Suppose USA is a small country in sugar market. At present,
there is no tariff on...
Suppose USA is a small country in sugar market. At present,
there is no tariff on sugar import. However, beginning January
2015, the U.S. government starts levying 10 % tariff on sugar
import. Using an appropriate graphs explain what happens in the
U.S. sugar market? Who gains, who loses and what will be overall
welfare effect?
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 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...
Suppose the price of import good is 20 dollar before tariff, and
now a small country posted a 10% tariff on this product. As the
results, the production of this product of this small country
increase from 1000 to 1200. And the import of this product
decreased from 600 to 200 units.
a. What is the change of producer's surplus?
b. What is the change of consumer's surplus?
c. What is the total tariff revenue?
d. What is the total...
It is more efficient for the government of a small country to
impose an import tariff than a production subsidy to stimulate
output because it does not have to pay the producers directly.
Comment and Explain why?
Suppose there are two countries, USA and Japan. USA is regarded
as the home country and Japan is the foreign country. USA has 100
units of labor available and Japan has 80 units of labor. Both
countries can produce only two goods, airplanes and cars. The
output per hour of labor in the production of airplanes in the USA
is 12, while in car production the output per hour of labor is 6.
In Japan, the output per hour of...
Consider a world with two countries - USA and Foreign
and a competitive market of sugar in both countries.
Foreign is more efficient in the production of sugar and
in a free trade equilibrium, US would
import part of its consumption of sugar. Describe
graphically such trading equilibrium of sugar.
What would be the effect on the sugar price in USA and
on the welfare (measured by consumer surplus, producer surplus and
tariff revenue) of US when US imposes an...
When a small country levies a tariff on imports, this causes the
domestic price of the imported good to ________, which is ________
to the foreign exporting country and ________ to the importing
country.
A) Rise; harmful; irrelevant
B) Fall; beneficial; harmful
C) Rise; beneficial; irrelevant
D) Rise; irrelevant; harmful
E) Rise; irrelevant; beneficial
If a tariff is imposed by a country that is large enough to have
market power in global markets, the domestic consumer will face a
domestic price ________ than the world price for the product, and
this world price will be ________ by the tariff.
Consider a small country (perfect competition) applying a
tariff, t, to imports of a good
a. Suppose that the country currently has a tariff on imports,
but decides to reduce it from t to t’. Draw graphs for the Home and
import markets and illustrate this change.
b. What happens to the quantity of goods produced at Home and
their price? What happens to the quantity of imports?
c. Are there gains or losses to domestic consumer surplus due to...