ECON216 Quiz 3 Question and ans PDF

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econ216 quiz questions and answers university of wollongong in dubai...

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Time allowed: 30 minutes The answers should be typed. Diagrams can be drawn by hand and then scanned. One document in Pdf format should be uploaded through the Turnitin Link provided. The link will open at 12:00 and close at 12:30. Please make sure you have put your name and student number on the answer sheet. Question 1 (6 marks) Use the figure below to answer the following questions:

a) What is the consumption effect of the tariff? ANS) 140X to 130X that means the consumption effect is -10X. b) What is the production effect of the tariff? ANS) 80X to 100X that means the production effect is 20X.

c) What is the trade effect of the tariff? ANS) the trade effect is: Before tariffs imports: 140-80+=60

after tariffs impots: 130-100=30

So the trade effect after the implementation of tariffs is -30, as the imports have been decreased fr4om 60 to 30.

d) Calculate the revenue effect of the tariff. ANS) the revenue effect is : Before tariffs: 140*10=1400 After tariffs: 130*12=1560

So this proves that the revenue effect after the implementation of tariffs is +60 because the revenue has increased from 1400 to 1560.

e) What is the dollar value of the welfare cost of the tariff to consumers? Ans) 0.5*((140-130)*(12-10) =$10

f)

What is the dollar value of the welfare benefit of the tariff to producers?

Ans) 0.5*((100-80)*(12-10)) =$20

Question 2 (4 marks) Determine the size of the nominal tariff relative to the effective rate of protection under the following conditions. a) There are no imported inputs and the tariff on a finished good is 10%. Ans) there are no imported inputs and tarrif on finished good is 10% Rate of effective production(g)=t-(ai)(ti)/1-ai g = 0.1-0/1-0 g= 0.1 b) A country imposes a 10% tariff on all finished goods and inputs. It imports 50% of the inputs used in the production of a finished good. Ans)

c) A country imposes a 10% tariff on finished goods and a 20% tariff on inputs. It imports 50% of the inputs used in the production of a finished good. ANS) t=10%

ti=20%

ai=50%

G= t-ai*ti/1-ai g= 0.10-0.5*0.2/1-0.5

g= 0

d) A country imposes a 10% tariff on finished goods and a 20% tariff on inputs. It imports 70% of the inputs used in the production of a finished good. Ans) g= 0.10-0.7*0.2/1-0.7 g = 0.10-0.14/0.3 g = 0.133....