Exam 1 in class.docx - Exam 1 Solve Problem Under free trade a large country produces 1 million leather bags per year and imports another 2 million bags

# Exam 1 in class.docx - Exam 1 Solve Problem Under free...

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Exam 1 Solve Problem: Under free trade, a large country produces 1 million leather bags per year and imports another 2 million bags per year at the world price of \$60 per bag. Assume that the country imposes a specific tariff of \$5 per bag. As a result, the per-unit price of leather bags increase to \$63 in the international market and the import of leather bags drops to 1.6 million. The domestic production, on the other hand, increases to 1.1 million. a. Calculate change in Consumer suplus b. Calculate change in Producer Surplus c. Net nation Welfare Or (15 points) Under free trade, a large country produces 1 million leather bags per year and imports another 2 million bags per year at the world price of S60 per bag. Assume that the

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