Steel Industry 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. 1. Because this country exports steel, the world price is represented by P1 or P2. Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad. 2. With this export subsidy, the price paid by domestic consumers is $???? per ton, and the price received by domestic producers is $???? per ton. 3. The quantity of steel consumed by domestic consumers INCREASES or REMAINS UNCHANGED or DECREASES, the quantity of steel produced by domestic producers INCREASES or REMAINS UNCHANGED or DECREASES, and the quantity of steel exported INCREASES or REMAINS UNCHANGED or DECREASES. 4. TRUE or FALSE: With the export subsidy, this country will start importing steel from abroad. 5. Under the export subsidy, consumer surplus is $???? and producer surplus is $????. 6. Government revenue INCREASES or DECREASES by $???? . 7. As a result, total surplus INCREASES or REMAINS UNCHANGED or DECREASES. .

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter10: Prices, Output, And Strategy: Pure And Monopolistic Competition

Section: Chapter Questions

Problem 1.1CE

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Steel Industry

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.

1. Because this country exports steel, the world price is represented by P1 or P2.

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

2. With this export subsidy, the price paid by domestic consumers is $???? per ton, and the price received by domestic producers is $???? per ton.

3. The quantity of steel consumed by domestic consumers INCREASES or REMAINS UNCHANGED or DECREASES, the quantity of steel produced by domestic producers INCREASES or REMAINS UNCHANGED or DECREASES, and the quantity of steel exported INCREASES or REMAINS UNCHANGED or DECREASES.

4. TRUE or FALSE: With the export subsidy, this country will start importing steel from abroad.

5. Under the export subsidy, consumer surplus is $???? and producer surplus is $????.

6. Government revenue INCREASES or DECREASES by $????

. 7. As a result, total surplus INCREASES or REMAINS UNCHANGED or DECREASES.

Price of Steel (Dollars perton)
100
90
80
70
8
60
50
40
30
20
10
0
0
Demand
100
200
300 400 500 600
700
Quantity of Steel (Tons)
Supply
800
P
1
900 1000
Triangle
Polygon
?

Expert Solution

Step 1: Define competitive market

Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts for you. To get the remaining sub-part solved please repost the complete question and mention the sub-parts to be solved.

In a competitive market, the equilibrium situation is determined at a point where the market forces of demand and supply balance out each other.

Exports refers to the goods and services that are produced in the borders of the domestic country and are sold in the rest of the world. On the other hand, imports are those goods and services are produced in the rest of the world and are sold in the domestic nation.

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Can you please answer questions 4, 5, 6, and 7?

All sub-parts and questions have been provided. In the textbook question the chart falls above all of the questions, directly under the sentence, 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.

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