Econ 302 Exam 2 Questions & Answers Correct 100 %

Under free trade: Domestic price=$8 per ton Under free trade: World price=$8 per ton Under free trade: QSd=6 tons Under free trade: QDd=24 tons With tariff: Domestic price=$10 per ton With tariff: World price=$8 per ton With tariff: QSd=12 tons With tariff: QDd=20 tons 1. What is the impact on domestic consumers of setting a $2 per ton tariff? - Answer -44 Under free trade: Domestic price=$8 per ton Under free trade: World price=$8 per ton Under free trade: QSd=6 tons Under free trade: QDd=24 tons With tariff: Domestic price=$10 per ton With tariff: World price=$8 per ton With tariff: QSd=12 tons With tariff: QDd=20 tons 2. What is the impact of the $2 tariff on producers' surplus? - Answer +18 Under free trade: Domestic price=$8 per ton Under free trade: World price=$8 per ton Under free trade: QSd=6 tons Under free trade: QDd=24 tons With tariff: Domestic price=$10 per ton With tariff: World price=$8 per ton With tariff: QSd=12 tons With tariff: QDd=20 tons 3. What is the effect of the $2 tariff on government revenue? - Answer It rises by 16 Under free trade: Domestic price=$8 per ton Under free trade: World price=$8 per ton Under free trade: QSd=6 tons Under free trade: QDd=24 tons With tariff: Domestic price=$10 per ton With tariff: World price=$8 per ton With tariff: QSd=12 tons With tariff: QDd=20 tons 4. What is the effect of applying the $2 tariff on national economic well being? - Answer -10 5. In what ways are the effects of immigration similar to those of international trade? - Answer a. All academic studies show immigration raises aggregate GDP or the economic pie. c. There are sharp income distribution effects, typically low skill workers suffer wage reductions even especially in the short run. A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount: World price of wine (free trade): $20 per bottle Domestic production (free trade): 500,000 bottles Domestic production (after tariff): 600,000 bottles Domestic consumption (free trade): 750,000 bottles Domestic consumption (after tariff): 650,000 bottles 6. 1. Refer to Scenario 1. Before the tariff is imposed, the country imports _____ bottles of wine, but following the imposition of the tariff, the country will import _____ bottles of wine. - Answer 250000, 50000 A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount: World price of wine (free trade): $20 per bottle Domestic production (free trade): 500,000 bottles Domestic production (after tariff): 600,000 bottles Domestic consumption (free trade): 750,000 bottles Domestic consumption (after tariff): 650,000 bottles 7. 2. Refer to Scenario 1. The imposition of the tariff on wine will cause the surplus of the domestic producers to _____ by ____. - Answer Rises, 2.75 million A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount: