Suppose Burundi is open to free trade in the world market for oranges. Since Burundi is small relative to the international market, the demand for and supply of oranges in Burundi have no impact on the world price. The following graph shows the domestic market for oranges in Burundi. The world price of a ton of oranges is PW = $350. Complete the following table to summarize your results from the previous two graphs. With Free TradeWith a Tariff(Dollars)(Dollars)Consumer Surplus Producer Surplus Government Revenue0 The image features an economic graph and a table designed to help understand the effects of tariffs on market surpluses and government revenue.### Graph ExplanationThe graph illustrates the domestic market for oranges with the following components:- **Axes**: The horizontal axis represents the "QUANTITY (Tons of oranges)," ranging from 0 to 50. The vertical axis displays "PRICE (Dollars per ton)," ranging from 320 to 620.- **Lines**: - **Domestic Demand (Blue Line)**: Shows the quantity of oranges demanded at various price levels, sloping downward from left to right. - **Domestic Supply (Orange Line)**: Represents the quantity of oranges supplied, sloping upward from left to right.- **Price Points**: - **Pw (Horizontal Black Line)**: Represents the world price without a tariff. - **Legend**: - **World Price Plus Tariff (Black Crossed Line)** - **CS (Green Triangles)**: Consumer Surplus - **PS (Purple Diamonds)**: Producer Surplus - **Government Revenue (Orange Squares)** - **DWL (Light Brown Triangles)**: Deadweight Loss### TableThis table is meant to consolidate the findings from analyzing the graphs:- **Columns**: - "With Free Trade (Dollars)": For entering values without the tariff. - "With a Tariff (Dollars)": For entering values when a tariff is applied.- **Rows**: - **Consumer Surplus** - **Producer Surplus** - **Government Revenue**: Note that it’s pre-filled with a value of "0" for the free trade scenario.This instructional content aims to help students compare economic impacts based on tariff presence in a market. # Welfare Effects of a Tariff in a Small Country## OverviewThis section explores the welfare effects of a tariff in a small country, using the example of Burundi's market for oranges. Since Burundi is small relative to the international market, its domestic demand and supply have no impact on the world price.### The Market Situation**World Price**: The world price for a ton of oranges is $ P_W = \$350 $.### Graphical RepresentationThe graph illustrates the domestic market for oranges in Burundi, with two main curves:- **Domestic Demand** (blue line)- **Domestic Supply** (orange line)#### Key Areas to Identify:- **Consumer Surplus (CS)**: Highlighted using a green triangle (triangle symbols), represents the benefit consumers receive from purchasing goods at the market price.- **Producer Surplus (PS)**: Illustrated using a purple triangle (diamond symbols), represents the benefit producers receive by selling at the market price.### Import QuantitiesWhen engaged in free trade, Burundi imports oranges, the quantity of which needs further assessment based on graphical data.### Tariff ImplicationsBurundi government plans to impose a tariff of $60 on each imported ton of oranges, which will affect the price and quantities traded in the domestic market. This will alter the consumer and producer surpluses.## Detailed Graph ExplanationThe graph shows:- **X-axis**: Represents the quantity of oranges (tons).- **Y-axis**: Represents the price in dollars per ton.- **Intersection**: The point where domestic demand and supply curves meet determines the equilibrium without trade adjustments.Highlighting specific areas using designated colors distinguishes surpluses, which will shift with the imposition of a tariff.By analyzing these components, we assess how tariffs influence overall welfare in small economies like Burundi.

A tariff is described as a tax or duty that a government imposes on imported or exported goods.…

Answered: Suppose Burundi is open to free trade…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Burundi is open to free trade in the world market for oranges. Since Burundi is small relative to the international market, the demand for and supply of oranges in Burundi have no impact on the world price. The following graph shows the domestic market for oranges in Burundi. The world price of a ton of oranges is PW = $350.

Complete the following table to summarize your results from the previous two graphs.

	With Free Trade	With a Tariff
(Dollars)	(Dollars)
Consumer Surplus
Producer Surplus
Government Revenue	0

The image features an economic graph and a table designed to help understand the effects of tariffs on market surpluses and government revenue.

### Graph Explanation

The graph illustrates the domestic market for oranges with the following components:

- **Axes**: The horizontal axis represents the "QUANTITY (Tons of oranges)," ranging from 0 to 50. The vertical axis displays "PRICE (Dollars per ton)," ranging from 320 to 620.

- **Lines**:
- **Domestic Demand (Blue Line)**: Shows the quantity of oranges demanded at various price levels, sloping downward from left to right.
- **Domestic Supply (Orange Line)**: Represents the quantity of oranges supplied, sloping upward from left to right.

- **Price Points**:
- **Pw (Horizontal Black Line)**: Represents the world price without a tariff.

- **Legend**:
- **World Price Plus Tariff (Black Crossed Line)**
- **CS (Green Triangles)**: Consumer Surplus
- **PS (Purple Diamonds)**: Producer Surplus
- **Government Revenue (Orange Squares)**
- **DWL (Light Brown Triangles)**: Deadweight Loss

### Table

This table is meant to consolidate the findings from analyzing the graphs:

- **Columns**:
- "With Free Trade (Dollars)": For entering values without the tariff.
- "With a Tariff (Dollars)": For entering values when a tariff is applied.

- **Rows**:
- **Consumer Surplus**
- **Producer Surplus**
- **Government Revenue**: Note that it’s pre-filled with a value of "0" for the free trade scenario.

This instructional content aims to help students compare economic impacts based on tariff presence in a market.

# Welfare Effects of a Tariff in a Small Country

## Overview

This section explores the welfare effects of a tariff in a small country, using the example of Burundi's market for oranges. Since Burundi is small relative to the international market, its domestic demand and supply have no impact on the world price.

### The Market Situation

**World Price**: The world price for a ton of oranges is $ P_W = \$350 $.

### Graphical Representation

The graph illustrates the domestic market for oranges in Burundi, with two main curves:
- **Domestic Demand** (blue line)
- **Domestic Supply** (orange line)

#### Key Areas to Identify:
- **Consumer Surplus (CS)**: Highlighted using a green triangle (triangle symbols), represents the benefit consumers receive from purchasing goods at the market price.
- **Producer Surplus (PS)**: Illustrated using a purple triangle (diamond symbols), represents the benefit producers receive by selling at the market price.

### Import Quantities

When engaged in free trade, Burundi imports oranges, the quantity of which needs further assessment based on graphical data.

### Tariff Implications

Burundi government plans to impose a tariff of $60 on each imported ton of oranges, which will affect the price and quantities traded in the domestic market. This will alter the consumer and producer surpluses.

## Detailed Graph Explanation

The graph shows:
- **X-axis**: Represents the quantity of oranges (tons).
- **Y-axis**: Represents the price in dollars per ton.
- **Intersection**: The point where domestic demand and supply curves meet determines the equilibrium without trade adjustments.

Highlighting specific areas using designated colors distinguishes surpluses, which will shift with the imposition of a tariff.

By analyzing these components, we assess how tariffs influence overall welfare in small economies like Burundi.

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