Economics 2620 (Micro)

Oakland Community College

Fall 2010
Professor J. Seiler
Homework #4
Due: Thursday: September 30
Tuesday: October 5th

Date of Exam 1 has been changed to the following:

Thursday Section: October 7
Tuesday Section: October 12

Name____________________________
Please Circle: Tuesday Sector or Thursday Section

1. Use the graph to answer the following questions about the market for CD’s
in the U.S.

A) What is the equilibrium price prior to trade?

B) What is the equilibrium quantity of CD’s prior to trade?

C) What is the price of CD’s after trade is allowed?

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D) Does the U.S. export or import CD’s? How much?

E) Calculate the amount of consumer surplus before trade.

F) Calculate the amount of consumer surplus after trade.

G) Are consumers better off after trade? Why are why not?

H) Are producers better off after trade? Why or why not?

I) What is the change in total surplus because of trade?

2) Use the graph below, answer the following questions about hammers?

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A) What is the equilibrium price prior to trade?

B) What is the equilibrium quantity of hammers prior to trade?

C) What is the price of hammers after trade is allowed?

D) Does the U.S. export or import hammers? How much?

E) Calculate the amount of producer surplus before trade.

F) Calculate the amount of producer surplus after trade.

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 G) Are consumers better off after trade? Why are why not?

H) Are producers better off after trade? Why or why not?

I) What is the change in total surplus because of trade?

3. Using the graph, assume that the government imposes a $1 tariff on hammers.

A) What is the domestic price and quantity demanded of hammers before the tariff is
imposed?

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B) What is the quantity of hammers imported before the tariff?

C) What is the quantity of hammers imported after the tariff?

D) Calculate the amount of government revenue because of the tariff.

E) Calculate the amount of the consumer surplus after the tariff.

F) Calculate the total amount of deadweight loss (the reduction in total surplus) due
to the tariff.