Show the effects of the $40 tariff on the following graph.Use the black line (plus symbol) to indicate the world price plus the tarifr. Then, use the green points (triangle symbols) to show the consumer surpluswith the tariff and the purple triangie (diamond symbols) to show the producer surplus with the tariff. Lastly, use the orange quadriiateral (squaresymbols) to shade the area representing government revenue recelved from the tariff and the tan points (rectangie symbols) to shade the areasrepresenting deadwelght loss (DWL) caused by the tanff.Domestic Supply710Domestic Dermand670World Price Plus Tariff630590550Cs510470PS430390Government Revenue35031015304560 7590105120135150DWLQUANTITY (Tons of maize)Complete the following table to summarize your resuits from the previous two graphs.Under Free TradeUnder a Tarifr(Dollars)(Dollars)Consumer SurplusProducer SurplusGovernment RevenueBased on your analysis, as a result of the tariff, Bangladesh's consumer surplusby sproducer surplusby $, and the government collects Sin revenue. Therefore, the net welfare effect is aofPRICE (Dollars per ton) 3. Welfare effects of a tariff in a small countrySuppose Bangladesh is open to free trade in the world market for maize. Because of Bangladesh's small size, the demand for and supply of maize inBangladesh do not affect the world price. The following graph shows the domestic maize market in Bangladesh. The world price of maize is Pw = $350per ton.On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at thefree-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS).710Domestic DemandDomestic Supply670Cs630590550PS510470430390350310153045607590105120135150QUANTITY (Tons of maize)If Bangladesh allows international trade in the market for maize, it will import|tons of maize.Now suppose the Bangladeshi government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Bangladeshiconsumers pay for a ton of maize is $|, and Bangladesh will importtons of maize.PRICE (Dollars per ton)

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Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 2PA

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The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 34.6 and Table 34.7. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell? What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell? Sketch two supply and demand diagrams, one for each country, in the situation before trade. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade. If the Land of Submarines imposes an anti- dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country. Does your general answer change if the Land of Submarines imposes an import quota of 70?
Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.
Show graphically that for any tariff, there is an equivalent quota that would give the same result. What would be the difference, then, between the two types of trade barriers? Hint: It is not something you can see from the graph.
Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras In Thailand and Japan is described by the following functions: QsT=-5+14P QsJ=-10+14P QdT=60-P QdJ=80-P P is the price measured in a common currency used in both countries, such as the Thai Baht. Compute the equilibrium price (P) and quantities in each country without trade. Now assume that free trade occurs. The free-trade price goes to 56.36 Baht. Who exports and Imports cameras and in what quantities?
Consider two countries: South Korea and Taiwan. Taiwan can produce one million mobile phones per day at the cost of 10 per phone and South Korea can produce 50 million mobile phones at 5 per phone. Assume these phones are the same type and quality and there is only one price. What is the minimum price at which both countries will engage in trade?
3. Welfare effects of a tariff in a small country Suppose Ronduras is open to free trade in the world market for soybeans. Because of Honduras's small size, the demand for and supply of soybeans in Honduras do not affect the world price. The following graph shows the domestic soybeans market in Honduras. The world price of soybeans is Pw = $400 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). 1200 Domestic Demand Domestic Supply 1100 CS 1000 900 PS 800 700 600 500 400 300 200 100 120 140 160 180 200 20 40 60 80 QUANTITY (Tons of soybeans) PRICE (Dollars pe: ton)
3. Welfare effects of a tariff in a small country Suppose Zambia is open to free trade in the world market for soybeans. Because of Zambia's small size, the demand for and supply of soybeans in Zambia do not affect the world price. The following graph shows the domestic soybeans market in Zambia. The world price of soybeans is Pw = $400 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). 680 Domestic Demand Domestic Supply 640 cs 600 580 520 PS 480 440 400 360 320 280 15 30 45 60 75 90 105 120 135 150 QUANTITY (Tons of soybeans) If Zambia allows international trade in the market for soybeans, it will import tons of soybeans. Now suppose the Zambian government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Zambian…
3. Welfare effects of a tariff in a small country Suppose Bangladesh is open to free trade in the world market for maize. Because of Bangladesh's small size, the demand for and supply of maize in Bangladesh do not affect the world price. The following graph shows the domestic maize market in Bangladesh. 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). PRICE (Dollars per ton) 710 670 630 500 550 510 470 430 300 350 310 Domestic Demand 10 Domestic Supply 10 QUANTITY (Thousands of tons of maize) 18 20 8 PS
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)
Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel. ecause this country exports steel, the world price is represented by . Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad. With this export subsidy, the price paid by domestic consumers is per ton, and the price received by domestic producers is per ton. The quantity of steel consumed by domestic consumers , the quantity of steel produced by domestic producers , and the quantity of steel exported . True or False: With the export subsidy, domestic producers will sell steel to domestic consumers and sell the rest abroad. True False Under the export subsidy, consumer surplus is and producer surplus is . Government revenue by (increases or Decreases) . As a…
2 Using the graph, assume that the government imposes a $1 tariff on solar panels. Answer the following questions given this information. Price $13 65 8 Domestic Supply $1.00 Tariff World Price Domestic Demand о 30 40 60 84 96 Quantity a. What is the domestic price and quantity demanded of solar panels after the tariff is imposed? b. What is the quantity of solar panels imported before the tariff? c. What is the quantity of solar panels imported after the tariff? d. What would be the amount of consumer surplus before the tariff? e. What would be the amount of consumer surplus after the tariff? f. What would be the amount of producer surplus before the tariff? g. What would be the amount of producer surplus after the tariff? h. What would be the amount of government revenue because of the tariff? i. What would be the total amount of deadweight loss due to the tariff?
Now suppose the Zambian government decides to impose a tariff of $60 on each imported ton of soybeans. Under the tariff, the price Zambian consumers pay for a ton of soybeans becomes S tons of soybeans. and Zambia will import Use the following graph to show the effects of the $60 tariff. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the 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 points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. PRICE (Dollars perton) 490 460 430 400 370 340 310 280 250 220 190 0 Domestic Demand Domestic Supply 20 40 60 80 100 120 140 QUANTITY (Tons of soybeans) P W 160 180 200 World Price Plus Tariff CS PS Government…

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