Tariff and Quota Problems Annotated
 

tariff
A tariff is a tax on imports.  In thse problems we consider the simplest kind of tariff, the specific tariff, a set tax per unit.  Further explanation of tariffs.

quota
A quota is a quantitave restriction on the number of units of a good that may be imported in some period. 
Further explanation of quotas.

small country
With a small country, we can assume that the international price will not fall if it buys a smaller quantity.
Click here to see the problem that is annotated below.

large country
(without domestic production*)
With a large country,  the international price will fall if it buys a smaller quantity.
Click here to see the problem that is annotated below.

small country
With a small country, we can assume that the international price will not fall if it buys a smaller quantity.
Click here to see the problem that is annotated below.

large country
.

before the tariff, with free trade

before the tariff, with free trade

before the quota, with free trade

in the interest of time, we won't do one of these on the exam.

after the tariff is imposed

immediately after the tariff is imposed
A. B. 

immediately after the quota is imposed

 

 

further adjustment
A. B.

further adjustment

 

winners and losers
Review consumer surplus
consumers before

consumers after

consumers' loss

Review producer surplus
domestic producers before

domestic producers after

domestic producers' gain

government's gain

putting it all together

winners and losers
Review consumer surplus
consumers before

consumers after

consumers' loss

Review producer surplus
foreign producers before

foreign producers after

foreign producers' gain

government's gain

putting it all together

winners and losers
Review consumer surplus
consumers before

consumers after

consumers' loss

Review producer surplus
domestic producers before

domestic producers after

domestic producers' gain

foreign producers' gain

putting it all together

 

*We assume away domestic production, in the large-country case, for the sake of simplicity.
 
 



Copyright 2000 Colin Danby