ch.5 Import Tariffs Perf. Comp

Question 1

Trade policy

Answer 1

gov’t action meant to influence the amount of international trade. Includes the use of import tariffs, import quotas, and subsidies for exports.

Question 2

Tariff

Answer 2

taxes on imports

Question 3

Specific Tariff

Answer 3

a trade tax equal to a fixed amount of money per unit sold

Question 4

Ad Valorem Tariff

Answer 4

a trade tax equal to a give % of the selling price. (Used more often than specific duties)

Question 5

Compound tariff

Answer 5

a trade tax that has both a specific and ad valorem component

Question 6

ASSUMPTIONS:

Answer 6

assume firms are perfectly competitive
under perfect comp. each firm is a price taker
small country - incomparison to other countries
small country has no influence on world prices (P^w)

Question 7

how to get consumer surplus

Answer 7

add up surplus on each unit purchased, from 0 to D1.

the area between demand and price paid - up to quantity sold

Question 8

How to get Producer surplus

referred to as “fixed factors of production” and loosely used as “profit”

Answer 8

add all individual surpluses obtained from each unit sold from 0 to S1.
(the area between price received and supply curve up to quantity sold)

Question 9

Total Home Welfare measured by

Answer 9

consumer and producer surplus

Great total surplus = GOOD

Question 10

No-Trade Equilibrium

Answer 10

found at autarky where demand and supply intersect