Two years ago, the WTO negotiated a package intended to reduce trade barriers. Developed countries agreed to eliminate farm export subsidies. (I exaggerated what actually happened.) Developed countries are net exporters of farm products. As a group, developed countries comprise a large economy. Use appropriate diagrams and an explanation to show the economic welfare effects (i.e., changes in consumer surplus and producer surplus) of this reduction in farm export subsidies on: (a) developed countries (use one graph to represent them). (b) a small developing country which is a net importer of farm products. The small country practices free trade. (c) a small developing country which is a net exporter of farm products. The small country practices free trade.
Two years ago, the WTO negotiated a package intended to reduce trade barriers. Developed countries agreed to eliminate farm export subsidies. (I exaggerated what actually happened.) Developed countries are net exporters of farm products. As a group, developed countries comprise a large economy. Use appropriate diagrams and an explanation to show the economic welfare effects (i.e., changes in consumer surplus and producer surplus) of this reduction in farm export subsidies on: (a) developed countries (use one graph to represent them). (b) a small developing country which is a net importer of farm products. The small country practices free trade. (c) a small developing country which is a net exporter of farm products. The small country practices free trade.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- Two years ago, the WTO negotiated a package intended to reduce trade barriers. Developed countries agreed to eliminate farm export subsidies. (I exaggerated what actually happened.) Developed countries are net exporters of farm products. As a group, developed countries comprise a large economy. Use appropriate diagrams and an explanation to show the economic welfare effects (i.e., changes in
consumer surplus and producer surplus) of this reduction in farm export subsidies on:
(a) developed countries (use one graph to represent them).
(b) a small developing country which is a net importer of farm products. The small country practices free trade.
(c) a small developing country which is a net exporter of farm products. The small country practices free trade.
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