The following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents the world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the farmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat. On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy. Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position. (? PRICE (Dollars per bushel) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 DEU SEU SWorld 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 WHEAT (Bushels) Support Price SWorld New
The following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents the world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the farmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat. On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy. Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position. (? PRICE (Dollars per bushel) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 DEU SEU SWorld 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 WHEAT (Bushels) Support Price SWorld New
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 9PA
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![4. Variable levies
The following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents the
world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the
farmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat.
On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy.
Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position.
PRICE (Dollars per bushel)
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0
0
DEU
SEU
Sworld
2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
WHEAT (Bushels)
Support Price
SWorld New
(?)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F220eed70-1154-4fb9-a08e-8184afa41c7e%2F8e4a0cd6-da8e-405a-954c-93a01d9b0599%2Fvmphg2a_processed.png&w=3840&q=75)
Transcribed Image Text:4. Variable levies
The following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents the
world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the
farmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat.
On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy.
Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position.
PRICE (Dollars per bushel)
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0
0
DEU
SEU
Sworld
2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
WHEAT (Bushels)
Support Price
SWorld New
(?)
![Fill in the following table by entering the quantities for production, consumption, and imports of wheat in the EU before and after the $2.00 levy.
Before the levy
After the levy
Production Consumption
(Bushels)
(Bushels)
Imports
(Bushels)
Suppose that the world price of wheat rises to $3.00 per bushel, but the EU keeps the same support price for the farmers.
On the previous graph, use the grey line (star symbol) to draw the new world supply curve (Sworld,New).
Given the change in the world price, the variable levy adjusts to $
per bushel of wheat in order to maintain the support price.
Which of the following describe the effects of the variable levy on international trade? Check all that apply.
Foreign producers have an incentive to cut prices to maintain export sales.
Foreign producers have no incentive to subsidize their exports.
Foreign producers are discouraged from reducing prices to maintain export sales.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F220eed70-1154-4fb9-a08e-8184afa41c7e%2F8e4a0cd6-da8e-405a-954c-93a01d9b0599%2Fdh2z8p7_processed.png&w=3840&q=75)
Transcribed Image Text:Fill in the following table by entering the quantities for production, consumption, and imports of wheat in the EU before and after the $2.00 levy.
Before the levy
After the levy
Production Consumption
(Bushels)
(Bushels)
Imports
(Bushels)
Suppose that the world price of wheat rises to $3.00 per bushel, but the EU keeps the same support price for the farmers.
On the previous graph, use the grey line (star symbol) to draw the new world supply curve (Sworld,New).
Given the change in the world price, the variable levy adjusts to $
per bushel of wheat in order to maintain the support price.
Which of the following describe the effects of the variable levy on international trade? Check all that apply.
Foreign producers have an incentive to cut prices to maintain export sales.
Foreign producers have no incentive to subsidize their exports.
Foreign producers are discouraged from reducing prices to maintain export sales.
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