EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
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Chapter 9, Problem 9PA
Subpart (a):
To determine
The impact of avoiding tariff and taxing the consumption instead.
Sub part (b):
To determine
The impact of avoiding tariff and taxing the consumption instead.
Sub part (c):
To determine
The impact of avoiding tariff and taxing the consumption instead.
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Students have asked these similar questions
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?
8. 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.
Assume the United States is an importer of televisions and there are no trade restrictions. US consumers buy 1 million televisions per year, of which 400,000 are produced domestically and 600,000 are imported,a. Suppose that a technological advance among Japanese television manufacturers causes the world price of televisions to fall by $100. Draw a graph to show how this change affects the welfare of U.S. consumers and U.S. producers and how it affects total surplus in the United States.b. After the fall in price, consumers buy 1.2 million televisions, of which 200,000 are produced domestically and 1 million are imported. Calculate the change in consumer surplus, producer surplus, and total surplus from the price reduction. c. If the government responded by putting a $100 tariff on imported televisions, what would this do? Calculate the revenue that would be raised and the deadweight loss. Would it be a good policy from the standpoint of U.S. welfare? Who might support the policy?d.…
Chapter 9 Solutions
EBK ESSENTIALS OF ECONOMICS
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