Consider the Bolivian market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in Bolivia. Suppose Bolivia's government currently does not allow international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in Bolivia in the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade the area representing producer surplus in equilibrium. 1100 Domestic Demand 1000 PRICE (Dollars per ton) - 900 800 700 600 500 400 300 200 100 0 35 70 Domestic Supply 105 140 175 210 245 QUANTITY (Tons of lemons) 280 315 350 Equilibrium without Trade Consumer Surplus Producer Surplus (?)

Consider the Bolivian market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in Bolivia. Suppose Bolivia's government currently does not allow international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in Bolivia in the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade the area representing producer surplus in equilibrium. 1100 Domestic Demand 1000 PRICE (Dollars per ton) - 900 800 700 600 500 400 300 200 100 0 35 70 Domestic Supply 105 140 175 210 245 QUANTITY (Tons of lemons) 280 315 350 Equilibrium without Trade Consumer Surplus Producer Surplus (?)

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 8PA

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2. The impact of a tariff Consider a hypothetical example of trade in aluminum between the United States and China. For simplicity, assume that China is the only source of U.S. aluminum imports. The following graph shows the U.S. market for aluminum. Note that in the absence of any trade, the market price for aluminum in the United States is $500 per tonne, and the equilibrium quantity is 250 million tonnes per month. Use the green area (triangle symbol) to show U.S. consumer surplus under free trade with China, and use the purple area (diamond symbol) to show U.S. producer surplus under free trade with China. 1000 Domestic Demand Domestic Supply 900 Consumer Surplus 800 700 Producer Surplus 600 500 400 Free Trade Price 300 200 100 200 250 300 350 400 450 500 50 100 150 QUANTITY OF ALUMINUM (Millions of tonnes per month) PRICE (Dollars per tonne)
5. Welfare effects of a tariff in a small country Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is Pw=$250 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) 490 460 430 400 370 340 310 280 250 220 190 + 0 Domestic Demand 5 Domestic Supply 10 15 20 25 30 35 QUANTITY (Thousands of tons of wheat) 40 P 50 If Kenya allows international trade in the market for wheat, it will import Show the effects of the $60 tariff on the following graph. CS PS tons of wheat. Now suppose the Kenyan government decides to impose a tariff of $60…
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3. Welfare effects of a tariff in a small country Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is PWPW = $250 per tonne. 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 producer surplus (PS). If Kenya allows international trade in the market for wheat, it will import tonnes of wheat. Now suppose the Kenyan government decides to impose a tariff of $60 on each imported tonne of wheat. After the tariff, the price Kenyan consumers pay for a tonne of wheat is , and Kenya will import tonnes of wheat. Show the effects of the…
3. 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 surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 550 PS 510 470 430 390 P. W 350 310 15 30 45 60 75 90 105 120 135 150 QUANTITY (Tons of maize) If Sudan allows international trade in the market for maize, it will import 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…
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E1 Graphically illustrate and explain the equilibrium position of the market for locally produced chicken, and the equilibrium position of the market for imported chicken with the tariff on imported chicken in place.
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
1. Welfare effects of free trade in an exporting country The following problem analyzes the Guatemalan market for melons. The graph below shows the domestic supply and demand curves for melons in Guatemala. Assume that Guatemala's government does not currently permit international trade in melons. Use the black point (plus symbol) to denote the equilibrium price of one ton of melons and the equilibrium quantity of melons in Guatemala without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. PRICE (Dollars per ton) 590 Domestic Demand Domestic Supply 560 530 500 470 440 410 380 350 320 290 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Tons of melons) Equilibrium without Trade Consumer Surplus 1시시 Producer Surplus Based on the information from the previous graph, absent…
4. Effects of a tariff on international trade The following graph shows the domestic demand for and supply of lemons in Sudan. The world price (Pw) of lemons is $265 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of lemons and that there are no transportation or transaction costs associated with international trade in lemons. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per ton) 535 Domestic Demand. 505 475 445 415 385 355 325 295 265 235 0 Domestic Supply P I 50 100 150 200 250 300 350 400 450 500 QUANTITY (Tons of lemons) ? If Sudan is open to international trade in lemons without any restrictions, it will import tons of lemons. A tariff set at this level would raise $ Suppose the Sudanese government wants to reduce…
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