Please see attachment then answer the following questions:
The graph above shows the demand and supply of socks for the country of Bangladesh.
a. If trade is avoided, Bangladesh consumes _____ pairs of socks at a price of _____ per socks.
b. With free trade, for a world price of $4 per pair of socks, Bangladesh is producing _____pairs of socks.
c. With free trade, for a world price of $4 per pair of socks, Bangladesh is consuming _______ pairs of socks.
d. With free trade, for a world price of $4 per pair of socks, Bangladesh is importing _________pairs of socks.
e. If the world price is $4 per sock, and the government of Bangladesh imposes a tariff of $1, Bangladesh produces ____________ and imports __________pairs of socks.
f. If the world price is $4 per pair of socks, and the government of Bangladesh imposes a tariff of $1, how much tariff revenue will the Bangladesh government collect? _____ .
Please see the attached document for the answers.
In general, here is how to answer such questions:
1. Domestic Production and Price without Trade is the Equilibrium point, where Supply and Demand Curves meet
2. With trade, and given world price, see where the World Price line meets the Supply curve, that Quantity is the Domestic Production. See where the World Price line meets the Demand Curve, that would be domestic demand or Consumption. The difference between Consumption and Production would be ...
This solution explains how to identify production, consumption and imports using a graph when there is free trade, and when tariffs are imposed. It also explains how to identify production consumption and price without trade.
Free Trade Equilibrium - International Economics
3. Draw an initial free-trade equilibrium for a small country facing fixed world prices, depicting its production possibilities frontier and relevant indifference curves.
a). Indicate in your diagram the rate of the tariff that would completely wipe out trade between this country and the rest of the world.
b) What happens to production and consumption if legislators are overzealous and the tariff rate is set higher that this rate?View Full Posting Details