Chapter 13 Problems

Chapter 13 Problems - Chapter 13 Problems 1 2 4 5 and 7 Problems 1 2 Estimate the welfare cost of a 20 tariff imposed in a market where imports

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Chapter 13 Problems 1, 2, 4, 5 and 7
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• Estimate the welfare cost of a 20% tariff imposed in a market where imports were $100 million before tariff and $50 million after (valued at world prices). Can you estimate approximate loss in welfare in terms of areas in Figure 10.1? • Suppose the trade restriction above is not related to a tariff but to a voluntary export restraint. What would be the welfare loss?
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• The welfare loss will be represented by areas 2 and 4 in the figure. The sum of these areas will be equal to $5 million. • If the policy were a VER, then the tariff revenue (area 3 in the figure) must also be sent abroad This area will be equal to $10 million. The total welfare loss will then be $15 million.
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Problem 4 • You are a domestic manufacturer persuading the government to protect your industry. You can secure either a twenty percent tariff or a fixed quota that is equivalent to it. You expect the market to grow in real terms. Will that fact affect whether you choose the tariff or quota?
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Chapter 13 Problems - Chapter 13 Problems 1 2 4 5 and 7 Problems 1 2 Estimate the welfare cost of a 20 tariff imposed in a market where imports

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