Kenya is a relatively small exporter of wheat. Suppose at the world price of $100 per ton, wheat growers in Kenya export 20 tons of wheat. Now suppose that the government of Kenya decides to support its domestic wheat producers with an export subsidy of $40 per ton. Use the following diagram to answer the following questions.What is the quantity exported under free trade and under the export subsidy?Identify the areas and calculate the effect of export subsidy on consumer surplus, producer surplus and government revenue.Identify the areas and calculate the overall net effect of the export subsidy on Kenya as a whole.Rather than an export subsidy that results in more exports but raises the price of wheat to Kenyan consumers, the Kenyan government provides the domestic producers with a production subsidy of $40 per ton that effectively reduces the production cost to wheat farmers in Kenya, leaving the world price unchanged at $100. What is the quantity exported with the production subsidy? What do you think will happen to domestic production of wheat in Kenya?Identify and compute the effect of production subsidy on consumer surplus, producer surplus, and government revenue in Kenya.Calculate the overall net effect of production subsidy on Kenya. Is the cost of a production subsidy more or less than the cost of export subsidy for Kenya? Explain Home price140100aDс10202040550SupplyPw +PwsubsidyDemandQuantity

Question 1: What is the quantity exported under free trade and under the export subsidy?Under Free…

Answered: Home price 140 100 a D с 10 20 20 40…

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ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

ChapterA: The Use Of Mathematics In Principles Of Economics

Section: Chapter Questions

Problem 3RQ: Exercise A3 What dome slices of a pie chart represent?

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Kenya is a relatively small exporter of wheat. Suppose at the world price of $100 per ton, wheat growers in Kenya export 20 tons of wheat. Now suppose that the government of Kenya decides to support its domestic wheat producers with an export subsidy of $40 per ton. Use the following diagram to answer the following questions.
What is the quantity exported under free trade and under the export subsidy?
Identify the areas and calculate the effect of export subsidy on consumer surplus, producer surplus and government revenue.
Identify the areas and calculate the overall net effect of the export subsidy on Kenya as a whole.
Rather than an export subsidy that results in more exports but raises the price of wheat to Kenyan consumers, the Kenyan government provides the domestic producers with a production subsidy of $40 per ton that effectively reduces the production cost to wheat farmers in Kenya, leaving the world price unchanged at $100. What is the quantity exported with the production subsidy? What do you think will happen to domestic production of wheat in Kenya?
Identify and compute the effect of production subsidy on consumer surplus, producer surplus, and government revenue in Kenya.
Calculate the overall net effect of production subsidy on Kenya. Is the cost of a production subsidy more or less than the cost of export subsidy for Kenya? Explain

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