Answered: Suppose that a “pro-trade” government…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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 (DECREASE, REMAINS UNCHANGED, INCREASE) , the quantity of steel produced by domestic producers (DECREASE, REMAINS UNCHANGED, INCREASE) , and the quantity of steel exported . (DECREASE, REMAINS UNCHANGED, INCREASE) ,

Under the export subsidy, consumer surplus is$________and producer surplus is$________. Government revenue (DECREASE OR INCREASE) by$____. As a result, total surplus (DECREASE , REMAINS UNCHANGED OR INCREASED)

True or False: With the export subsidy, domestic producers will not sell any steel to domestic consumers.

Demand
Supply
100
90
Triangle
70
00
Polygon
50
40
30
20
10
400 500 00 700 800
Quantity of Steel (Tons)
100
200 300
000 1000
Price of Steel (Dollars per ton)

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