Il-jee

=CHAPTER 9 QUIZ= When world price is higher than domestic price, the country will export because when a country has a price lower price than world price, it indicates that the country has comparative advantage. When the nation exports, the general price becomes higher. Therefore, consumer surplus decreases, and producer surplus increases. However since the increase exceeds the loss, total surplus increases overall.
 * 1 Explain the changes in consumer, producer, and total surplus when a domestic market enters the world market and the market price is above the domestic price.**

When government imposes tariff on good domestically, price goes up, then demand decreases. When price goes up, consumer surplus decreases. When demand for good decreases, less good is sold. Therefore consumer surplus decreases. In conclusion, tariff is inefficient in international trade. When quota is imposed on a good domestically, it limits the number of products within the nation. Therefore, the demand could be higher than supply. Since not everyone is satisfied, market is inefficient.
 * 2 Explain the changes in efficiency that occur when the government imposes a tariff or quota on a good domestically.**

Tariff is a tax on imported goods. Quota on the other hand is the limited number put on importation. Both tariff and quota are imposed by the government, which effects the market negatively. Tariffs raise price of goods, which causes decrease in total surplus.
 * 3 What is the differences and similarities between tariffs and quotas?**

**October 13, 2009**
Quota and Tax achieve the same Tax reduces quantity demanded