1. a. A small country imports industrial goods and exports agricultural goods. Both industry and agricultural are perfectly competitive. A new minimum wage law raises wages in industry but not in agriculture. However, all workers displaced from industry as a result of the new, higher wage find employment in agriculture. Is an import tax on industrial goods the best way to deal with any resulting problems? Why (not) ?
b. Your country imports cigarettes. Identical cigarettes are also produced inside your country in a perfectly competitive industry. The Government wishes to reduce the consumption of cigarettes. Is an import tax on cigarettes the best way to reduce cigarette consumption? Why (not) ?