ASSIGNMENT TOPIC 10
INDIVIDUAL ASSIGNMENT
1.The imposition of an export tax by a home country will lead to _an increase
in home country consumer surplus and will lead to a decrease in home country producer surplus.C
a) a decrease; also lead to a decrease
b) a decrease; lead to an increase
c) an increase; lead to a decrease
d) an increase; also lead to an increase
2.Given the following information for (small) country A concerning a good X:
free trade price in A $20 per unit
tariff rate 20 percent
price in A, with tariff $24 per unit
consumption in A, free trade 1,000 units
consumption in A, with tariff 900 units
production in A, free trade 600 units
production in A, with tariff 800 units
a) The government revenue
generated by the tariff is $800.
b) The decrease in consumer surplus because of the tariff is $4,000.
c) The increase in producer surplus because of the tariff is $3,200.
d) The net welfare loss for A from the tariff is $600.
3.The diagram below shows the situation of a small country with free-trade in an imported product
(at a price of $10) and the situation with a tariff on the product (at a price of $11). In this graph, the
net welfare loss (or total deadweight loss) to the country from the imposition of the tariff is
__________.
a) $2
b) $6
c) $32
d) $44
4.In the diagram in Question #3 above, what is the amount of tariff revenue collected by the
government when the tariff is in place?
a) $3
b) $6
c) $18
d) $40
5. In the large-country case, an export tax
a) leads to an increase in the price of the good in the importing country.
b) leads to no change in the price of the good in the importing country.
c) is absorbed totally by the exporting country.
d) increases consumer welfare in both the exporting and the importing country
6. You are given the following information pertaining to large country B with respect to good W
(which is produced at home and also imported), both under free trade and with a $10.00 import
tariff in place:
domestic price of W under free trade $40
world price of W (i.e., price of W from rest-of-the-world) under free trade $40
domestic price of W after imposition of tariff $44
world price of W (i.e., price of W from rest-of-the-world after imposition of tariff $34
domestic production of W under free trade 80 units
domestic production of W after imposition of tariff 94 units
domestic consumption of W under free trade 120 units
domestic consumption of W after imposition of tariff 112 units
Given this information, and assuming that demand and supply curves are straight lines, what is
the loss of consumer surplus in country B that occurs because of the imposition of the tariff?
a) $44
b) $72
c) $448
d) $464
