EC120 Lecture Notes - Lecture 24: Economic Surplus, Deadweight Loss

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28 Nov 2018

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EC120 Lecture Notes - Lecture 1: Sunk Costs, Opportunity Cost

EC120 Lecture 2: Lecture 2 - September 12, 2018

EC120 Lecture Notes - Lecture 24: Economic Surplus, Deadweight Loss

Document Summary

: goods that are easy to transport will sell at the same price worldwide. If a good is cheaper in a than b then . Buyers shift to a and sellers shift to b. Thereby causing price to rise in a and fall in b. Good x if the world price of x (p w ) exceeds the pre-trade domestic price of x (p 0 ) The difference between domestic quantity supplied and demanded of good x at. Trade in export markets increases producer surplus by more than it lowers consumer surplus. Good y if the world price of y (p w ) is less than the pre-trade domestic price of y (p 0 ) The difference between domestic quantity demanded and supplied of good y at. Trade in import markets increases consumer surplus by more than it lowers producer surplus. Are taxes applied to an imported good.

Related Questions

1. If we know that Canada exports maple syrup, we can conclude that maple syrup consumers in Canada are worse off than they would be in the absence of trade.

Is the statement true or false?

2. When a country opens up to trade in a good for which it has a comparative advantage, and the country begins to export the good, we can conclude that:

	a.	The domestic price will fall after trade opens up.
	b.	The total surplus for this good will increase as a result of opening up the market to international trade.
	c.	Opening the market to international trade will create a deadweight loss.
	d.	Both buyers and sellers in that country will be better off as a consequence of opening up the market to international trade.

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2. Winners and losers from free trade

Consider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of a meeker is $21. Suppose that the world price for a meeker is $22. Assume that Meekertown is too small to influence the world price for meekers once they enter the international market.

If Meekertown allows free trade, then it will meekers.

Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false.

Statement	True	False
Meekertownian consumers are worse off under free trade than they were before.
Meekertownian producers are worse off under free trade than they were before.

True or False: When a country is too small to affect the world price, allowing for free trade will always increase total surplus in that country, regardless of whether it imports or exports as a result of international trade.

True

False

1. An import tariff

a. lowers the domestic price of the exported good below the world price.

b. keeps the domestic price of the exported goods the same as the world price.

c. raises the domestic price of the imported good above the world price

d. lowers the domestic price of the imported good below the world price.

2. Which two accounts are included in the balance of payments:

a. current account and the reserve account.

b. current account and the trade account.

c. current account and the capital account.

d. trade account and the capital account.

3. A producer has a comparative advantage in the production of a good when the producer:

a. has a production cost that is less than sales revenue.

b. has the highest cost of production compared to any other producer.

c. is comparatively more efficient at producing the good than it is at producing anything else.

d. specializes through the use of an assembly line.

4. According to the Fischer effect, if the "real" rate of interest in a country is 4 percent and expected annual inflation is 9 percent, the "nominal" interest rate will be _____.

5 percent

B.	13 percent

9 percent

36 percent

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EC120 Lecture Notes - Lecture 24: Economic Surplus, Deadweight Loss

EC120 Lecture Notes - Lecture 1: Sunk Costs, Opportunity Cost

EC120 Lecture 2: Lecture 2 - September 12, 2018

EC120 Lecture Notes - Lecture 24: Economic Surplus, Deadweight Loss

Document Summary

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