers.arrow_forward
- 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?arrow_forwardThe US decides to impose a tariff on Avocados of $0.75 each Under Free Trade you have the following information: $1 per Unit World and US Price: Domestic Consumption 25 Billion Units 1 Billion Units Domestic Production: Under a Tariff you have the following information: New US Price: $1.75 per Unit Domestic Consumption: Domestic Production: 21 Billion Units 5 Billion Units (a) How much does the government gain in tariff revenue? (b) How much do domestic producers gain? (c) How much do consumers lose? (d) What is net national or "dead weight" loss?arrow_forwardQUESTION 11 In the figure given below, Mexico, the importing country in free trade, imposes a binding import quota on wheat exported by the U.S. The import demand curve for wheat is represented by MDMEX and the export supply curve is represented by XS US e represents the binding import quota imposed by Mexico, and QFT is the free trade equilibrium output and PFT is the free trade price level. PAUT and the price level post import quota in the U.S. and Mexico respectively. prex 0. represent AUT represent the autarky price level in the U.S. and Mexico respectively. and XSUS PMex Aut PMex PFT pus pus Aut Which of the following conditions must be satisfied to attain quota equilibrium? a. The price in the U.S after the quota should be equal to the price in Mexico. b. The price in the U.S. after the quota should be lower than the autarky price level. c. The price in Mexico after the quota should be higher than the price in the U.S. d. The price in Mexico after the quota should be equal to the…arrow_forward
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