Reference no: EM133719081

Explain with DIAGRAMS.

Given: Under free trade; a small country imports blankets. The price of a blanket is $100.00.

Suppose the country levies a tariff of $10.00 per blanket. Show the effects of this change in a diagram. Give all welfare effects. Is the country better off or worse off under restricted trade?

Is it better for the country to use an import tariff or an import quota, if the idea is to protect the domestic blanket industry? Explain clearly with diagrams. (no need to give numerical answers in part b.)

What are the effects if a government decides to give a subsidy to the domestic importing industry? Do you think this policy may be better or worse than the tariff and quota in order to protect the domestic industry? If yes, give reasons. If no, give reasons as well.

Draw detailed diagrams and explain.

In what ways is the effect of a tariff in a large country different from that in a small country?

True/False? Explain and give diagrams when needed.

There are no benefits to a small country from imposing tariffs.
Import quotas always help domestic consumers.
Import quotas always help domestic producers.
Import quotas always help the domestic government.
Export subsidies in a small country lead to a fall in the world price.

Define:
Import tariff on toys

b. Export Subsidy on bananas

Deadweight loss; and show in a diagram of labor model

Voluntary Export Restraint

Quota Rent to landlord

In table below you can find information about goods produced in Poland. Total expenditure on each good is in last column.

a) Calculate unweighted average nominal tariff rate for Poland

b) Calculate weighted average nominal tariff rate for Poland. Weight them by contribution to total expenditure.

c) Assume that good A is final good produced using intermediate goods B and C. Calculate the ERP for good A. Take a look at your relevant result in part b and argue if this is a maximum protection for a good or not.
d) (extra credit) Suppose that recent inflation increased in world prices and that all of the import values in table increased by 25 percent (i.e., $1000 becomes $1250, $400 becomes $500, and so forth). Given these new values (assuming that the quantities of each import do not change):
(i) Calculate the weighted-average nominal tariff rate for Poland. Compare it with result from part (b) and comment on effect of inflation on weighted nominal tariff.
(ii) Calculate the ERP for good A. Go back to part ( c) and comment on effect of inflation on ERP