Optimal Tariff

Optimal Tariff - Assignment Optimal Tariff Question and...

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Unformatted text preview: Assignment: Optimal Tariff Question and Answer Question: Tariff and Trade • Let us suppose that the U. S. demand curve for sugar is given by D = 300 - 3p. • Its supply curve is, S = 100 + 2p. • Consider that the rest of the world has an export supply curve of sugar given by XS* = - 100 + 5p. Question: Effect of Tariff • Derive the U S import demand schedule. What would be the prices of sugar in the U. S. and the rest of the world if the U. S. did not trade? • Suppose the U. S. trades at zero transportation cost. Find the world price under free trade. What is the volume of trade? • The U. S. government considers a specific tariff $ t per unit of on sugar imports. Determine the price of sugar in the U. S. and the rest of the world in the event the tariff is imposed. • What would be the quantity of sugar supplied and demanded in the U. S. and, therefore, the volume of trade? Question: Welfare Effect of Tariff • Determine the effect of this proposed tariff on the welfare of the sugar producers and...
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This document was uploaded on 02/10/2012.

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Optimal Tariff - Assignment Optimal Tariff Question and...

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