1. What are the 5 effects of a tariff in a small country listed in the manual, and the domestic import-competing industry is perfectly competitive?

2. What are the redistributive effects of a tariff in a small country? Who receives the deadweight losses from a tariff?

3. Suppose the free trade price of a good is $100 and the cost of the imported input with free trade is $20. (a) What is the value added with free trade [V]?

(b) Suppose the imported final good is subject to a tariff of 10%, and the imported input can enter duty free. What is the value added [V']? What is the ERP?

(c) Suppose that in addition to the tariff on the final product of 10%, there is a tariff on the imported input of 20%. Calculate the resulting value-added and the ERP.

4. Instead of a competitive industry suppose the domestic import-competing industry is a monopoly. Would the monopolist's price be higher with a tariff or with a quota that allows an equivalent amount of imports as under a tariff?

5. What is the optimal tariff? For a small country, what is the optimal tariff?

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1 The tariff has the following effects 1The tariff affects the amount of goods produced An increase ... View the full answer