1.
Homework on B.Hine course<br />Anna Dekalchuk<br />October, 17th<br />Customs Union:<br />trade creation and trade diversion<br />home supply<br />demand<br />price<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

2.
(P3) OA – home production<br /> OB – home demand<br /> AB – import (wherever)<br />(P3) producers’ surplus:<br />+v+v1+k<br /> (blue triangle)<br />home supply<br />demand<br />price<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />k<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

3.
(P2) OC – home production<br /> OD – home demand<br /> CD – import (partner)<br />(P2) producers’ surplus:<br />+v1+k<br /> (blue triangle)<br />home supply<br />demand<br />price<br />(P2) producers’ surplus:<br /> loss of -v<br /> (pink trapezium)<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />k<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

4.
(P3) OA – home production<br /> OB – home demand<br /> AB – import (wherever)<br />(P3) consumers’ surplus:<br />+r<br /> (blue triangle)<br />home supply<br />demand<br />price<br />r<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

5.
(P2) OC – home production<br /> OD – home demand<br /> CD – import (partner)<br />(P2) consumers’ surplus:<br />+r+v+w+x+y<br /> (blue&pink triangle)<br />home supply<br />demand<br />price<br />r<br />(P2) consumers’ surplus:<br /> gain to +v+w+x+y<br /> (pink trapezium)<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

6.
(P3) OA – home production<br /> OB – home demand<br /> AB – import (wherever)<br />(P3) imports (wherever):<br /> imports are AB <br /> world receives P1 = t<br /> (yellow rectangle)<br />home supply<br />demand<br />price<br />P3<br />Sw + tariff<br />(P3) tariff revenue:<br /> P1P3 x AB =<br />+x+x1<br /> (green rectangle)<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />t<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

7.
(P3) OA – home production<br /> OB – home demand<br /> AB – import (wherever)<br />(P2) OC – home production<br /> OD – home demand<br /> CD – import (partner)<br />home supply<br />demand<br />price<br />(P2) imports (partner):<br /> imports are CD <br /> partner receives P2<br /> (yellow rectangle)<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />x1<br />y1<br />Sw<br />P1<br />(P2) tariff revenue:<br />0<br />in comp.to P3: -x-x1<br />BUT: h.producers produce less<br /> OA-CA = OC<br />BUT: consumption increases<br /> OB+BD <br />O<br />A<br />C<br />quantity<br />D<br />B<br />

8.
net welfare effect of CU<br />(the Hicks-Kaldor compensation principle)<br />(P2) producers’ surplus: -v<br />home supply<br />demand<br />price<br />(P2) consumers’ surplus: +v+w+x+y<br />(P2) Taxpayer revenue: -x-x1 <br />Net: +w+y-x1<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />v1<br />w1<br />y1<br />x1<br />Sw<br />P1<br />O<br />A<br />C<br />quantity<br />D<br />B<br />

9.
TC:<br />light violet trapezium<br /> (2 parts)<br />TD: <br />light pink square<br />home supply<br />demand<br />price<br />Net: +w+y-x1<br />P3<br />Sw + tariff<br />v<br />x<br />y<br />w<br />Sp<br />P2<br />y<br />w<br />v1<br />w1<br />y1<br />x1<br />Sw<br />P1<br />x1<br />Trade creation-diversion ration: <br />O<br />A<br />C<br />quantity<br />D<br />B<br />