Chapter 9 Notes

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c. Total surplus is equal to : A + B + C.4. Welfare After Tradea. Consumer surplus is equal to: A + B + D.b. Producer surplus is equal to: C.c. Total surplus is equal to: A + B + C + D.5. Changes in Welfarea. Consumer surplus changes by: +(B + D).b. Producer surplus changes by: -B.c. Total surplus changes by: +D.6. When a country imports a good, domestic consumers are better off anddomestic producers are worse off.7. When a country imports a good, total surplus is increased and theeconomic well-being of the country rises.8. In the News: Life in IsolandE. The Effects of a Tariffa. In 1998, President Clinton threatened to limit cheap steelimports into the United States.b. This is an article from The New York Times discussing thePresident’s statement.1. Definition of Tariff: a tax on goods produced abroad and solddomestically.2. A tariff raises the price above the world price. Thus, the domestic priceof steel will rise to the world price plus the tariff.3. As the domestic price rises, the domestic quantity of steel demanded willfall and the domestic quantity of steel supplied will rise. The quantity ofimports will fall and the market will move closer to the domestic marketequilibrium which occurred before trade.4. Welfare Before the Tariff (with trade)a. Consumer surplus is equal to: A + B + C + D + E + F.b. Producer surplus is equal to: G.c. Total surplus is equal to : A + B + C + D + E + F + G.
PriceSupplyAPrice aftertradeCGDEBFWorld Price + tariffWorld PriceDemandQuantityImports after tariff5. Welfare After Tariff (with trade)a. Consumer surplus is equal to: A + B.b. Producer surplus is equal to: C + G.c. Tariff revenue is equal to: E.d. Total surplus is equal to: A + B + C + E + G.5. Changes in Welfarea. Consumer surplus changes by: -(C + D + E + F).b. Producer surplus changes by: +C.c. Tariff revenue changes by: +E.d. Total surplus changes by: -(D + F).E. The Effects of an Import Quota
Page 3 and 4: 2. If the world price is greater th
Page 8 and 9: 1. Definition of Import Quota: a li
Page 10 and 11: 1. New industries need time to get

Chapter 9 Notes

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