During the Napoleonic Wars, Britain blockaded North America, seizing U.S. vessels and cargo and impressing sailors. At

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During the Napoleonic Wars, Britain blockaded North America, seizing U.S. vessels and cargo and impressing sailors. At President Thomas Jefferson’s request, Congress imposed a nearly complete—perhaps 80%—embargo on international commerce from December 1807 to March 1809. Just before the embargo, exports were about 13% of the U.S. gross national product (GNP). Due to the embargo, U.S. consumers could not find acceptable substitutes for manufactured goods from Europe, and producers could not sell farm produce and other goods for as much as in Europe. According to Irwin (2005), the welfare cost of the embargo was at least 8% of the GNP in 1807. Use graphs to show the effects of the embargo on a market for an exported good and one for an imported good. Show the change in equilibria and the welfare effects on consumers and firms.

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Managerial Economics and Strategy

ISBN: 978-0321566447

1st edition

Authors: Jeffrey M. Perloff, James A. Brander

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