Small country tariffin the us supply and demand for a

Assignment Help Microeconomics

Reference no: EM13375855

Small Country Tariff

In the U.S., supply and demand for a particular good are given by the equations:

Q^S = 10P

Q^D = 105 - 5P

Assume the U.S. is a small country in the market for this good. Further, assume that in the rest of the world (ROW), the market price for this good (P_ROW) is $5.

1. Before trade opens up, what are the values of the equilibrium price and quantity in the U.S.?

2. If trade opens up, what will be the quantity of U.S. imports?

3. Suppose the U.S. puts a $1 tariff on this good. What will be the quantity of U.S. imports now? [Hint:What will be the relationship between P and P_ROW after the tariff? What, if anything, will happen to P_ROW after the U.S. imposes this tariff? Remember: the U.S. is a small country.]

4. What is the total dollar value of the change in welfare in the United States caused by the tariff? State whether the U.S. enjoys a welfare gain or suffers a welfare loss (a deadweight loss) from the tariff. [Hint: draw a rough graph, put some numbers on it based on your answers above and the supply and demand equations, and figure out some area(s)]

5. What is total U.S. government revenue from the tariff?

Reference no: EM13375855

Questions Cloud

Based on many years of experience a lecturer in econ241 has : based on many years of experience a lecturer in econ241 has determined that the probability distribution function of x

Modelling stock returns in an oecd country the objective of : modelling stock returns in an oecd country the objective of this assignment is to estimate some alternative models of

For the following problems assume that under free trade ie : for the following problems assume that under free trade i.e. before any tariffs are imposedthe u.s. has a domestic shoe

Now assume that the us is a large country in this market : now assume that the u.s. is a large country in this market with the same supply and demand equations given in part ii

Small country tariffin the us supply and demand for a : small country tariffin the u.s. supply and demand for a particular good are given by the equationsqs 10pqd 105 -

Suppose that x and y are random variables such that ex 4 : suppose that x and y are random variables such that ex 4 ey 2 and varx vary 4. let zxy. 1. find ez 1 dp 2. assuming

Students are to choose a low income economy lic as : students are to choose a low income economy lic as classified by the world bank and write a brief report on the level

Country investment final casenbspthe woman in the dark suit : country investment final casenbspthe woman in the dark suit serious women always wear black suits leafed through the

1find a recent january 2012-march 2012 money and banking : 1.find a recent january 2012-march 2012 money and banking related article in the media the economist globe and mail

User Account

All Pages