Question: a. If the foreign export supply is perfectly elastic, what is the optimal tariff Home should apply to increase welfare? Explain. b. If the foreign

a. If the foreign export supply is perfectly elastic, what is the optimal tariff Home should apply to increase welfare? Explain.
b. If the foreign export supply is less than perfectly elastic, what is the formula for the optimal tariff Home should apply to increase welfare?
c. What happens to Home welfare if it applies a tariff higher than the optimal tariff?

Step by Step Solution

★★★★★

3.37 Rating (172 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a This is the smallcountry case Lowering the foreign export p... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

745-B-E-I-E (945).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Consider the following two-country model of the market for spinach. All producers and consumers take the price of spinach as given. Home's supply curve for spinach is given by SH = 5 + P, where sH is...

Government Competition, Leviathan and Benevolence: Suppose governments can spend taxpayer resources on both public goods that have social benefits and political rents that are private benefits for...

Suppose that the demand for a good is given by the inverse demand function: p =0 - 3q. a. Plot the demand curve on a graph. b. Compute the price at which 2 units of the good will be demanded. c....

5. Consider a large country applying a tariff t to imports of a good like that represented in Figure 8-9. How does the size of the terms-of-trade gain compare with the size of the deadweight loss...

5. a. If the foreign export supply is perfectly elastic, what is the optimal tariff Home should apply to increase welfare? Explain. b. If the foreign export supply is less than perfectly elastic,...

Consider a large country applying a tariff t to imports of a good like that represented in Figure 8-9. How does the size of the terms-of-trade gain compare with the size of the deadweight loss when...

1. Home is a large country. The demand for a good at home is QB : 14 P and the 2. supply for the same good is Q5 i P 4. The Foreign export supply function is QXS'? : 3px _ 3 . I . (a) Calculate Home...

Q1. Consider a small Home country which imports rice. An import quota Select one: a.always results in the same loss in net Home welfare compared to an equivalent tariff b.always results in a larger...

(d) Explain what happens when there is trade between Home and Foreign - find the equilibrium with world trade. Can you say whether there are more or less firms operating in the Home country? Explain....

(1) fill in the gray cells in terms of the information in the same row in tab Q3. For example, the first gray cell is to calculate the total sales. (2) fill in the orange cells according to the value...

Airplane takeoff from an aircraft carrier is assisted by a steam driven piston/cylinder with an average pressure of 200 psia. A 38 500 lbm airplane should be accelerated from zero to a speed of 100...

On January 1, 2023, Venus Company had 200,000 ordinary shares outstanding, 100,000, 7% P100 par cumulative nonconvertible preference shares outstanding and share options outstanding to buy 50,000...

Eds Bowling Alley has made the following sales projections for the next six months. All sales are credit sales. Sales in January and February were $15,000 and $12,000 respectively. Experience has...

For each of the following scenarios, assume that the economy experiences an exogenous decrease in investment demand. For each case, illustrate the ISLMFX diagram and state the effect of the shock...

During the 1990s, American depositors dramatically increased the share of their funds in money market mutual fund accounts. Although these accounts have restrictions (such as limited access to funds...

Repeat the previous question, assuming that the government responds to maintain a fixed exchange rate. In which case or cases will the government response be the same as in the previous question?...

Martin Development Co. is deciding whether to proceed with Project X. The cost would be $10 million in Year 0. There is a 50% chance that X would be hugely successful and would generate annual...

On January 1, 2020, a machine costing $210,000 with a four-year life and an estimated $18,000 salvage value is installed in Apple Company's factory to Required: Compute depreciation for each year and...

Matt is analyzing two mutually exclusive projects of similar size and has prepared the following data. Both projects have 5 year lives. Matt has been asked for his best recommendation given this...