Wednesday, August 01, 2007

Tariff Changes

I hope my micro students can answer the following:

In 1828, the US Congress passed the “Tariff of Abominations.” The law established various very high tariffs on imported manufactured products to protect northern factories. However it pained southern states who bought much of their manufactured goods from either the north or abroad. Five southern states—lead by South Carolina—refused to collect the tariff and forced a compromise with the US government. The average tariff dropped from 50% to 15%. Illustrate the effect of this drop in the tariff on the market for boots. (Use the average tariff rates for the tariff rates on boots if you wish or need to.) Be sure to indicate changes in deadweight loss, tax revenue, producer surplus, and consumer surplus.

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