If Burundi allows international trade in the market for maize, it will import answer, accounting for the horizontal axis units.) C Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the domestic price of a ton of maize will be $ , and Burundi will import tons of maize. Show the effects of the $40 tariff on the following graph. Use the grey line (star symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the domestic producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff. 710 Domestic Demand Domestic Supply 550 XI x 510 PRICE (Dollars per ton) 670 630 590 470 430 390 350 310 0 3 6 9 12 15 18 21 QUANTITY (Thousands of tons of maize) Consumer surplus Producer surplus Government revenue W 24 27 30 0 of $ World Price Plus Tariff tons of maize. (Note: Be sure to enter the full value for your CS Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) PS Based on your analysis, as a result of the tariff, Burundi's consumer surplus by S Government Revenue DWL (?) by S , and producer surplus . Taking into account how much revenue the tariff generates for the government, the net welfare effect is a
If Burundi allows international trade in the market for maize, it will import answer, accounting for the horizontal axis units.) C Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the domestic price of a ton of maize will be $ , and Burundi will import tons of maize. Show the effects of the $40 tariff on the following graph. Use the grey line (star symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the domestic producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff. 710 Domestic Demand Domestic Supply 550 XI x 510 PRICE (Dollars per ton) 670 630 590 470 430 390 350 310 0 3 6 9 12 15 18 21 QUANTITY (Thousands of tons of maize) Consumer surplus Producer surplus Government revenue W 24 27 30 0 of $ World Price Plus Tariff tons of maize. (Note: Be sure to enter the full value for your CS Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) PS Based on your analysis, as a result of the tariff, Burundi's consumer surplus by S Government Revenue DWL (?) by S , and producer surplus . Taking into account how much revenue the tariff generates for the government, the net welfare effect is a
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Effects of a tariff in a small nation
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 maize in Burundi
do not affect the world price. The following graph shows the domestic maize market in Burundi. The world price of maize is Pw = $350 per ton.
Throughout this problem, assume that changes in trade policies in other nations do not significantly affect the world market for maize and that there
are no transportation or transaction costs associated with international trade in maize. Also assume that domestic supplies will satisfy domestic
demand as much as possible before any exporting or importing takes place.
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 domestic producer surplus (PS).
(?)
PRICE (Dollars per ton)
710
670
630
590
550
510
470
430
390
350
310
Domestic Demand
0 3
Domestic Supply
24
6 9 12 15 18 21
QUANTITY (Thousands of tons of maize)
27
PW
30
CS
8
PS
Transcribed Image Text:If Burundi allows international trade in the market for maize, it will import
answer, accounting for the horizontal axis units.)
Now suppose the Burundian government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the domestic price of a ton of
maize will be $
, and Burundi will import
tons of maize.
Show the effects of the $40 tariff on the following graph.
Use the grey line (star symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumer surplus
with the tariff and the purple triangle (diamond symbols) to show the domestic producer surplus with the tariff. Lastly, use the orange quadrilateral
(square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) to shade the areas
representing the net loss or deadweight loss (DWL) caused by the tariff.
PRICE (Dollars per ton)
710
670
630
590
550
510
470
430
390
350
310
0
Domestic Demand
3
of $
Consumer surplus
Producer surplus
Government revenue
Domestic Supply
9 12 15 18 21 24 27 30
QUANTITY (Thousands of tons of maize)
W
0
World Price Plus Tariff
CS
Complete the following table to summarize your results from the previous two graphs.
Under Free Trade
(Dollars)
Under a Tariff
(Dollars)
tons of maize. (Note: Be sure to enter the full value for your
PS
Based on your analysis, as a result of the tariff, Burundi's consumer surplus
by S
Government Revenue
DWL
(?
by S
, and producer surplus
. Taking into account how much revenue the tariff generates for the government, the net welfare effect is a
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