Jenny


 * 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.

When the market price is above the domestic price, the country will "export" the product. When that happens, the consumer surplus decreases because the price changed from a domestic price to the world price by exporting the product, the producer surplus increases because the revenue increases as the price of the product increases and the total surplus would also increase because the increased amount of producer surplus is more than the decreases amount of the consumer surplus.


 * 1) 2 Explain show the changes in efficiency that occur when the government imposes a tariff or quota on a good domestically.

Whenever a government imposes a kind of tax on a product, the government would gain profit from the amount of tax gained from the consumers and producers. Yet, dead weight loss would be created in the market, because people don't realize the benefits gotten from the imposing of the tax. Domestically, it is not efficient either because it is an increase of the price which is not "maximizing" the total revenue, which is the ultimate goal of trading.

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 * 1) 3 What is the differences and similarities between tariffs and quotas?

Tariffs and quotas are similar in a way that they are both imposed on the goods that is from the trade of a country with the world, and in a way that they both lead to the government revenue. But they are different in a sense that tariffs are the tax on the imported goods as the quota is more the limitation put on the producers during the trade. Quota can also be applied during an export, when tariffs are only possible during the import.