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2. Welfare effects of a tariff in a small country Suppose Venezuela is open to free trade in the world market for soybeans. Because of Venezuela's small size, the demand for and supply of soybeans in Venezuela do not affect the world price. The following graph shows the domestic soybeans market in Venezuela. The world price of soybeans is Pw $400 per ton. = 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) 680 Domestic Demand 640 600 560 520 480 440 400 360 320 280 + 05 10 15 20 25 30 35 QUANTITY (Tons of soybeans) Domestic Supply 7.1 at PW 40 45 50 If Venezuela allows international trade in the market for soybeans, it will import CS PS Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans. Show the effects of the $40 tariff on the following graph. If Venezuela allows international trade in the market for soybeans, it will import tons of soybeans. tons of soybeans. Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans.

2. Welfare effects of a tariff in a small country Suppose Venezuela is open to free trade in the world market for soybeans. Because of Venezuela's small size, the demand for and supply of soybeans in Venezuela do not affect the world price. The following graph shows the domestic soybeans market in Venezuela. The world price of soybeans is Pw $400 per ton. = 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) 680 Domestic Demand 640 600 560 520 480 440 400 360 320 280 + 05 10 15 20 25 30 35 QUANTITY (Tons of soybeans) Domestic Supply 7.1 at PW 40 45 50 If Venezuela allows international trade in the market for soybeans, it will import CS PS Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans. Show the effects of the $40 tariff on the following graph. If Venezuela allows international trade in the market for soybeans, it will import tons of soybeans. tons of soybeans. Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans.

Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
Glencoe Algebra 1, Student Edition, 9780079039897, 0079039898, 2018
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ISBN:9780079039897
Author:Carter
Publisher:Carter
Chapter2: Linear Equations
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2. Welfare effects of a tariff in a small country Suppose Venezuela is open to free trade in the world market for soybeans. Because of Venezuela's small size, the demand for and supply of soybeans in Venezuela do not affect the world price. The following graph shows the domestic soybeans market in Venezuela. The world price of soybeans is Pw $400 per ton. = 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) 680 Domestic Demand 640 600 560 520 480 440 400 360 320 280 + 05 Domestic Supply 10 15 20 25 30 35 QUANTITY (Tons of soybeans) 7.1 PW 40 45 50 CS If Venezuela allows international trade in the market for soybeans, it will import PS Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans. Show the effects of the $40 tariff on the following graph. If Venezuela allows international trade in the market for soybeans, it will import tons of soybeans. tons of soybeans. Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans.
Transcribed Image Text:2. Welfare effects of a tariff in a small country Suppose Venezuela is open to free trade in the world market for soybeans. Because of Venezuela's small size, the demand for and supply of soybeans in Venezuela do not affect the world price. The following graph shows the domestic soybeans market in Venezuela. The world price of soybeans is Pw $400 per ton. = 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) 680 Domestic Demand 640 600 560 520 480 440 400 360 320 280 + 05 Domestic Supply 10 15 20 25 30 35 QUANTITY (Tons of soybeans) 7.1 PW 40 45 50 CS If Venezuela allows international trade in the market for soybeans, it will import PS Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans. Show the effects of the $40 tariff on the following graph. If Venezuela allows international trade in the market for soybeans, it will import tons of soybeans. tons of soybeans. Now suppose the Venezuelan government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Venezuelan consumers pay for a ton of soybeans is $ , and Venezuela will import tons of soybeans.
Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. PRICE (Dollars per ton) 680 640 600 560 520 $ 480 440 Q400 360 320 280 Domestic Demand 0 5 10 15 20 25 30 QUANTITY (Tons of soybeans) Consumer Surplus Producer Surplus Government Revenue Domestic Supply 0 Pw 35 40 45 50 Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) =r[x+r+y] World Price Plus Tariff Government Revenue Based on your analysis, as a result of the tariff, Venezuela's consumer surplus by $ , and the government collects $ (?) by S , producer surplus in revenue. Therefore, the net welfare effect is a of of
Transcribed Image Text:Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. PRICE (Dollars per ton) 680 640 600 560 520 $ 480 440 Q400 360 320 280 Domestic Demand 0 5 10 15 20 25 30 QUANTITY (Tons of soybeans) Consumer Surplus Producer Surplus Government Revenue Domestic Supply 0 Pw 35 40 45 50 Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) =r[x+r+y] World Price Plus Tariff Government Revenue Based on your analysis, as a result of the tariff, Venezuela's consumer surplus by $ , and the government collects $ (?) by S , producer surplus in revenue. Therefore, the net welfare effect is a of of
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