ec-22 - Homework #8 E201 Spring 2009 The problems below...

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Homework #8 E201 Spring 2009 The problems below draw from the material in Chapters 9 and 10 and accompanying lectures. 1. The world price of cotton is below the no-trade price in Great Britain and above the no- trade price in Peru. Using supply and demand diagrams and welfare tables such as those in Chapter 9, show the gains from trade in each country. Compare your results for the two countries. 2. Suppose that Congress imposes a tariff on Japanese motorcycles to protect the U.S. motorcycle industry from foreign competition. Assuming that U.S. and Japanese motorcycles are homogeneous (perfect substitutes), use a diagram of the market for motorcycles sold in the U.S. to show the effect of this tariff on the following: the quantity of Japanese imports, the quantity of domestically produced motorcycles, the price of motorcycles in the U.S., government revenue , and the deadweight loss . What does the deadweight loss represent? 3. Alcohol consumption is directly related to motor vehicle accidents; thus, greater consumption of alcohol imposes costs on people who do not drink and drive. a.
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ec-22 - Homework #8 E201 Spring 2009 The problems below...

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