Exercise 1
You have a request to estimate the effect of changing tariff policy (imposed on
Kitkat chocolate bar) on economic welfare with the
information
Supposed that you are in price-taker country
In the free-trade world (without tariff),
+Vietnam domestic price is equal to the world price, $0.1 USD/Kitkat bar
+Vietnam market consumes 22 million units
+Vietnames firms supply 6 million units
After that, because of industry protection, Vietnam imposes import tax on
chocolate bar as $0.02USD/bar
+Vietnam market consumes 20 million units
+Vietnamese firms supply 8 million units
