MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
Question
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Chapter 9, Problem 9QE

(a)

To determine

Check the possibilities among two countries for trade.

(b)

To determine

Effect of a fall in per unit cost of producing pickles and olives in the production of countries.

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If the U.S. did not trade what price would the good cost? If the world price was $200 what quantity would the U.S. produce? What quantity would be imported. What is consumer surplus at the world price? Producer surplus at the world price? Who benefits from the free trade and who gets hurt If the U.S. government puts a tariff on the good so now the price is $300 who benefits, who is hurt? What quantity will U.S. producers now produce? What happens to consumer surplus from $200 to $300? What does producer surplus do with the price going from $200 to $300? What does the government gain with the tariff? Who benefits from free trade overall? Who benefits from trade restrictions? Why is a tariff the most used trade restriction?
Draw a domestic supply and demand diagram for a product in which the United States does not have a comparative advantage. What impact do foreign imports have on domestic price and quantity? On your diagram show a protective tariff that eliminates approximately one-half of the assumed imports. What are the price-quantity effects of this tariff on ( a) domestic consumers, (b) domestic producers, and (c) foreign exporters? How would the effects of a quota that creates the same amount of imports differ?
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