1. Use the following information to work on Problems (a) and (b).

Suppose that the New Zealand government lowers the tariff on imports of textiles from China from 100% to 50%.

1. Explain how the tariff on textiles will change the price that New Zealand consumers pay for textiles, the quantity of textiles imported, and the quantity of textiles produced in New Zealand. Based on this, please answer questions (a1), (a2) and (a3) below.

(15 marks)

You need to first select the most appropriate answer from the given options and write your answer in the last column of the table below. Then, you need to explain

(a1) Step 1: Selecting the most appropriate answer (1 mark)

	Options	Your answer
The price that New Zealand consumers pay for textiles imported from China	A=decreased; B=unchanged; C=increased

(a1) Step 2: Explain answers (4 marks).

(a2) Step 1: Selecting the most appropriate answer (1 mark)

	Options	Your answer
The quantity of textiles imported from China	A=decreased; B=unchanged; C=increased

(a2) Step 2: Explain your answers (4 marks).

(a3) Step 1: Selecting the most appropriate answer(1 mark)

	Options	Your answer
The quantity of textiles produced in New Zealand	A=decreased; B=unchanged; C=increased

(a3) Step 2: Explain your answers (4 marks).

B) Please explain how New Zealand and Chinese gains from the international trade will change (A=decrease; B=unchange; C=increase) (2 marks) and why (3 marks)?

C) Who in New Zealand will lose from the international trade (2 marks) and why (3 marks)?

D) Who in New Zealand will gain from the international trade (2 marks) and why (3 marks)?