7. Your government is considering an import tax on a consumer good (imported). Your team is...

7. Your government is considering an import tax on a consumer good (imported). Your team is assisting the government in evaluating the welfare impact of the tax. You are the head of the team, and your task is to explain to your team members how the small-country or non-small-country assumptions would influence the result.

Solutions

Expert Solution

A small country means that the share of their imports in the world market. So small that even if the imports are completely wiped out, there won't be any significant change observed in the market. But one must understand that no matter whether our country falls under the category of big or small, when a tax is imposed on the goods imported, the domestic selling prices of these goods increase, implying that the demand of these goods decrease to an extent. In response to this, the level of imports decrease. The only factor here is that, this level of decrease in imports has little to no effect in world price in the case of a small country as against a significant effect in the case of a large country. Ceteris Paribus, the welfare of consumers against high domestic prices are preserved furthermore giving impetus to local vendors to prosper in their business.

Hope this helps. Do hit the thumbs up. Cheers!

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

1) The loss of consumer benefits when a tariff imposed on imported consumer good is called:...

1) The loss of consumer benefits when a tariff imposed on imported consumer good is called: a) Consumer surplus b) Net-welfare gain c) Consumer deadweight cost d) Producer deadweight cost 2) Which one is not true about countries of the world? a) Only large countries involve in an international trade b) Openness of countries to international trade vary between countries c) Countries produce, exchange, and consume goods and services d) Economic development of countries is little affected by the extent...

Pears PLC adheres to IFRS. It recently imported inventory for $100 million, paid import tax of...

Pears PLC adheres to IFRS. It recently imported inventory for $100 million, paid import tax of $ 2milion, carrying in cost of $5 million and spent $5 million for storage prior to selling the goods. The amount it charged to inventory expense ($ millions) was closest to: $100 $105 $107 $115 In an inflationary environment, a LIFO liquidation will most likely result in an increase in: Inventory. Accounts payable. Operating profit margin. None of them. 3. The CFO of APEX,...

A sales tax on sellers of a good leads to a loss of consumer surplus, but...

A sales tax on sellers of a good leads to a loss of consumer surplus, but a price ceiling or a price floor on that same product will not. True or False?

Suppose that the Malaysian government is considering whether to impose an import tariff or quota to...

Suppose that the Malaysian government is considering whether to impose an import tariff or quota to protect domestic automobile industry. As an advisor, what are your advice to the government? Please analyse the similarities and differences between import tariff and import quota when there is a reduction in supply for the product. Use appropriate diagram/s to demonstrate your answers.

7,Why do you think you might be a good team member on a software development team...

7,Why do you think you might be a good team member on a software development team someday?

The city government is considering two tax proposals:

8. Problems and Applications Q8 The city government is considering two tax proposals: • A lump-sum tax of $300 on each producer of hamburgers. • A tax of $1 per burger, paid by producers of hamburgers. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Marginal cost will increase. Average variable cost will remain unchanged. Average fixed cost will increase. Average total cost will increase. Which of the following statements is true as a result of the per-burger tax? Check all that...

Suppose that the government imposes a $1 tax on a good that currently sells for a...

Suppose that the government imposes a $1 tax on a good that currently sells for a price of $5. Also, assume that after the tax is imposed, the good sells for $5.60. Which statement best explains the effect this has on the tax burden? a. The tax burden is being passed on to buyers. b. The tax burden is being carried by sellers. c. The tax burden is being shared between buyers and sellers. d. The tax burden is precisely...

20- The imposition of a tax on a good enables the government to raise the price...

20- The imposition of a tax on a good enables the government to raise the price received by sellers of the goods that have been taxed. lower the price paid by buyers for the goods that have been taxed. create a more efficient economic system. take part of consumer and producer surplus as tax revenue when the good is purchased. 21- The demand for gasoline is inelastic and the supply of gasoline is elastic. Therefore, sellers bear most of the...

Peripatetic? Enterprises, a U.S.? import-export trading? firm, is considering its international tax situation. Tax law in...

Peripatetic? Enterprises, a U.S.? import-export trading? firm, is considering its international tax situation. Tax law in the United States requires U.S. corporations to pay taxes on their foreign earnings at the same rate as profits earned in the United? States; this rate is currently 47 % ?However, a full tax credit is given for the foreign taxes paid up to the amount of the U.S. tax liability. Peripatetic has major operations in? Poland, where the tax rate is 15%?, and...

Even when there are no externalities in a market, a government may still tax a good...

Even when there are no externalities in a market, a government may still tax a good such as petrol to earn revenue. Describe what happens to each of the surpluses (including total surplus) in the market for petrol when this occurs, and why. What elasticity is the market for petrol likely to exhibit? Explain how elasticity influences the impact of the price change on total surplus.

Subjects