Assume that the United States is an importer of televisions and there are no trade restrictions. U.S. consumers buy 1 million televisions per year, of which 400,000 are produced domestically and 600,000 are imported.
a.Suppose that a technological advance among Japanese television manufacturers causes the world price of televisions to fall by $100. How would this change affect the welfare of U.S. consumers and the U.S. producers? Would this affect the trade surplus in the U.S.?
b.If the government responded by putting a $100 tariff on imported televisions, what would this do? Would it be a good policy from the standpoint of U.S. welfare? Who might support such a policy? Why?
- KWAI FONGLv 71 decade agoFavorite Answer
a)Since the price is decreased, by law of demand, there is increase of quantity demanded. As a result, the welfare of U.S. consumers and the U.S. producers is changed. It is not known that it is increase, decrease or unchanged which depend on elasticity of demand. Amd the trade surplus in the U.S. is unchanged.
b)The consumer and producer will burded the $100. The price is incerased, by law of demand, there is decreased of quantity demanded. It is not good since some user is lost. The government might support it since she will gain some money.