5. Welfare effects of a tariff in a small country Suppose Sudan is open to free trade in the world market for maize. Because of Sudan's small size, the demand for and supply of maize in Sudan do not affect the world price. The following graph shows the domestic maize market in Sudan. The world price of maize is Pw=$350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer's surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). (?) PRICE (Dollars per ton) 710 Domestic Demand Domestic Supply 670 630 590 550 510 470 430 390 350 P 310 0 3 8 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Sudan allows international trade in the market for maize, it will import CS 1 1 PS tons of maize. Now suppose the Sudanese government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Sudanese consumers pay for a ton of maize is $ , and Sudan will import tons of maize. Show the effects of the $40 tariff on the following graph.

5. Welfare effects of a tariff in a small country Suppose Sudan is open to free trade in the world market for maize. Because of Sudan's small size, the demand for and supply of maize in Sudan do not affect the world price. The following graph shows the domestic maize market in Sudan. The world price of maize is Pw=$350 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer's surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). (?) PRICE (Dollars per ton) 710 Domestic Demand Domestic Supply 670 630 590 550 510 470 430 390 350 P 310 0 3 8 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Sudan allows international trade in the market for maize, it will import CS 1 1 PS tons of maize. Now suppose the Sudanese government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Sudanese consumers pay for a ton of maize is $ , and Sudan will import tons of maize. Show the effects of the $40 tariff on the following graph.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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