Question 4 (Export subsidy in the 2-country case) Assume that the market for soybeans is competitive. The demand for soybeans from users in China is given by the demand curve Q = 90 - P, and the supply of soybeans from Chinese producers is given by the supply curve Q = P-20. China buys soybeans from Brazil. The demand and supply curves for soybeans in Brazil are given by Q = 40 - P and Q = P – 10. What would be the price of a soybeans in China and how much soybeans are bought and sold in the absence of trade? a) b) What would be the price of a soybeans in Brazil and how much soybeans are bought and sold in the absence of trade? Now calculate the import demand schedule for China and the export supply schedule for Brazil. Suppose Brazil and China trade freely in soybeans. Calculate the world price of soybeans and the amount traded. d) Calculate the impact of free trade on the welfare of Brazil compared to autarky. Now suppose Brazil gives an export subsidy of 4. Calculate the new world price of soybeans and the volume traded. What happens to the terms of trade for Brazil? f) Calculate the impact of export subsidy on the welfare of Brazil compared to the free situation. Show your results graphically.
Question 4 (Export subsidy in the 2-country case) Assume that the market for soybeans is competitive. The demand for soybeans from users in China is given by the demand curve Q = 90 - P, and the supply of soybeans from Chinese producers is given by the supply curve Q = P-20. China buys soybeans from Brazil. The demand and supply curves for soybeans in Brazil are given by Q = 40 - P and Q = P – 10. What would be the price of a soybeans in China and how much soybeans are bought and sold in the absence of trade? a) b) What would be the price of a soybeans in Brazil and how much soybeans are bought and sold in the absence of trade? Now calculate the import demand schedule for China and the export supply schedule for Brazil. Suppose Brazil and China trade freely in soybeans. Calculate the world price of soybeans and the amount traded. d) Calculate the impact of free trade on the welfare of Brazil compared to autarky. Now suppose Brazil gives an export subsidy of 4. Calculate the new world price of soybeans and the volume traded. What happens to the terms of trade for Brazil? f) Calculate the impact of export subsidy on the welfare of Brazil compared to the free situation. Show your results graphically.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please help me answer each part of the questions in detail. Thank you
Transcribed Image Text:Question 4 (Export subsidy in the 2-country case)
Assume that the market for soybeans is competitive. The demand for soybeans from users in
China is given by the demand curve Q = 90 - P, and the supply of soybeans from Chinese
producers is given by the supply curve Q = P-20. China buys soybeans from Brazil. The
demand and supply curves for soybeans in Brazil are given by Q = 40 - P and Q = P – 10.
What would be the price of a soybeans in China and how much soybeans are
bought and sold in the absence of trade?
a)
b) What would be the price of a soybeans in Brazil and how much soybeans are
bought and sold in the absence of trade?
Now calculate the import demand schedule for China and the export supply
schedule for Brazil. Suppose Brazil and China trade freely in soybeans. Calculate the
world price of soybeans and the amount traded.
d)
Calculate the impact of free trade on the welfare of Brazil compared to autarky.
Now suppose Brazil gives an export subsidy of 4. Calculate the new world
price of soybeans and the volume traded. What happens to the terms of trade for Brazil?
f) Calculate the impact of export subsidy on the welfare of Brazil compared to the
free situation. Show your results graphically.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education