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Practice Problem

after tariff

The domestic country is Krakosia.

Before trade is allowed

The domestic equilibrium price of carnations is $_______ and the equilibrium quantity is _______.

Consumer surplus in Krakosia is $_______.

Producer surplus in Krakosia is $_______.

The world equilibrium price of carnations is $________.

World equilibrium quantity is, of course, not shown on this graph.

After trade is allowed (but before the tariff is imposed)

Will Krakosia become an importer or exporter of carnations?

Krakosian producers will make and sell ______ carnations at a price of $______.

Krakosian consumers will buy _______ carnations at a price of $____.

The difference between the domestic consumption and production of carnations is ______ carnations. What is this difference called?

Consumer surplus in Krakosia is now $______.

Producer surplus in Krakosia is now $_______.

Total surplus in Krakosia is now $_______.

Is this an increase or decrease? How much?

Deadweight loss from trade is $________.

Tax revenue from trade is $_____.

Who will be hurt by trade, Krakosian consumers or producers?

Now assume trade is allowed but a tariff is imposed

Will Krakosia now import or export carnations?

Krakosian producers will make and sell _________ carnations at a price of $______.

Krakosian consumers will buy _____________ carnations at a price of $__________.

The difference between the domestic consumption and the domestic production of carnations is _________ carnations.

Consumer surplus in Krakosia is now $_______.

Producer surplus in Krakosia is now $_______.

Total surplus in Krakosia is now $___________.

Is this an increase or decreasein total surplus with trade but before the tariff? How much?

Deadweight loss resulting from the tariff is $_______.

Tax revenue resulting from the tariff is $_________.

Who will be hurt by the tariff, Krakosian consumers or producers?

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Categories: International Trade
  1. clansy
    December 14, 2015 at 6:12 pm

    Sir there are no answers to quiz ?

  2. Kelcy Hahn
    December 14, 2015 at 6:29 pm

    No, you should be able to work it out. Check with each other to see if you got the same answer, and if not, try to figure out who made a mistake and why.

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