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pophw2-final

# pophw2-final - ECON 333 SPRING 2008 POP HOMEWORK ASSIGNMENT...

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ECON 333 SPRING 2008 POP HOMEWORK ASSIGNMENT - II FEBRUARY 22 ND Q: Suppose that world price of a TV set is \$200, but the price of a TV set in country A is \$250. (Assuming that country A is small enough not to affect the world price) what must be the tariff rate if country A had imposed an ad valorem tariff? What must be the tariff rate if country A had imposed a specific tariff? A: The domestic price is \$50 higher than the world price, which means the ad valorem tariff is 215%. (50/200=0.25.) The equivalent specific tariff is \$50. LAST NAME INITIALS: THON FEBRUARY 25 TH Q: What is producer surplus? How does it change as the price rises? Using a graph, illustrate the consumer surplus, and the change in consumer surplus in response to a price increase. A: Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. Thus, it is an approximate measure of consumer welfare in a given market. In a graph, consumer surplus can be illustrated by the triangle below the demand curve and above the price line. As the price rises, consumer surplus falls.

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pophw2-final - ECON 333 SPRING 2008 POP HOMEWORK ASSIGNMENT...

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