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Table 1 gives the effect of a tariff on cotton sweaters. (Assume there is no difference between domestically produced sweaters and foreign-produced sweaters.) Table 1
Table 1 gives the effect of a tariff on cotton sweaters. (Assume there is no difference between domestically produced sweaters and foreign-produced sweaters.) Table 1 Free Trade With a $4.00 Tariff World Price of sweaters Tariff per sweater Domestic Price of sweaters Sweaters consumed domestically (million sweaters/year) $42.00 0 $42.00 60 12 48 $42.00 $4.00 $46.00 52 18 Sweaters produced domestically (million sweaters/year) Sweaters imported (million packs/year 34 a) Using partial equilibrium analysis, estimate the amount domestic consumers lose from the tariff (give a dollar number). b) Estimate the net effect on the country's welfare as a result of the tariff (give a dollar number). c) Based on the information given in Table 1, would the optimum import tariff on sweaters be negative, zero, or positive? Why
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