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Unformatted text preview: Tax revenues = 3.5*$10 = $35 m Deadweight loss = (1/2)*$10*0.5+(1/2)*$10*1= -7. 5 Draw a graph to show the above. Gain in CS = ABCI Loss of Producer Surplus = ABGH Tax Revenues = EFHI DW Loss = CEI + FGH S $40 B C E F G DW Tax DW Revenues P $30 A I H D 5 5.5 9 10 Q in millions 2. Let us assume that the free trade price of laptop monitors is $100 and that the US levies a specific tax of $10 . Let us say that the domestic price of laptops rise to $105 (The US is a large country) . At the free trade price, the US produces 8 thousand units per week, and imports 16 thousand units. At the higher price of $105, domestic production rises to 10 thousand units per week and imports fall to 10 thousand units. Calculate the following: (i) Dead weight loss: HCD+GEF =- 0.5*5*2+-0.5*$5*4=-$15 thousand (ii) Gain for the US from the trading partner: $5*10 = $50 thousand (iii) Net Gain/Loss for the US. $50 thousand - $15 thousand = $35 thousand S Price $105 A H G $100 B C D E F D 8 10 20 24 Q in thousands...
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This note was uploaded on 10/24/2010 for the course ECON 460 taught by Professor Staff during the Fall '08 term at UNC.
- Fall '08
- International Economics