4. A graphical comparison of tariffs and quotas Borzia and Ardon are small countries that protect their economic growth
Posted: Wed Jul 06, 2022 5:55 am
4. A graphical comparison of tariffs andquotas
Borzia and Ardon are small countries that protect their economicgrowth from rapidly advancing globalization by limiting the importof televisions to 20 million. To this end, each country imposes adifferent type of trade barrier when the world price (PWPW) is$3,000. In Borzia, the government decides to impose a tariff of$2,000 per television; in Ardon, the government implements a quotaof 20 million televisions.
Assume that Borzia and Ardon have identical domestic demand(D0D0) and supply (SS) curves for televisions as shown on thefollowing graph. Under these conditions, the price of televisionsis $5,000 per television in each country.
Suppose that in both countries, demand for televisions risesfrom D0D0 to D1D1.
Assuming Borzia keeps the tariff at $2,000 per television,complete the first row of the following table by calculating eachof the values given this increase in demand. Assuming Ardonmaintains a quota of 20 million televisions, complete the secondrow of the table by calculating each of the values given thisincrease in demand.
Country
Price
Quantity Demanded at New Price
Imports
(Dollars)
(Millions of televisions)
(Millions of televisions)
True or False: The increase in demand helps domestic producersbut hurts domestic consumers in Ardon.
Which of the following explain why a quota is a restrictive trade barrier than an equivalenttariff. Check all that apply.
a.) By foreclosing the market mechanism, a quota suppressescompetition.
b.) A foreign producer may offset the quota by the pricereductions.
c.) A quota ensures the domestic industry a ceiling onimports.
PRICE (Dollars per television) 10000 9000 8000 7000 6000 5000 4000 3000 2000 + 1000 0 P WA 0 10 D 0° D₁ 40 ☆ 20 30 50 60 70 QUANTITY (Millions of televisions) 80 90 S 100 (?)
Borzia and Ardon are small countries that protect their economicgrowth from rapidly advancing globalization by limiting the importof televisions to 20 million. To this end, each country imposes adifferent type of trade barrier when the world price (PWPW) is$3,000. In Borzia, the government decides to impose a tariff of$2,000 per television; in Ardon, the government implements a quotaof 20 million televisions.
Assume that Borzia and Ardon have identical domestic demand(D0D0) and supply (SS) curves for televisions as shown on thefollowing graph. Under these conditions, the price of televisionsis $5,000 per television in each country.
- 4 A Graphical Comparison Of Tariffs And Quotas Borzia And Ardon Are Small Countries That Protect Their Economic Growth 1 (16.33 KiB) Viewed 16 times
Assuming Borzia keeps the tariff at $2,000 per television,complete the first row of the following table by calculating eachof the values given this increase in demand. Assuming Ardonmaintains a quota of 20 million televisions, complete the secondrow of the table by calculating each of the values given thisincrease in demand.
Country
Price
Quantity Demanded at New Price
Imports
(Dollars)
(Millions of televisions)
(Millions of televisions)
True or False: The increase in demand helps domestic producersbut hurts domestic consumers in Ardon.
Which of the following explain why a quota is a restrictive trade barrier than an equivalenttariff. Check all that apply.
a.) By foreclosing the market mechanism, a quota suppressescompetition.
b.) A foreign producer may offset the quota by the pricereductions.
c.) A quota ensures the domestic industry a ceiling onimports.
PRICE (Dollars per television) 10000 9000 8000 7000 6000 5000 4000 3000 2000 + 1000 0 P WA 0 10 D 0° D₁ 40 ☆ 20 30 50 60 70 QUANTITY (Millions of televisions) 80 90 S 100 (?)