Question: Problem 7. Consider the following information in the table below about the production and consump- tion of kimchi in South Korea (here considered a
Problem 7. Consider the following information in the table below about the production and consump- tion of kimchi in South Korea (here considered a small country) before and after the introduction of a 20% tariff. Kimchi ($/kg) (free trade) Domestic production (free trade) Domestic production (after tariff) Domestic consumption (free trade) $3.4 80,000 kg 85,000 kg 100,000 kg Domestic consumption (after tariff) 95,000 kg a) Calculate: i) the cost to consumers; ii) the benefits to producers; iii) the change in government revenue; and iv) the deadweight loss associated with the imposition of such a tariff. b) Calculate the total change in national welfare associated with the imposition of the tariff. Should Korea impose such a tariff? What other considerations could you present to push for the imposition of this tariff?
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