Figure W: The market for docks in Italy with S is the supply curve of Italian pr

Question

Figure W: The market for docks in Italy with S is the supply curve of Italian producers and D Is Italian consumers demand curve. The horizontal axis labeled "Q" measures the quantity of clocks. The vertical axis labeled "P" measures the price per clock. PHome $25, is the price of a clock in italy when Italy does not partiopate in intemational trade. world $10, is the price of a clock in italy when Italy participates in intemational trade. Pworldtanff $10+ S5 $15, ia the price of a clock in taly when Italy partiipates in trade and the Itaian government imposes a tariff of $5 per dock a4 $25 $15 $10 home Pworld+ tariff P world a3 a2 1b2 b3b4 a1

Explanation / Answer

1 If Italy does not participate in the international trade then the the price in the market is $25,

and if the price in the market is $25, consumer surplus is represented by the area a4  

IT is so because consumer surplus is the area above the pricei.e, $25 here an belowthe deand curve which is here shown by area a4.

So correct ans is C.a4.

Q22. At price $10, quantity supplied by Italian producers is 10,000 units while quantity demanded by Italian consumers is 60,000.

According to the figure, at $10 price quantity supply curve cut the $10 price line at 10,000 units and cuts the demand curve at 60,000. Thats why

correct ans is B.Qs = 10,000 and Qd = 60,000.

23. When Italy participates in international trade, Italy's conumer surplus is represented by area a2 + a3 + a4 b1 +b2 + b3 + b4 + c1 +c2.

because at price $10 price line this whole area isunder demand curve and above price line of $10.

So correct ans is B. a2 + a3 + a4 b1 +b2 + b3 + b4 + c1 +c2.

24. When Italy participates in international trade, Italy's proucer surplus is represented by area a1

because at price $10, only a1 is the area that is above supply curve and below price line.

So correct ans is D) a1.

31. After imposition of tariff of $5 on imported clocks. The area that represents the producer surplus is

a1 + a2

So correct ans is C) a1 + a2.

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