4. Effects of a tariff on international trade The fallowing graph shows the domestic supply of and demand for soybeans in Colombia. The world price (Pw) of soybeans is $545 per ton and represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the wo. price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that dom suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 860 Domestic Demand Domestic Supply

4. Effects of a tariff on international trade The fallowing graph shows the domestic supply of and demand for soybeans in Colombia. The world price (Pw) of soybeans is $545 per ton and represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the wo. price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that dom suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 860 Domestic Demand Domestic Supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following image shows the market for wheat for the country of Palatino. sº is the domestic supply of wheat, and DD is the domestic demand for wheat. Suppose the world price of wheat is $9 per bushel. Suppose a specific tariff of $6 is imposed on each bushel of wheat imported. The net welfare loss from the tariff is represented by the area Figure 19.4 SO Price($) 25 H 15 A E DD 200 300 600 700 Quantity of Wheat (thousands of bushels) a. B and D b. I and H O c. E O d. F e. A and C
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a. In the absence of trade, what is the equilibrium price and equilibrium quantity? b. The government opens the wheat market to free trade and U.S enters the Turkish market, pricing wheat at $40 per ton. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will be imported from U.S? c. The government imposes a $10 per ton tariff on all imported wheat. What will happen to the domestic price of wheat? What will be the new domestic quantity supplied and domestic quantity demanded? How much wheat will now be imported from U.S? d. How much revenue will the Turkish government receive from the $10 per ton tariff?
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. The United States currently imports all of its coffee. The annual demand for coffee by U.S. consumers is given by the demand curve Qd = 150 − 10P, where Qd is quantity (in millions of pounds) and P is the market price per pound of coffee. Suppose the domestic supply is Qs = 10P −50. The U.S. coffee market is competitive. Suppose that the world price of coffee is $6. Congress is considering a tariff on coffee imports of $2 per pound. (a) Find the producer and consumer surplus if there was no trade. (b) Calculate the consumer and producer surplus after we engage in free trade. (c) If the tariff is imposed calculate the changes to consumer and producer surplus. (d) Other than lower prices, provide two benefits that can occur as a result of free trade.
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Analyze the impact of the tariff on domestic production, consumption, and imports of solar panels. Include a graph with properly labeled axes, demand and supply curves, and tariff levels to illustrate your answer.
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