Econ 4221
Group Assignment #5
Please put your names in alphabetical order (by last name).
1.
The figure below shows the Swiss domestic market for good beer
p
21
Switzerland
S
18
15
12
9
6
3
D
0
a.
b.
c.
d.
e.
f.
g.
10
20
35
50
60
70
80
90
100
110
Q (thousands of 6-packs)
What would be the equilibrium price and quantity of beer in autarky?
Assume the world price of beer is $9, how much will Swiss brewers supply at this price? How many 6-packs
will Swiss consumers demand at this price? How much will be imported?
Switzerland decides to protect its beer industry and imposes a tariff of $3.00. What is the post-tariff price of
beer in Switzerland? Draw this line. How much beer does Switzerland import with the tariff?
What is the net change in consumer surplus due to the tariff (this is a dollar amount)?
What is the net change in producer surplus due to the tariff (this is a dollar amount)?
How much tariff revenue does the Swiss government receive?
What is the net Gain/Loss (circle one) from the tariff?
2.
In the two-good, one-factor Ricardian model, define comparative advantage and define absolute advantage. If I
look at the production possibility frontiers for two countries, how can you identify absolute versus comparative
advantage in the figure?
3.
Ricardoland faces constant opportunity costs in production, has a relative autarky price of good X = 1, and faces
P* = 2.
a.
Draw this scenario and add some typical community indifference curves. Use a big graph! Take at least half a
page.
b.
Now suppose there are increasing opportunity costs (due to diminishing MPL) of importing/exporting. Draw a
new CPF with a corresponding IC.
c.
Now suppose an import quota (binding) is applied. Draw this outcome.