You have been asked to analyze the welfare effects of removing an import tariff.

You have been asked to analyze the welfare effects of removing an import tariff. Somebody has already estimated the effects on U.S. production consumption and imports. This time the facts are just a bit different. The import tariff in question is a $100 tariff on imported motorcycles. You are given the following information:
situation situation
with tariff without tariff
World price of motorcycles $2000 $2050
Tariff $ 100 $ 0
U.S. domestic price $2100 $2050
Number of cycles bought in U.S. per year 100000 105000
Number of cycles made in U.S.
You have been asked to analyze the welfare effects of removing an import tariff. Somebody has already estimated the effects on U.S. production consumption and imports. This time the facts are just a bit different. The import tariff in question is a $100 tariff on imported motorcycles. You are given the following information:
situation situation
with tariff without tariff
World price of motorcycles $2000 $2050
Tariff $ 100 $ 0
U.S. domestic price $2100 $2050
Number of cycles bought in U.S. per year 100000 105000
Number of cycles made in U.S. per year 40000 35000
Number of cycles imported by U.S. per year 60000 70000
7. (4 points) What is it that tells you that this is a large country case?
8. (8 points) Construct a graph showing the above situation. To get full credit you graph must be neat.
Label the axes. Label the curves. Put the numbers you were given into their correct place in the graph.
9. (4 points) Calculate the increase in consumer surplus if the tariff on imported motorcycles is removed.
10. (4 points) Calculate the reduction in producer surplus if the tariff on imported motorcycles is removed.
11. (4 points) Calculate the loss of government tariff revenue if this tariff is removed.
12. (4 points) Would total surplus in the country increase decrease or remain unchanged? If there is a change calculate what change there will be in total surplus.
Attachments: