The diagram below shows the supply and demand curves for the Canadian domestic market for hockey sticks. Assume all hockey sticks are identical.

a. If Canada is a closed market and there is no international trade in hockey sticks, what is the price and quantity exchanged?

b. If Canada is an open market and the world price of hockey sticks is $120, describe the Canadian market.
What is domestic production and consumption? Is Canada exporting or importing this product? How many per year?

c. If Canada is an open market and the world price of hockey sticks is $60, describe the Canadian market. What is domestic production and consumption? Is Canada exporting or importing this product? How many per year?

d. Suppose the world price is $60 and the Canadian government imposes a tariff of 50 percent on all imported hockey sticks. Describe the change in the Canadian market. What is the new price to Canadian consumers?
What is domestic production and consumption? What is the new level of imports?

e. Describe which groups benefit and which groups lose due to the trade restriction described in part (d).

f. How much tariff revenue would the Canadian government collect with the 50 percent tariff in place?

Transcribed Image Text:

$ Dollars 120 100 World price (b) 60 -World price (e) D 0.6 0.8 1.0 1.2 1.4. Millions of hockey sticks (per year)