Answered: Demand Supply 100 90 Triangle 80 70 60…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel.

Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph.

Because this country exports steel, the world price is represented by ________ .

Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad.

With this export subsidy, the price paid by domestic consumers is _________ per ton, and the price received by domestic producers is ___________ per ton. The quantity of steel consumed by domestic consumers _______ , the quantity of steel produced by domestic producers ______ , and the quantity of steel exported ________ .

True or False: With the export subsidy, domestic producers will sell steel to domestic consumers and sell the rest abroad.

True

False

Under the export subsidy, consumer surplus is ________ and producer surplus is _______. Government revenue ________ by As a result, total surplus __________ .

(?
Demand
Supply
100
90
Triangle
80
70
60
Polygon
50
40
30
20
10
100
200
300
400
500
600
700
800
900
1000
Quantity of Steel (Tons)
Price of Steel (Dollars per ton)

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