5. Welfare effects of a tariff in a small còuntrySuppose Burundi is open to free trade in the world market for malze. Because of Burundl's small size, the demand for and supply of malze in Burundido not affect the world price. The followling graph shows the domestic malze market in Burundi. The world price of malze 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 thefree-trade equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS).710Domestic DemandDomestic Supply670CS630590550PS510W 4704303903503103912151821242730QUANTITY (Thousands of tons of maize)If Burundi allows international trade in the market for maize, it will importtons of maize.Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price BurundiancORCUmers pay for a ten of malze lelsand Runindil imnotons of mairMacBook AirPRICE (Dollars per ton) Now suppose the Burundian government decides to Impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundlanconsumers pay for a ton of malze is $and Burundi will Importtons of malze.Show the effects of the $40 tariff on the following graph.Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers'surplus with the tariff and the purple triangle (diamond symbols) to show the producers' surplus with the tariff. Lastly, use the orange quadrilateral(square symbols) to shade the area representing govemment revenue received from the tariff and the tan triangles (dash symbols) to shade the areasrepresenting the net loss or deadweight loss (DWL) caused by the tariff.(?710Domestic SupplyDomestic Demand670World Price Plus Tariff630590550CS510470PS430390Govemment RevenuePw3503106 . 12 15 18 21QUANTITY (Thousands of tons of maize)242730DWLComplete the following table to summarize your results from the previous two graphs.Under Free TradeUnder a Tariff(Dollars)(Dollars)Consumers' SurplusProducers' SurplusGovernment RevenueBased on your analysis, as a result of the tariff, Burundi's consumers' surplusbyproducers' surplusv by $, and the government collects sIn revenue. Therefore, the net welfare effect Is a v ofPRICE (Dollars per ton)

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countr Suppose Burundi is open to free trade in the world market for maize. Because of Burundi's small size, the demand for and supply of malze in Burundi do not affect the world price. The followling graph shows the domestic malze market in Burundi. 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 equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 E 550 PS 510 w 470 430 390 350 310 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Burundi allows International trade in the market for maize, it will import tons of maize. Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundian CORCUmerEpay fora ten of malze le PRICE (Dollars per ton)

countr Suppose Burundi is open to free trade in the world market for maize. Because of Burundi's small size, the demand for and supply of malze in Burundi do not affect the world price. The followling graph shows the domestic malze market in Burundi. 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 equllibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). 710 Domestic Demand Domestic Supply 670 CS 630 590 E 550 PS 510 w 470 430 390 350 310 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of maize) If Burundi allows International trade in the market for maize, it will import tons of maize. Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Burundian CORCUmerEpay fora ten of malze le PRICE (Dollars per ton)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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