1. The graph below depicts a large country which has opened up trade in cars with other countries. The free trade price in the world market is $8000. The large country imposes a tariff of $1000 per car.
Price
Dd Sd
9000 Sw’+t
8000 a b c d Sw
7800 Sw’
30 50 90 110 Automobile
What is the autarky equilibrium price of cars in this country? —————————
If the world market price is $8000, what is:
Consumer demand at free trade price? ————
Domestic production at free trade price? ————–
How much is import at free trade price? —————–
As referred above, to satisfy the discontent domestic producers, government imposes a tariff of $1,000 on each imported car.
Price in the world market falls to $7800. As a result, Domestic consumers now face a supply curve Sw’+t at price $8800.
What is domestic demand after tariff? ——————
What is domestic production after tariff? ______________
How much is import after tariff? _______________
As a result of tariff:
Consumer surplus in the large country decreases by how much? (detailed computation must be shown) ————–
Producer surplus in the country increases by how much? (Detailed computation must be shown) ————–
What is government’s revenue after tariff? (areas are to be indicated and computations must be shown)
How much of this revenue is terms of trade effect? ————
How much of this revenue government collects from the domestic consumers?
How much is deadweight loss in this country? ———————–
Does the country achieve net national gain or loss? By how much?
——————— —————————————–
2. Use the 2018 BOP Account data for the US given below and answer the questions that follows. Show every step of your Computations
Compute US Current Account Balance for the year 2018. Explain whether the balance indicated a deficit or surplus for the year 2018.
Compute the Capital Account Balance for US in the year 2018. Did the account reflect a deficit or a surplus?
Compute US Financial Account Balance for the year 2018. Was the account in deficit or surplus?
Compute Statistical Discrepancy for the 2018 BOP Account. Does your answer match with the number shown on the table? (Show how you arrive at your answer for Statistical Discrepancy).
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