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Suppose Guatemala is open to free trade in the world market for maize. Because of Guatemala's small size, the demand for and supply of maize in Guatemala do not affect the world price. The following graph shows the domestic maize market in Guatemala. The world price of maize is Pw=$350 per ton.

Suppose Guatemala is open to free trade in the world market for maize. Because of Guatemala's small size, the demand for and supply of maize in Guatemala do not affect the world price. The following graph shows the domestic maize market in Guatemala. The world price of maize is Pw=$350 per ton.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Show the effects of the $30 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle (diamond symbols) to show the producers' 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) 440 430 420 410 $ 400 390 380 370 360 350 340 Domestic Demand 0 5 10 15 20 25 30 35 QUANTITY (Thousands of tons of maize) Consumers' Surplus Producers' Surplus Government Revenue Domestic Supply I government collects $ 40 Pw 45 50 0 * | 4 + 4 = M 4* + World Price Plus Tariff CS PS Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Government Revenue DWL ? Under a Tariff (Dollars) Based on your analysis, as a result of the tariff, Guatemala's consumers' surplus $ producers' surplus by $ and the " in revenue. Therefore, the net welfare effect is a by of
Transcribed Image Text:Show the effects of the $30 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle (diamond symbols) to show the producers' 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) 440 430 420 410 $ 400 390 380 370 360 350 340 Domestic Demand 0 5 10 15 20 25 30 35 QUANTITY (Thousands of tons of maize) Consumers' Surplus Producers' Surplus Government Revenue Domestic Supply I government collects $ 40 Pw 45 50 0 * | 4 + 4 = M 4* + World Price Plus Tariff CS PS Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Government Revenue DWL ? Under a Tariff (Dollars) Based on your analysis, as a result of the tariff, Guatemala's consumers' surplus $ producers' surplus by $ and the " in revenue. Therefore, the net welfare effect is a by of
Suppose Guatemala is open to free trade in the world market for maize. Because of Guatemala's small size, the demand for and supply of maize in Guatemala do not affect the world price. The following graph shows the domestic maize market in Guatemala. 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's surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). PRICE (Dollars per ton) 440 430 420 + 410 400 390 380 370 360 350 340 Domestic Demand 0 Domestic Supply 5 10 15 20 25 30 QUANTITY (Thousands of tons of maize) 35 P 40 45 50 CS PS (?) If Guatemala allows international trade in the market for maize, it will import maize. tons of Now suppose the Guatemalan government decides to impose a tariff of $30 on each imported ton of maize. After the tariff, the price Guatemalan consumers pay for a ton of maize is $ and Guatemala will import tons of maize. Show the effects of the $30 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle
Transcribed Image Text:Suppose Guatemala is open to free trade in the world market for maize. Because of Guatemala's small size, the demand for and supply of maize in Guatemala do not affect the world price. The following graph shows the domestic maize market in Guatemala. 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's surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producers' surplus (PS). PRICE (Dollars per ton) 440 430 420 + 410 400 390 380 370 360 350 340 Domestic Demand 0 Domestic Supply 5 10 15 20 25 30 QUANTITY (Thousands of tons of maize) 35 P 40 45 50 CS PS (?) If Guatemala allows international trade in the market for maize, it will import maize. tons of Now suppose the Guatemalan government decides to impose a tariff of $30 on each imported ton of maize. After the tariff, the price Guatemalan consumers pay for a ton of maize is $ and Guatemala will import tons of maize. Show the effects of the $30 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (triangle symbols) to show the consumers' surplus with the tariff and the purple triangle
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