The government of canada recently signed a new preferential trade agreement and has agreed to pay subsidies to poultry farmers to compensate for increased competition they may face from imports. You are employed as an analyst. In order to determine the dollar value of compensation you are required to estimate how the Canadian price of poultry and the quantity of imported poultry will change as a result of this new trade agreement. Canada is a small importing country in the world market for poultry. Provided is the following information about the Canadian poultry market: 1.The world price of poultry is $5 2.The Canadian poultry market is currently (before new trade agreement) protected by a tariff rate quota (TRQ) of the following format: -an in-quota tariff is $1/unit -the import quota volume is 100 units -the over-quota tariff is $10/unit 3.An excess demand (ED) for imports function for poultry has been estimated as P = 28 - 0.14Q a)Draw the diagram for imports in this market, and solve for the Canadian poultry price and the volume of imports under the exisiting TRQ. Label all relevant functions, axes, etc. -Tip: First determine if the quota portion of the TRQ is binding. To do this solve for Q (using ED function) at the in-quota price (Pw + t) and at the over-quota price (Pw + T). Can ED intersect the effective supply function at those quantities? If not, determine Canadian P by plugging the import quota volume into ED function b)The Canadian goverment is considering reducing the over-quota tariff to a price of $6. Modify the diagram for this market, and solve for the Canadian turkey price and volume of imports. Label all relevant functions, axes, etc. c)The government is considering increasing the import quota volume from 100 units to 130 units. This would be instead of reducing the over quota rate. Modify the diagram for this market, and solve for the Canadian poultry price and the volume of imports. Label all relevant functions, axes, etc. d)The Canadian government is considering reducing the in-quota tariff to $0.50. This would be instead of the options in part b) and c). Modify the diagram for this market, and solve for the Canadian poultry price and volume of imports. Label all relevant functions, axes, etc.
The government of canada recently signed a new preferential trade agreement and has agreed to pay subsidies to poultry farmers to compensate for increased competition they may face from imports. You are employed as an analyst. In order to determine the dollar value of compensation you are required to estimate how the Canadian
Canada is a small importing country in the world market for poultry.
Provided is the following information about the Canadian poultry market:
1.The world price of poultry is $5
2.The Canadian poultry market is currently (before new trade agreement) protected by a tariff rate quota (TRQ) of the following format:
-an in-quota tariff is $1/unit
-the import quota volume is 100 units
-the over-quota tariff is $10/unit
3.An excess demand (ED) for imports function for poultry has been estimated as P = 28 - 0.14Q
a)Draw the diagram for imports in this market, and solve for the Canadian poultry price and the volume of imports under the exisiting TRQ. Label all relevant functions, axes, etc.
-Tip: First determine if the quota portion of the TRQ is binding. To do this solve for Q (using ED function) at the in-quota price (Pw + t) and at the over-quota price (Pw + T). Can ED intersect the effective supply function at those quantities? If not, determine Canadian P by plugging the import quota volume into ED function
b)The Canadian goverment is considering reducing the over-quota tariff to a price of $6. Modify the diagram for this market, and solve for the Canadian turkey price and volume of imports. Label all relevant functions, axes, etc.
c)The government is considering increasing the import quota volume from 100 units to 130 units. This would be instead of reducing the over quota rate. Modify the diagram for this market, and solve for the Canadian poultry price and the volume of imports. Label all relevant functions, axes, etc.
d)The Canadian government is considering reducing the in-quota tariff to $0.50. This would be instead of the options in part b) and c). Modify the diagram for this market, and solve for the Canadian poultry price and volume of imports. Label all relevant functions, axes, etc.
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