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Unformatted text preview: tariffs, the United States and South Korea are hoping to bring positive benefits to both countries. With the tariffs in place, domestic consumer surplus is lower than in a free trade situation. Also, this loss in consumer surplus is greater than the gain in producer surplus and government revenue, which means that tariffs create dead weight loss. With the removal of the tariffs, consumer surplus in both countries will increase, and the dead weight loss will be eliminated. Because tariffs are generally put in place to increase domestic producer surplus, the removal of these tariffs could cause a decrease in producer surplus. This decrease, however, will most likely be cancelled out because both countries are removing the tariffs. This means that both domestic industries will see higher levels of exports, which will increase production....
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This note was uploaded on 02/02/2011 for the course ECON 102 taught by Professor Rossana during the Fall '08 term at University of Michigan.
- Fall '08