Microeconomics Assignment: Tariff, Quota, and Production Calculations

This microeconomics assignment analyzes several key economic concepts. It begins by calculating the price and import value of beef in Korea under a tariff regime. The assignment then delves into the calculation of consumer and producer surplus both before and after the imposition of tariffs, assessing the welfare implications. Furthermore, it explores the changes in consumer and producer surplus resulting from the implementation of an import quota. The assignment also involves calculating the average and marginal product for a rose farm, illustrating production relationships. Finally, it includes a cost analysis, calculating total cost, average total cost, average variable cost, average fixed cost, and marginal cost for a hypothetical production scenario.

Microeconomics
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Table of Contents
QUESTION 3.......................................................................................................................................3
a. Stating the price of beef per kilo tonnes in Korea and its import value.......................................3
b. Calculating consumer and producer surplus before and after the tariff value ............................3
c. Assessing the changes take place in consumer and producer surplus on the basis of import
quota.................................................................................................................................................3
d. Calculating average and marginal product for a rose farm of Terri ............................................4
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QUESTION 3
a. Stating the price of beef per kilo tonnes in Korea and its import value
On the basis of the cited case situation price of beef per kilo tonne can be determined in the
following manner when 35% tariff would be charged.
With tariffs
Domestic demand = 750 kilo tonnes
Domestic supply = 150 kilo tonnes
Total imports = 750 -150 = 600 kilo tonnes
World price = $ 4 million per kilo tonne
Without tariffs
Domestic demand = 600 kilo tonnes
Domestic supply = 300 kilo tonnes
Total imports = 600 -300 = 300 kilo tonnes
World price = $ 4 million per kilo tonne
World price = $4 *(1+35%) = $ 5.4
Korea is going to import 300 kilo tonnes with tariff rate of 35%.
b. Calculating consumer and producer surplus before and after the tariff value
When no tariff is charged:
Producer surplus:
= 1/ 2 * (4-2) 150
= $150
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= ½ * (5.4 – 2) 300
= $510
Net producer surplus = $340
Consumer surplus:
(a) = 1/ 2 * (15-4) * 750
= $4125
(b) = ½ * (5.4 – 2) * 150
= $825
Net consumer surplus = -3300
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Tariff revenue
(600-300) * (5.6 – 4)
= $420
Dead weight loss: Producer surplus + government revenue from tariff – Consumer surplus
= 340 + 420 - 3300
= $-2540
c. Assessing the changes take place in consumer and producer surplus on the basis of import quota
Import quota refers to the quantity of goods that can be produced abroad and sold
domestically. On the basis of the import quota Japan can import cheese from France up to the
specific limit. In this way, it closely influences the profit margin and balance of payment aspect of
the country. Along with this, in domestic market price of the cheese will be affected to the large
extent. Moreover, due to less export supply within the home country will incline. In this, if demand
is higher than the supply the price will increase and vice versa. Further, such aspect will also
influence consumer surplus and producer surplus. Moreover, demand in the home country for
cheese is one of the main factors which have high level of impact on the customers willingness in
relation to making payment for cheese. In addition to this, when producer offers cheese at lower
price for enhancing the demand in France then producer surplus is also highly affected. Moreover,
in this situation, producer has to decide minimum amounts which they can accept from the
customers. In this way, import quota closely influences consumer and product surplus.
d. Calculating average and marginal product for a rose farm of Terri
Labour (workers per
week)
Output (roses per
week)
Average product
(roses per week)
Marginal product
(roses per week)
1 1000 1000 -
2 2000 1000 1000
3 4000 1333.33 2000
4 5000 1250 1000
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e. Calculating schedule cost
Formula: Total cost = Total variable cost + Total fixed cost
Average total cost = Total cost / Total output (house painted per week)
Average variable cost = Total variable cost/total output
Average fixed cost = Total Fixed cost / Total output
Marginal cost = Changes in total cost /changes in output
Workers
(per
week)
Output
(houses
painted
per
week)
TC
(dollars)
AFC
(dollars
per
house)
AVC (dollars
per house)
ATC
(dollars
per house)
MC (dollars per
house)
1 2 [(250*1)+500]
= 750
(500/2) = 250 (250*1)/2)
= 125
750/2 = 375
2 5 [(250*2)+500]
= 1000
(500/5 )= 100 (250*2)/5)
= 100
1000/5 = 200 250/3 = 83.33
3 9 [(250*3)+500]
= 1250
(500/9) =55.56 (250*3)/9) =
83.33
1250/9 =
138.88
250/4 = 62.5
4 12 [(250*4)+500]
= 1500
(500/12) = 41.67 (250*4)/12) =
83.33
1500/12 = 125 250/3 = 83.33
5 14 [(250*5)+500]
= 1750
(500/14) = 35.71 (250*5)/14) =
89.28
1750/14 = 125 250/2 = 125
6 15 [(250*6)+500] =
2000
(500/15) = 33.33 (250*6)/15) =
100
2000/15 =
133.33
250/1 = 250
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