QUESTION 1 10 points Save Answer In the case of a small open economy with no mar

Question

QUESTION 1 10 points Save Answer In the case of a small open economy with no market imperfections An 10% import tariff creates the same dead weight loss DM as a 10% roduction subsid O True False QUESTION 2 1 points Save Answer Figure: Figure 8a Price + t c d P +t Figure 8a) Consider a small country initially applying a tariff, t, to imports of a good like that shown in Figure 8-5 in the textbook. Suppose that the country decides to reduce its tariff to f, as shown in Figure 8a. The quantity of goods produced at Home: falls from 3 to 2 Ofalls from 2 to 1 O increases from 4 to 5 o falls from 5 to 4.

Explanation / Answer

Ans)

1.
TRUE
The effect of a production subsidy ad an import tariff is same if they are of the same rate.

2.
falls from 3 to 2
An import tariff reduction will reduce the welfare of the domestic producers.

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