ECN 153 Chapter Notes - Chapter 9: Deadweight Loss, Pineapple, Economic Surplus

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periwinklegoldfish100

20 Oct 2016

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This figure shows the consumer and producer surplus in the equilibrium without trade. The sum of consumer and producer surplus measures the total benefits that buyer and sellers receive from participating in the market. To check if a specific country is going to be an importer or exporter of a certain product depends on the price of product in that country vs the price of product at the world stage. World price- comparing the price of a product in home country vs a foreign country. A cou(cid:374)tr(cid:455)"s decisio(cid:374) to i(cid:373)port or e(cid:454)port products depe(cid:374)ds o(cid:374) the world price of that product. A country exports a product, if the world price of that product is higher than the domestic price. (suppose in canada, lumber costs to produce but the world price of lumber is . Canada will export lumber to other foreign countries so that they are able to get a higher price for their goods. )

Related Questions

The equation for the demand curve is D = 100 - P. That means that the intercept on the price axis is 100, and the intercept on the quantity axis is also 100. The slope of the demand curve is -1. The equation for the supply curve is S = 9*P. That means that the supply curve begins at the origin, and increases with a slope of 9. For example, if the price is $1, the quantity supplied is 9. If the price is $20, the quantity supplied is 180. If you draw these curves you will notice that the intersection of supply and demand occurs at a price of $10 and a quantity of 90. That is the market equilibrium. We will call it the autarkic equilibrium in this market.

A. What is the consumer surplus?

B. What is the producer surplus

C. Using the same information as in problems A and B, now also assume that the country can trade this product at a world price of $20. Will the country be an exporter or an importer of the product?

D. Continuing with the information in the previous problem, at a price of $20, what is the quantity demanded? Plug the price into the demand formula in problem A

E. What is the new consumer surplus when the country begins trading at a price of $20?

F. What is the new producer surplus when the country begins trading at a price of $20?

G. What is the dollar value of the gains from trade?

raspberrybear41

Trade Policy.

The demand for cars in Home is q = 30 â P and the supply of cars in Home is q = P. The demand for cars in Foreign is q = 10 â P and the supply of cars in Foreign is q = P.

a) Calculate the autarky equilibrium price and quantity in each country.

b) Who is the importer of cars and who is the exporter?

c) Write the import demand for Home and the export supply for Foreign.

d) Find the equilibrium world price under free trade. What is the amount of cars traded between the two countries?

e) Suppose the country that is the importer imposes a tariff of $2 per unit on car imports. Find the new equilibrium world price under the tariff. What is the amount of cars traded between the two countries now? Show this in a graph with the import demand for Home and the export supply for Foreign.

f) Look at figure 1 for Home and fill in the table below (with letters, no numbers) with the consumer surplus, producer surplus, government revenue and total surplus before and after the tariff.

g) Look at figure 2 for Foreign and fill in the table below ((with letters, no numbers) with the consumer surplus, producer surplus, government revenue and total surplus before and after the tariff.

h) Does Home experience a terms of trade gain or loss as a result of the tariff? Does Foreign experience a terms of trade gain or loss as a result of the tariff?

carminerat489

1. We can conclude that international trade is beneficial because, regardless of whether the country imports or exports a good, the overall increase in well-being outweighs the losses associated with trade.

Is the statement true or false?

2. Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run. This observation helps to explain why many economists are skeptical about the:

a. Unfair-competition argument.

b. Infant-industry argument.

c. national-security argument.

d. Jobs argument

3. Suppose that the U.S. has a comparative advantage in the production of spreadsheet software. As a result of opening up the market to international trade:

a. U.S. citizens benefit from lower software prices, increasing consumer surplus in the market.

b. U.S. producers benefit from higher software prices, increasing producer surplus in the market.

c. U.S. software producers are harmed since the price that these producers receive will decline as the price falls to the world price.

d. total surplus in this market will remain unchanged, as the decline in benefits received by software producers exactly balances the increase in benefits received by US software consumers.

blushzebra257

ECN 153 Chapter Notes - Chapter 9: Deadweight Loss, Pineapple, Economic Surplus

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