mported oranges. The This question asks you to analyze the effects aferamaval of
ID: 1224660 • Letter: M
Question
mported oranges. The This question asks you to analyze the effects aferamaval of a taritr on following table summarizes situations in the o first column describes the situation with a $4.00-per-bushel tariff on oranges. The second column represents the situation after the tariff Is Temoved. Yor may assume that transportation costs are zero and that the supply and demand curves are straight lines nd without the tariif. The With $4.00 Tariff With Free Trade World price of oranges ($/bushel) Tariff per bushel ($/bushel) Domestic price of oranges ($/bushel) Oranges consumed domestically $12.00 $4.00 $16.00 $12.00 $0.00 $12.00 (million bushels/year) 24 28 Oranges produced domestically (million bushels/year) 8 Ilustrate the effects of removal of the larif. You may find graph paper useful) Label the tree-trade and tarilf equilibria in terms of consumption, domestic production, imports Illustrate the effects of removal of the tariff You may find Estimate the amount domestic consumers gain from removal of the tariff. Show and explain your work stimate the amount of the net effect on the country's welfare from removal of the tariff. Show andexplain yourwork In this case, would the optimal import tariff on aranges he negative zera or positiye Why? Under what assumptions is the "optimal" tariff really optimal? 4.) Country A is abundant and practices unrestricted trade with the rest of the world. Th country's new minister for trade proposes an import tariff, claiming that such a policy would raise wages relative to the return to capital. Do you agree? Why, or why not? For each of the foltowing, how do tariffs affect the distribution of income23 wTho Truth Ahout industrial Country Tariffs " Finance aod DevelonmentExplanation / Answer
a) By removing the tarriff, we have seen high domestic consumption, high imports, less domestic production and lesser price.
The price has reduced from $16 to $12. Domestic consumption increases from 24 to 28 million bushels, Domestic production decreases from 8 to 6 million bushels and thus imports increases from 24-8=16 million bushels to 28-6=22 million bushels.
World prices remain same.
b) Domestic consumers were purchasing less of bushels with high price because of tarriff but now demand increases with lower prices. Lower prices has increases their consumer surplus that is deduction of actual price from price what a consumer is willing to pay, as actual price reduces, consumer surplus increases.
c) Because of free trade domestic production has decreased and imports have increased.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.