a. If Albania wants 100 pounds of potatoes, what is the most meat it can have?
This is intended to help you get additional practice beyond what we will do in class. I have made this as similar to exam problems as possible, but it can't be quite the same because the exam will ask you to write out answers, draw lines, and so forth. The two "identifying" problems below are included to give you added practice interpreting the areas on the graphs.
Problems are interactive
-- click answers to see if they are right.
1. Ricardian model problem (this problem will not appear on the exam for the 2010 course)
Albania has available 300 days of labor. It can make two
pounds
of meat with one day of labor, and one pound of potatoes with one day
of
labor. It does not trade.
a. If Albania wants 100 pounds of potatoes, what is the most meat it
can have?
| none | 100 | 200 | 300 | 400 | 500 | 600 | 700 | 800 |
b. If Albania wants 200 pounds of potatoes, what is the most meat it can have?
| none | 100 | 200 | 300 | 400 | 500 | 600 | 700 | 800 |
c. If all its workers are employed, how many pounds of meat must it give up to get another pound of potatoes?
| 1/3 | 1/2 | 1 | 2 | 3 | 4 | 5 |
d. Now Albania opens to trade with the outside world,
and finds that it can trade one pound of meat for one pound of potatoes.
If Albania wants 200 pounds of potatoes, what is the most meat it can
have?
| none | 100 | 200 | 300 | 400 | 500 | 600 | 700 | 800 |
e. If Albania wants 300 pounds of potatoes, what is the most meat it can have?
| none | 100 | 200 | 300 | 400 | 500 | 600 | 700 | 800 |
f. In general, how much meat must it give up to get another pound of potatoes?
| 1/3 | 1/2 | 1 | 2 | 3 | 4 | 5 |
g. Draw the PPF and the line representing post-trade consumption
possibilities.
click here to see the answer
h. Does it matter whether Albania is more or less efficient (in work per unit of output) at making potatoes than the rest of the world?
| yes | no |
2. Small-country tariff problem
This graph represents the bicycle market in Canada.
a. If there are no imports, what will the price of bicycles be?
| $20 | $40 | $60 | $80 | $100 | $120 | $140 | $160 | $200 |
b. Now suppose that foreign bicycles can be purchased for $120 each, and there is free trade. What will the price of bicycles be?
| $20 | $40 | $60 | $80 | $100 | $120 | $140 | $160 | $200 |
c. How many millions will be imported?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
d. How many millions will domestic producers make?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
e. How many millions will Canadian consumers buy?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
f. Now, suppose further that the Candian government imposes a tariff or $20 on every imported bicycle. What will the price of bicycles be?
| $20 | $40 | $60 | $80 | $100 | $120 | $140 | $160 | $200 |
g. How many millions will be imported?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
h. How many millions will domestic producers make?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
i. How many millions will Canadian consumers buy?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
j. Has there been a net national gain or loss from imposing this tariff?
| gain | loss | neither gain nor loss | can't tell |
Click here for a colored-in version of the graph above showing consumer surplus and so forth.
Click here for an annotated
description
of how to solve this problem.
3. Identifying consumer and producer surplus in the small-country case
Here is a diagram depicting the effects of a tariff in a small-country case.
a. Which regions, together, show consumer surplus before the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 10 only |
b. Which regions, together, show consumer surplus after the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 10 only |
c. Which regions, together, show producer surplus before the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 10 only |
d. Which regions, together, show producer surplus after the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 10 only |
e. Which regions, together, show the government's gain from the
tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 10 only |
4. Large-country tariff problem
This graph represents the coffee market in the USA.
There
is no domestic production.
a. If trade is free, what will the price of coffee be?
| $0.60 | $0.80 | $1.00 | $1.20 | $1.40 | $1.60 | $1.80 | $2.00 | $2.20 |
b. How many millions of pounds will be imported?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
c. Now suppose that the U.S. government imposes a tariff of $0.80 (eighty cents) on each pound of imported coffee. After any adjustment, hat will the price of coffee be (for consumers)?
| $0.60 | $0.80 | $1.00 | $1.20 | $1.40 | $1.60 | $1.80 | $2.00 | $2.20 |
d. How many millions of pounds will be imported?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
e. Has there been a net national gain or loss from imposing this tariff?
| gain | loss | neither gain nor loss | can't tell |
Click here for a colored-in version of the graph above showing consumer surplus and so forth.
Click here for an annotated
description
of how to solve this problem.
5. Identifying consumer and producer surplus in the large-country case
Here is a diagram depicting the effects of a tariff in a large-country case.
a. Which regions, together, show consumer surplus
before
the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 9 only |
b. Which regions, together, show consumer surplus after the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 9 only |
c. Which regions, together, show (foreign) producer surplus before the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 9 only |
d. Which regions, together, show (foreign) producer surplus after the application of the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 9 only |
e. Which regions, together, show the government's gain from the tariff?
| 1 only | 1 + 2 | 1 + 4 | 1 + 4 + 5 | 1 + 4 + 6 | 1 + 4 + 5 + 6 + 7 | 1 + 4 + 5 + 6 + 7 + 8 | 1 + 5 + 6 + 7 + 8 + 9 | 4 + 6 |
| 4 + 5 + 6 + 7 | 5 only | 5 + 10 | 6 only | 6 + 7 + 8 | 6 + 7 + 8 + 9 | 7 only | 8 only | 9 only |
6. Small-country quota problem
This graph represents the bicycle market in Canada.
a. Foreign bicycles can be purchased for $120 each, as in the last problem. Now, Canada imposes a quota of 3 million imported bicycles per year. After any adjustment, what will the price of bicycles be?
| $20 | $40 | $60 | $80 | $100 | $120 | $140 | $160 | $200 |
b. How many millions will be imported?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
c. How many millions will domestic producers make?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
d.. How many millions will Canadian consumers buy?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
e.. Has there been a net national gain or loss from imposing this tariff?
| gain | loss | neither gain nor loss | can't tell |
Click here for a colored-in version of the graph above showing consumer surplus and so forth.
Click here for an annotated
description
of how to solve this problem.
7. Large-country quota problem (this problem will not appear on the exam for the 2010 course)
This graph represents the coffee market in the USA.
There
is no domestic production.
a. Suppose we start with free trade, and the U.S. government imposes a quota of 4 million pounds per year. After any adjustment, what will the price of coffee be?
| $0.60 | $0.80 | $1.00 | $1.20 | $1.40 | $1.60 | $1.80 | $2.00 | $2.20 |
b. How many millions of pounds will be imported?
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
c. Has there been a net national gain or loss from imposing this tariff?
| gain | loss | neither gain nor loss | can't tell |
Click here for a colored-in version of the graph above showing consumer surplus and so forth.