Suppose That Elimination of Tariffs on Agricultural Products Means That

question 12

Essay

Suppose that elimination of tariffs on agricultural products means that 1,000 farm workers lose jobs that pay an average of $20,000 per year. At the same time, because of the importation of relatively cheaper foreign vegetables, 150 million consumers save $2 per year on their grocery bills.
a) What is the total income lost by farm workers because of the free trade?
b) What is the total dollar amount saved by all consumers combined?
c) Which is greater, the lost income or the consumer savings? Do the benefits of free trade out-weigh the costs in this simple example?
d) Which group is most likely to become politically involved over the issue of removing the tariffs, the farm workers or the consumers? Why?

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