Scott

Before a product ever goes into the world of trading, for example ipods, it is assumed that it is at equilibrium. However, as the product goes into trade with the world price above the domestic price, there should be a surplus of goods. Instead of a surplus however, there is a gain in producer surplus. With the producer surplus increasing so is the total surplus because the items that should be a surplus is being exported if it is not domestically bought. As a result, with the world price above the domestic price, producers gain much more benefits then a consumer would because the consumer's surplus decreases according to how big the price gap is between the world and domestic.
 * 1) 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.

The efficiency is lacking when the government imposes a tariff on an imported good. A tariff on a domestic good should result in a certain amount of dead weight because of either under consumption or under production. However, a tariff only occurs when the world price is below the domestic good and it is imported into the country. When a tariff is imposed on the good, it reduces the total surplus which shows the lack of efficiency because it is not getting the most out of its resources.
 * 1) 2 Explain show the changes in efficiency that occur when the government imposes a tariff or quota on a good domestically.

Back --> The difference between tariffs and quotas is that tariffs are only imposed on a good when the world price is below the domestic price while the quota is imposed if the world price is above the domestic price. The similarity is that they both resemble taxes imposed on goods that benefit the government.
 * 1) 3 How what is the differences and similarities between tariffs and quotas?