1. Assume the United States is an importer of televisions and there are no trade restrictions. U.S. consumers buy 1 million televisions per year, of which 400,000 are produced domestically and 600,000 are imported.

a. Suppose that a technological advance among Japanese television manufacturers causes the world price of televisions to fall by $100. Draw a graph to show how this change affects the welfare of U.S. consumers and U.S. producers and how it affects total surplus in the United States.

b. After the fall in price, consumers buy 1.2 million televisions, of which 200,000 are produced domestically and 1 million are imported. Calculate the change in consumer surplus, producer surplus, and total surplus from the price reduction.

c. If the government responded by putting a $100 tariff on imported televisions, what would this do? Calculate the revenue that would be raised and the deadweight loss. Would it be a good policy from the standpoint of U.S. welfare? Who might support the policy?

d. Suppose that the fall in price is attributable not to technological advance but to a $100 per television subsidy from the Japanese government to Japanese industry. How would this affect your analysis?

2.
Hotel rooms in Smalltown go for $100, and 1,000 rooms are rented on a typical day.

a) To raise revenue, the mayor decides to charge hotels a tax of $10 per rented room. After the tax is imposed, the going rate for hotel rooms rises to $108, and the number of rooms rented falls to 900. Calculate the amount of revenue this tax raises for Smalltown and the deadweight loss of the tax (Area of a triangle 1/2 (b) (h))

b) The rented falls to 800. Calculate tax revenue and deadweight double? mayor now doubles the tax to $20. The price rises to $116, loss and with the number this of rooms larger tax. Are they double, more than double, or less than Explain.

1. Assume the United States is an importer of televisions and there...