Question

Suppose there is a small country importing cars from foreign country. Which of the following statement...

Suppose there is a small country importing cars from foreign country. Which of the following statement about the welfare change when a tariff is imposed on imports is correct compared with free trade?

Total welfare of the home country increases

Both home producer surplus and home consumer surplus increase

Both home producer surplus and home consumer surplus decrease

Home consumer surplus decreases
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans: Home consumer surplus decreases

Explanation:

With free trade , consumer surplus is greater than the producer surplus due to the low world price . When the government imposes tariff on trade , then the domestic price ( world price + tarrif per unit) will increase. At this price consumers demand less . As a result home or domestic consumer surplus decreases whereas producer surplus increases. Total welfare of the home country decreases due to the imposition of tariff on trade.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following statements are correct for the effect of an import tariff on a...
Which of the following statements are correct for the effect of an import tariff on a small nation? Select one or more: a. In general, an import tariff reduces the national welfare of a small importing nation because the gain in producer surplus is smaller than the loss in consumer surplus. b. The import tariff raises government revenue. c. In general, an import tariff increases the national welfare of the small importing nation because the tariff raises the government revenue....
If a tariff in a small country reduces consumer surplus by $100, increases tariff revenue by...
If a tariff in a small country reduces consumer surplus by $100, increases tariff revenue by $50, and increases producer surplus by $20, then which of the following is incorrect? a. National welfare falls by $30. b. National welfare falls by $50. c. Deadweight loss is $30. d. The protection cost is $30. If a tariff of $10 per unit reduces the world price by $4, then a. The nation imposing the tariff must be a small nation. b. Domestic...
) The home country is small and imports at the equilibrium world price of $3. The...
) The home country is small and imports at the equilibrium world price of $3. The home country has the following domestic demand and supply curves for cars: Demand: Qd=1000 – 100P Supply: QS=100P -200 a. (6 points) Draw two graphs, one for home country and one for the world market with the appropriate (labeled) curves. Under the scenario of free trade, calculate and label the following in the appropriate places: (1) home country no-trade (autarky) price; (2) import demand...
Quotas are favoured over free international trade by:? ?consumers in the importing country and consumers in...
Quotas are favoured over free international trade by:? ?consumers in the importing country and consumers in the exporting country. ?domestic producers in the importing country and foreign producers with quota rights. ?domestic producers and domestic consumers in the exporting country. ?foreign producers without quota rights and consumers in the importing country. ?foreign consumers and domestic producers in the exporting country. Retaliation of trade restrictions can: set off still greater trade restrictions, leading to an outright trade war. recover the surplus...
Suppose that the equations S = 2P and D = 60 – P represent the domestic...
Suppose that the equations S = 2P and D = 60 – P represent the domestic supply and demand for Home market. All markets in this question are under perfect competition. a. Suppose Home is a small country and the price in the international market is 15. i. (4’)Suppose that Home uses a TRQ, tariff-rate quota, in the market: 5 units will be allowed to be imported tariff free and a 20% tariff rate will be charged in excess of...
3)      Explain why the following statements are true or false:                            &nbs
3)      Explain why the following statements are true or false:                                                        A: Exporting a good reduces consumer surplus therefor overall economic welfare decreases.                                                               B: Importing a good reduces producer surplus therefore overall economic welfare decreases.                                                      C: A tariff reduces imports, increases domestic production and producer surplus therefore overall economic surplus increases.        D: Export subsidies increase both consumer and producer surplus thereof they improve overall net economic welfare. 
     .    4) Explain why the following statements are either true or false:...
                              Home      Foreign Marginal Products Cheese  &nbs
                              Home      Foreign Marginal Products Cheese                       6           2 Wine                         4           3 Labor Force                 100         200 e. Suppose the price of wine in the home country before trade is equal to 2. What is the price of cheese? What is the wage? f. Suppose that the relative price of wine after trade is equal to one. Draw the consumption possibilities frontier for both the home country and the foreign country. Again show numerical values for the vertical and horizontal intercepts....
Tariffs and Quotas      Small Country      A. Effects of tariffs on         - Domestic Price...
Tariffs and Quotas      Small Country      A. Effects of tariffs on         - Domestic Price         - Domestic production         - Imports         - Consumer and producer surplus         - Production and consumption distortion         - Government revenue      B. Quotas         - Effect on export supply and domestic price         - Effects on consumer and producer surplus,           production and consumption distortion         - The quota rent         - Methods of allocating the quota rent      C. Large...
Trade barriers Suppose there are only two countries in the world (Home and Rest of the...
Trade barriers Suppose there are only two countries in the world (Home and Rest of the World) which produce and consume wheat. The price of wheat in Rest of the World is equal to 2 and Home is a small country with the following demand and supply functions for wheat: ?h = 50 − 10? ?h = 30 + 10? a. Compute and graph the equilibrium in the absence of trade. What would be the consumer and producer surplus? b....
Suppose that under free trade, country A is a small importer of good Z at the...
Suppose that under free trade, country A is a small importer of good Z at the amount M1. The government is considering imposing some trade restriction to reduce the amount of imports to M2(<M1). (6 points) Use a graph to analyze the impact of a tariff t that reduces the amount of import to M2 on country A’s domestic market price, consumption, production, and welfare. Clearly label the graph for full credits.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT