6. Effects of a tariff in a small nationSuppose New Zealand is open to free trade in the world market for wheat. Because of New Zealand's small size, the demand for and supply of wheatin New Zealand do not affect the world price. The following graph shows the domestic wheat market in New Zealand. The world price of wheat isPw = $250 per ton. Throughout this problem, assume that changes in trade policies in other nations do not significantly affect the world market forwheat and that there are no transportation or transaction costs associated with international trade in wheat. Also assume that domestic supplies willsatisfy domestic demand as much as possible before any exporting or importing takes place.On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at thefree-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing domestic producer surplus (PS).(?)PRICE (Dollars per ton)4604304003703403102802502201901600Domestic DemandDomestic Supplyx510 1525 30 35 40QUANTITY (Thousands of tons of wheat)2045PW50CSPS If New Zealand allows international trade in the market for wheat, it will importyour answer, accounting for the horizontal axis units.)tons of wheat. (Note: Be sure to enter the full value forNow suppose the New Zealand government decides to impose a tariff of $30 on each imported ton of wheat. After the tariff, the domestic price of aton of wheat will be $, and New Zealand will importtons of wheat.Show the effects of the $30 tariff on the following graph.Use the grey line (star symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumersurplus with the tariff and the purple triangle (diamond symbols) to show the domestic producer surplus with the tariff. Lastly, use the orangequadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) toshade the areas representing the net loss or deadweight loss (DWL) caused by the tariff.

Buyers and sellers have an incentive to profit more from economic interactions in an economy that is…

6. Effects of a tariff in a small nation Suppose New Zealand is open to free trade in the world market for wheat. Because of New Zealand's small size, the demand for and supply of wheat in New Zealand do not affect the world price. The following graph shows the domestic wheat market in New Zealand. The world price of wheat is Pw = $250 per ton. Throughout this problem, assume that changes in trade policies in other nations do not significantly affect the world market for wheat and that there are no transportation or transaction costs associated with international trade in wheat. Also assume that domestic supplies will satisfy domestic demand as much as possible before any exporting or importing takes place. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing domestic producer surplus (PS). PRICE (Dollars per ton) 460 430 400 370 340 310 280 250 220 190 160 Domestic Demand 0 5 Domestic Supply 10 15 20 25 30 35 40 QUANTITY (Thousands of tons of wheat) 45 Pw 50 CS PS (?)

6. Effects of a tariff in a small nation Suppose New Zealand is open to free trade in the world market for wheat. Because of New Zealand's small size, the demand for and supply of wheat in New Zealand do not affect the world price. The following graph shows the domestic wheat market in New Zealand. The world price of wheat is Pw = $250 per ton. Throughout this problem, assume that changes in trade policies in other nations do not significantly affect the world market for wheat and that there are no transportation or transaction costs associated with international trade in wheat. Also assume that domestic supplies will satisfy domestic demand as much as possible before any exporting or importing takes place. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing domestic producer surplus (PS). PRICE (Dollars per ton) 460 430 400 370 340 310 280 250 220 190 160 Domestic Demand 0 5 Domestic Supply 10 15 20 25 30 35 40 QUANTITY (Thousands of tons of wheat) 45 Pw 50 CS PS (?)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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