1 The world price of wine is below the price that would prevail in India in the absence of trade. a Assuming that Indian imports of wine are a small part of total world wine production, draw a graph for the Indian market for wine under free trade. Identify consumer surplus, producer surplus and total surplus in an appropriate table. b Australia is a major wine exporter. Suppose that a virulent disease destroys much of the grape harvest in Australia. What effect does this shock have on the world price of wine? Using your graph and table from part (a), show the effect on consumer surplus, producer surplus and total surplus in India. Who are the winners and losers? ls India as a whole better or worse of Suppose that the federal government imposes a tariff on imported cars to protect the Australian car industry from foreign competition. Assuming that Australia is a price taker in the world car market, show on a diagram the change in the quantity of imports, the loss to Australian consumers, the gain to Australian manufacturers, government revenue and the deadweight loss associated with the ta riff. The loss to consumers can be separated into three parts: a transfer to domestic producers, a transfer to the government and a deadweight loss. Use your diagram to identify these three parts. 10 Consider a small country that exports steel. Suppose that a 'protrade' government decides to subsidise the export of steel by paying a certain amount for each tonne sold abroad. How does this export subsidy affect the domestic price of steel, the quantity of steel produced, the quantity of steel consumed and the quantity of steel exported? How does it affect consumer surplus, producer surplus, government revenue and total surplus? (Hint: The analysis ofan export subsidy is similar to the analysis of a tariff.) 2 Show the effect of each of the following events on the market for labour in the computer manufacturing industry. a The federal government buys personal computers for all Australian university students. b More university students study engineering and computer science. c Computer firms build new manufacturing plants.6 Your enterprising uncle opens a sandwich shop that employs seven people. The employees are paid $32 per hour and a sandwich sells for $8. If the market for sandwiches is competitive, and your uncle is maximising his profit: a What is the value of the marginal product of the last worker he hired? b What is that worker's marginal product? c Suppose that your uncle purchases a new machine that increases the marginal product of each worker. How will this affect the number of workers that he hires? Explain