**3. Welfare Effects of a Tariff in a Small Country**Suppose Zambia is open to free trade in the world market for soybeans. Because of Zambia’s small size, the demand for and supply of soybeans in Zambia do not affect the world price. The following graph shows the domestic soybeans market in Zambia. The world price of soybeans is $P_w = \$400$ per ton.**Graph Explanation:**- The graph displays the domestic demand and supply curves for soybeans.- The horizontal axis represents the quantity of soybeans (in tons), and the vertical axis represents the price (in dollars per ton).- The line labeled "Domestic Demand" slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases.- The line labeled "Domestic Supply" slopes upward, indicating that as the price increases, the quantity supplied increases.- A horizontal line at $P_w = \$400$ marks the world price level, showing the price at which Zambian consumers can buy soybeans on the world market.**Consumer and Producer Surpluses:**- The green triangle (with triangle symbols) represents the consumer surplus (CS) in a free-trade equilibrium, which is the area above the world price line and below the demand curve.- The purple triangle (with diamond symbols) represents the producer surplus (PS), which is the area below the world price line and above the supply curve.**Free Trade Impact:**If Zambia allows international trade in the market for soybeans, it will import _____ tons of soybeans.**Tariff Impact:**Now suppose the Zambian government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Zambian consumers pay for a ton of soybeans is $_____, and Zambia will import _____ tons of soybeans.

International trade is the exchange of capital, goods, and services across international borders or…

Answered: Suppose Zambia is open to free trade in…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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**3. Welfare Effects of a Tariff in a Small Country**

Suppose Zambia is open to free trade in the world market for soybeans. Because of Zambia’s small size, the demand for and supply of soybeans in Zambia do not affect the world price. The following graph shows the domestic soybeans market in Zambia. The world price of soybeans is $P_w = \$400$ per ton.

**Graph Explanation:**

- The graph displays the domestic demand and supply curves for soybeans.
- The horizontal axis represents the quantity of soybeans (in tons), and the vertical axis represents the price (in dollars per ton).
- The line labeled "Domestic Demand" slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases.
- The line labeled "Domestic Supply" slopes upward, indicating that as the price increases, the quantity supplied increases.
- A horizontal line at $P_w = \$400$ marks the world price level, showing the price at which Zambian consumers can buy soybeans on the world market.

**Consumer and Producer Surpluses:**

- The green triangle (with triangle symbols) represents the consumer surplus (CS) in a free-trade equilibrium, which is the area above the world price line and below the demand curve.
- The purple triangle (with diamond symbols) represents the producer surplus (PS), which is the area below the world price line and above the supply curve.

**Free Trade Impact:**

If Zambia allows international trade in the market for soybeans, it will import _____ tons of soybeans.

**Tariff Impact:**

Now suppose the Zambian government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Zambian consumers pay for a ton of soybeans is $_____, and Zambia will import _____ tons of soybeans.

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Because Zambia participates in international trade in the market for soybeans, it will import

tons of soybeans.

Now suppose the Zambian government decides to impose a tariff of $10 on each imported ton of soybeans. Under the tariff, the price Zambian consumers pay for a ton of soybeans becomes

, and Zambia will import

tons of soybeans.

Use the following graph to show the effects of the $10 tariff

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