Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is Pw =$250 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).
Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is Pw =$250 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).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![490
Domestic Demand
Domestic Supply
460
World Price Plus Tariff
430
400
370
CS
340
310
PS
280
W
250
Government Revenue
220
190
5
10
15
20
25
30
35
40
45
50
DWL
QUANTITY (Thousands of tons of wheat)
Complete the following table to summarize your results from the previous two graphs.
Under Free Trade
Under a Tariff
(Dollars)
(Dollars)
Consumer Surplus
Producer Surplus
Government Revenue
Based on your analysis, as a result of the tariff, Kenya's consumer surplus
by $
producer surplus
by $
, and the government collects
in revenue. Therefore, the net welfare effect is a
of
PRICE (Dollars per ton)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F87aedfe3-194a-42e4-b574-69e2c3d463c9%2Fda7807db-d493-4bdd-8177-d02592b65d3a%2Fczdkkdo_processed.png&w=3840&q=75)
Transcribed Image Text:490
Domestic Demand
Domestic Supply
460
World Price Plus Tariff
430
400
370
CS
340
310
PS
280
W
250
Government Revenue
220
190
5
10
15
20
25
30
35
40
45
50
DWL
QUANTITY (Thousands of tons of wheat)
Complete the following table to summarize your results from the previous two graphs.
Under Free Trade
Under a Tariff
(Dollars)
(Dollars)
Consumer Surplus
Producer Surplus
Government Revenue
Based on your analysis, as a result of the tariff, Kenya's consumer surplus
by $
producer surplus
by $
, and the government collects
in revenue. Therefore, the net welfare effect is a
of
PRICE (Dollars per ton)
![4. Tariffs
Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do
not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is Pw =$250 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).
490
Domestic Demand
Domestic Supply
460
CS
430
400
370
PS
340
310
280
250
220
190
10
15
20
25
30
35
40
45
50
QUANTITY (Thousands of tons of wheat)
If Kenya allows international trade in the market for wheat, it will import
tons of wheat.
Now suppose the Kenyan government decides to impose a tariff of $60 on each imported ton of wheat. After the tariff, the price Kenyan consumers
pay for a ton of wheat is $
and Kenya will import
tons of wheat.
Show the effects of the $60 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 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 triangles (dash symbols) to shade the areas
representing the net loss or deadweight loss (DWL) caused by the tariff.
PRICE (Dollars per ton)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F87aedfe3-194a-42e4-b574-69e2c3d463c9%2Fda7807db-d493-4bdd-8177-d02592b65d3a%2Fz0e4tva_processed.png&w=3840&q=75)
Transcribed Image Text:4. Tariffs
Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do
not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is Pw =$250 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).
490
Domestic Demand
Domestic Supply
460
CS
430
400
370
PS
340
310
280
250
220
190
10
15
20
25
30
35
40
45
50
QUANTITY (Thousands of tons of wheat)
If Kenya allows international trade in the market for wheat, it will import
tons of wheat.
Now suppose the Kenyan government decides to impose a tariff of $60 on each imported ton of wheat. After the tariff, the price Kenyan consumers
pay for a ton of wheat is $
and Kenya will import
tons of wheat.
Show the effects of the $60 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 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 triangles (dash symbols) to shade the areas
representing the net loss or deadweight loss (DWL) caused by the tariff.
PRICE (Dollars per ton)
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