Show the effects of the following on welfare for a large and a small country: a....

Show the effects of the following on welfare for a large and a small country:

a. an import tariff

b. an export subsidy

Expert Solution

Welfare effects for a large country on an

Import tariff:-

Consumers of the product in the importing country suffer reduction in well being as a result of tariff.
Increase in the price of both imported and domestic products reduces the amount in the market.
Producers experience an increase in well being.
Increase in price of products increases producers surplus in the country..
Increase in output of existing firms.
Benefits from the revenue.
Tariff implemented by a large importing country raise national welfare.
If tariff is high in a large country national welfare will fall.

Positive optimal tariff will maximize national welfare.

Welfare effects of a small country on import tariff:-

Raise the domestic price by the full value.
Consumers of the product in the importing country are worse which result in tariff.
The increase in the price of both imported and domestic products reduces surplus in the market.
Producers are better off as a result of tariff.

Increase in the price of products increases producer surplus in the industry..

An export subsidy of a large country:-

Cause an increase in the price of the goods on domestic market and decrease in the price.
Cosumers of the product in export country decreases in well being as a result of export subsidy..
Increase in the domestic price reduces the consumer and surplus in the market.
Producers in exporting country experiences increase in well being.

Market raises producers surplus in the industry..

An export subsidy of a small country:-

Consumers of the product in importing country experiences increase in well being.
Decrease in price of imported goods as well as domestic goods increases the rate of surplus in the market.
Domestic consumer price remains the same
Producers gain surplus in the market.
Foreign prices remain unchanged and exports to small country fall.
Thus the welfare effects on small country are insignificant and are assumed to be zero.f

Rahul Sunny answered 2 years ago

What differentiates a "large country" from a "small country" in the analysis of the effects of...

What differentiates a "large country" from a "small country" in the analysis of the effects of a tariff? What are the consequences of the difference between being a "small country" and being a "large country" upon the world price when a tariff is imposed? What does this imply about the advisability of imposing a tariff on the tariff-imposing nation's welfare?

Welfare effects of a tariff in a small country Suppose Burundi is open to free trade...

Welfare effects of a tariff in a small country Suppose Burundi is open to free trade in the world market for maize. Because of Burundi’s small size, the demand for and supply of maize in Burundi do not affect the world price. The following graph shows the domestic maize market in Burundi. The world price of maize is PWPW = $350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus...

3. Welfare effects of a tariff in a small country Suppose Guatemala is open to free...

3. Welfare effects of a tariff in a small country Suppose Guatemala is open to free trade in the world market for oranges. Because of Guatemala’s small size, the demand for and supply of oranges in Guatemala do not affect the world price. The following graph shows the domestic oranges market in Guatemala. The world price of oranges is PW = $800 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer...

Welfare effect of a tariff in a small country

D. Assume a large open economy and discuss the welfare effects of a tariff in a...

D. Assume a large open economy and discuss the welfare effects of a tariff in a partial equilibrium framework. DRAW GRAPHS AND LABEL THEM CLEARLY.

1. Welfare effects of free trade in an exporting country Consider the Kenyan market for lemons....

1. Welfare effects of free trade in an exporting country Consider the Kenyan market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in Kenya. Suppose Kenya's government currently does not allow international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in Kenya in the absence of international trade. Then, use the green triangle (triangle symbol) to...

Explain the difference between a “large country” and a “small country” within the concept of trade....

Explain the difference between a “large country” and a “small country” within the concept of trade. What wheat-exporting countries would you consider “large”? What wheat-importing country would you consider “large”?

Draw a well-presented and well-labelled supply and demand diagram to show the welfare effects of rent...

Draw a well-presented and well-labelled supply and demand diagram to show the welfare effects of rent control. Using your diagram from part (a) construct a well-presented table that shows the consumer surplus, producer surplus, total surplus and deadweight loss both before and after the rent control has been put in place. According to your diagram has consumer surplus increased or decreased? Briefly explain consumer surplus has decreased or increased.

Explain, the effects of a tariff in a large vs. a small importing economy.

In general to evaluate welfare effects we need to consider the welfare of groups of individuals....

In general to evaluate welfare effects we need to consider the welfare of groups of individuals. What problem does consumer surplus pose in this regard?

Question