Matt Lowe
Professor Schlosser
Econ 465
Chapter 4 Assignment
10/7/15
1). Specific tariff is a fixed amount of money per physical unit of the imported product. A main disadvantage of a specific tariff is that the degree of protection it affords domestic producers varies inversely with changes in imported prices. On the other hand a specific tariff has the advantage of providing domestic producers more protection during a business recession, when cheaper products are purchased. An ad valorem tariff, is much like a sales tax, expressed as a fixed percentage of the value of the imported product. Ad valorem tariff can distinguish among small differentials in product quality to the extent that they are reflected in product price. Another advantage …show more content…
Consumer surplus refers to the difference between the amount that buyers would be willing and able to pay for a good and the actual amount they do pay. Producer surplus is the revenue producers receive over and above the minimum amount required to induce them to supply a good. Economic welfare is made up of consumer surplus and producer surplus and is affected by the market price. The objective of economic welfare is to maximize the well-being of society. To do that buyers must benefit from what they buy and sellers must benefit from what they sell. When people buy something they generally pay less than what they are willing to pay which is referred to as consumer surplus. Likewise, sellers can sell a product at a higher price than their economic cost to produce which is referred to as producer …show more content…
Oil is a basic necessity that we all need. If a tariff was imposed on oil it would decrease the demand for oil a little bit, but it wouldn't be enough to affect anything. I think it would encourage businesses to innovate new ideas about other alternative energy sources, but the costs businesses would have to have to redesign and produce a different energy source would outweigh the increased cost of oil because of a tariff.
14). A bonded warehouse is a storage facility used for imported goods. A bonded warehouse allows imported goods to be put into storage without having to pay a duty. The goods may be later sold overseas duty free or withdrawn for domestic sale upon payment of import duties. A foreign trade zone is a site where foreign merchandise can be imported with no import duty. Merchandise in the foreign trade zone can be stored or used in the manufacturing of a final product.
15). A). 1). Equilibrium price = $250, Equilibrium quantity = 25. 2). Consumer surplus = $3,125 and producer surplus = $3,125. B). 1). Quantity supplied = 10 and quantity demanded = 40, imports = 30. 2). Consumer surplus = $8,000 and producer surplus = $500. C). 1). Price = $200, quantity supplied = 20, quantity demanded = 30, imports = 10. 2).
Professor Schlosser
Econ 465
Chapter 4 Assignment
10/7/15
1). Specific tariff is a fixed amount of money per physical unit of the imported product. A main disadvantage of a specific tariff is that the degree of protection it affords domestic producers varies inversely with changes in imported prices. On the other hand a specific tariff has the advantage of providing domestic producers more protection during a business recession, when cheaper products are purchased. An ad valorem tariff, is much like a sales tax, expressed as a fixed percentage of the value of the imported product. Ad valorem tariff can distinguish among small differentials in product quality to the extent that they are reflected in product price. Another advantage …show more content…
Consumer surplus refers to the difference between the amount that buyers would be willing and able to pay for a good and the actual amount they do pay. Producer surplus is the revenue producers receive over and above the minimum amount required to induce them to supply a good. Economic welfare is made up of consumer surplus and producer surplus and is affected by the market price. The objective of economic welfare is to maximize the well-being of society. To do that buyers must benefit from what they buy and sellers must benefit from what they sell. When people buy something they generally pay less than what they are willing to pay which is referred to as consumer surplus. Likewise, sellers can sell a product at a higher price than their economic cost to produce which is referred to as producer …show more content…
Oil is a basic necessity that we all need. If a tariff was imposed on oil it would decrease the demand for oil a little bit, but it wouldn't be enough to affect anything. I think it would encourage businesses to innovate new ideas about other alternative energy sources, but the costs businesses would have to have to redesign and produce a different energy source would outweigh the increased cost of oil because of a tariff.
14). A bonded warehouse is a storage facility used for imported goods. A bonded warehouse allows imported goods to be put into storage without having to pay a duty. The goods may be later sold overseas duty free or withdrawn for domestic sale upon payment of import duties. A foreign trade zone is a site where foreign merchandise can be imported with no import duty. Merchandise in the foreign trade zone can be stored or used in the manufacturing of a final product.
15). A). 1). Equilibrium price = $250, Equilibrium quantity = 25. 2). Consumer surplus = $3,125 and producer surplus = $3,125. B). 1). Quantity supplied = 10 and quantity demanded = 40, imports = 30. 2). Consumer surplus = $8,000 and producer surplus = $500. C). 1). Price = $200, quantity supplied = 20, quantity demanded = 30, imports = 10. 2).