Assignment #2

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Assignment #2

Part 1: Finding the Optimal Tariff

1. After opening the file, set the supply and demand parameters to values that are different from the present values in the spreadsheet. Ensure that the equilibria will make it beneficial for Home to import goods from Foreign. Take a snapshot like this of your situation and paste it into your assignment.

2. Use the arrows on the left side of the screen to impose a tariff. Keep increasing the tariff until you find the "optimal" value. Take a screenshot like the one below to show the outcome. Take another screenshot of the outcome that looks like this and paste it into your assignment.

3. Explain what is true at the optimal tariff and describe how you found it. Indicate (perhaps with a table) what has happened to total surplus in each country across the following three scenarios: autarky, free trade and Home imposing an optimal tariff.

Part 2: Teaching Someone Else

4. Now you need to build a document that could teach/demonstrate to someone the nature of the relationship between the elasticity of the export supply curve and the optimal tariff size. Make sure your document is readable and includes snapshots from the spreadsheet that demonstrate the concepts that you are explaining. You can use snapshots from Part 1 of this assignment as a starting point, if you would like.