China is a major producer of grains, such aswheat, corn, and rice. Some years ago, the Chinesegovernment, concerned that grain exports weredriving up food prices for domestic consumers,imposed a tax on grain exports.a. Draw the graph that describes the market for grainin an exporting country. Use this graph as thestarting point to answer the following questions.b. How does an export tax affect domestic grainprices?c. How does it affect the welfare of domesticconsumers, the welfare of domestic producers,and government revenue?d. What happens to total welfare in China, asmeasured by the sum of consumer surplus,producer surplus, and tax revenue?
China is a major producer of grains, such aswheat, corn, and rice. Some years ago, the Chinesegovernment, concerned that grain exports weredriving up food prices for domestic consumers,imposed a tax on grain exports.a. Draw the graph that describes the market for grainin an exporting country. Use this graph as thestarting point to answer the following questions.b. How does an export tax affect domestic grainprices?c. How does it affect the welfare of domesticconsumers, the welfare of domestic producers,and government revenue?d. What happens to total welfare in China, asmeasured by the sum of consumer surplus,producer surplus, and tax revenue?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
China is a major producer of grains, such as
wheat, corn, and rice. Some years ago, the Chinese
government, concerned that grain exports were
driving up food
imposed a tax on grain exports.
a. Draw the graph that describes the market for grain
in an exporting country. Use this graph as the
starting point to answer the following questions.
b. How does an export tax affect domestic grain
prices?
c. How does it affect the welfare of domestic
consumers, the welfare of domestic producers,
and government revenue?
d. What happens to total welfare in China, as
measured by the sum of
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