1. Regarding trade and tariffs:
a. Draw the supply and demand curves for shoes in Germany using the below demand and supply schedule, and show on the graph the autarky equilibrium price and quantity.
| Price | Quantity demanded | Quantity supplied |
| $0 | 8 | 0 |
| $1 | 7 | 1 |
| $2 | 6 | 2 |
| $3 | 5 | 3 |
| $4 | 4 | 4 |
| $5 | 3 | 5 |
| $6 | 2 | 6 |
| $7 | 1 | 7 |
| $8 | 0 | 8 |
b. If the world price is $2 and Germany opens up to free trade, how many shoes will they produce, how many will they consume, and how many shoes will be traded?
c. Describe the effects of allowing free trade by explaining the change in the producer surplus and consumer surplus. Show on the graph. Who are the winners and losers? Is there a net benefit or net loss?
d. If Germany adds a tariff of 50% on shoes, then what is the new price, how many shoes will Germany produce, how many will they consume, and how many shoes will be traded?
e. Describe the effects of the tariff by explaining the change in the producer surplus, consumer surplus, government revenue, and deadweight loss. Show on the graph. Who are the winners and losers? Does the tariff create a net benefit or a net loss?