Suppose Zambia is open to free trade in the world market for soybeans. Since Zambia is small relative to the international market, the demand for and supply of soybeans in Zambia have no impact on the world price. The following graph shows the domestic market for soybeans in Zambia. The world price of a ton of soybeans is Pw = $250. 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) 490 Domestic Demand Domestic Supply 460 430 400 370 340 310 280 250 220 P 190 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Tons of soybeans) CS PS Because Zambia participates in international trade in the market for soybeans, it will import tons of soybeans. Now suppose the Zambian government decides to impose a tariff of $60 on each imported ton of soybeans. Under the tariff, the price Zambian consumers pay for a ton of soybeans becomes $ tons of soybeans. and Zambia will import Use the following graph to show the effects of the $60 tariff.
Suppose Zambia is open to free trade in the world market for soybeans. Since Zambia is small relative to the international market, the demand for and supply of soybeans in Zambia have no impact on the world price. The following graph shows the domestic market for soybeans in Zambia. The world price of a ton of soybeans is Pw = $250. 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) 490 Domestic Demand Domestic Supply 460 430 400 370 340 310 280 250 220 P 190 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Tons of soybeans) CS PS Because Zambia participates in international trade in the market for soybeans, it will import tons of soybeans. Now suppose the Zambian government decides to impose a tariff of $60 on each imported ton of soybeans. Under the tariff, the price Zambian consumers pay for a ton of soybeans becomes $ tons of soybeans. and Zambia will import Use the following graph to show the effects of the $60 tariff.
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter2: Production Possibilities Frontier Framework
Section: Chapter Questions
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Transcribed Image Text:Suppose Zambia is open to free trade in the world market for soybeans. Since Zambia is small relative to the international market, the demand for
and supply of soybeans in Zambia have no impact on the world price. The following graph shows the domestic market for soybeans in Zambia. The
world price of a ton of soybeans is Pw = $250.
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)
490
Domestic Demand
Domestic Supply
460
430
400
370
340
310
280
250
220
P
190
0 20
40
60
80 100 120 140 160 180
200
QUANTITY (Tons of soybeans)
CS
PS
Because Zambia participates in international trade in the market for soybeans, it will import
tons of soybeans.
Now suppose the Zambian government decides to impose a tariff of $60 on each imported ton of soybeans. Under the tariff, the price Zambian
consumers pay for a ton of soybeans becomes $
tons of soybeans.
and Zambia will import
Use the following graph to show the effects of the $60 tariff.
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