Suppose New Zealand is open to free trade in the world market for maize. Since New Zealand is small relative to the international market, the demand for and supply of maize in New Zealand have no impact on the world price. The following graph shows the domestic market for maize in New Zealand. The world price of a ton of maize is Pw = $800. 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) 1150 Domestic Demand 1100 1050 1000 950 900 850 800 750 700 + 650 0 5 10 15 Domestic Supply 20 25 30 35 QUANTITY (Tons of maize) Pw 40 45 50 F CS Because New Zealand participates in international trade in the market for maize, it will import PS Use the following graph to show the effects of the $50 tariff. Now suppose the New Zealand government decides to impose a tariff of $50 on each imported ton of maize. Under the tariff, the price New Zealand consumers pay for a ton of maize becomes $ and New Zealand will import tons of maize. tons of maize.
Suppose New Zealand is open to free trade in the world market for maize. Since New Zealand is small relative to the international market, the demand for and supply of maize in New Zealand have no impact on the world price. The following graph shows the domestic market for maize in New Zealand. The world price of a ton of maize is Pw = $800. 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) 1150 Domestic Demand 1100 1050 1000 950 900 850 800 750 700 + 650 0 5 10 15 Domestic Supply 20 25 30 35 QUANTITY (Tons of maize) Pw 40 45 50 F CS Because New Zealand participates in international trade in the market for maize, it will import PS Use the following graph to show the effects of the $50 tariff. Now suppose the New Zealand government decides to impose a tariff of $50 on each imported ton of maize. Under the tariff, the price New Zealand consumers pay for a ton of maize becomes $ and New Zealand will import tons of maize. tons of maize.
Principles of Macroeconomics (MindTap Course List)
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Chapter9: Application: International Trade
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![Suppose New Zealand is open to free trade in the world market for maize. Since New Zealand is small relative to the international market, the demand
for and supply of maize in New Zealand have no impact on the world price. The following graph shows the domestic market for maize in New Zealand.
The world price of a ton of maize is Pw $800.
=
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)
1150
1100
1050
1000
950
900
850
800
750
700
650
0
Domestic Demand
5
Il a small country
10
15
Domestic Supply
20 25 30 35
QUANTITY (Tons of maize)
Pw
40 45 50
CS
PS
Because New Zealand participates in international trade in the market for maize, it will import
Use the following graph to show the effects of the $50 tariff.
tons of maize.
Now suppose the New Zealand government decides to impose a tariff of $50 on each imported ton of maize. Under the tariff, the price New Zealand
consumers pay for a ton of maize becomes S
and New Zealand will import
tons of maize.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F72b90a15-b20c-4c7d-8f95-1bd3e12e7a65%2Fb9125d0c-6778-4082-946d-dccbbae8c4b3%2Fzd9y1be_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose New Zealand is open to free trade in the world market for maize. Since New Zealand is small relative to the international market, the demand
for and supply of maize in New Zealand have no impact on the world price. The following graph shows the domestic market for maize in New Zealand.
The world price of a ton of maize is Pw $800.
=
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)
1150
1100
1050
1000
950
900
850
800
750
700
650
0
Domestic Demand
5
Il a small country
10
15
Domestic Supply
20 25 30 35
QUANTITY (Tons of maize)
Pw
40 45 50
CS
PS
Because New Zealand participates in international trade in the market for maize, it will import
Use the following graph to show the effects of the $50 tariff.
tons of maize.
Now suppose the New Zealand government decides to impose a tariff of $50 on each imported ton of maize. Under the tariff, the price New Zealand
consumers pay for a ton of maize becomes S
and New Zealand will import
tons of maize.
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