4. Variable leviesThe following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents theworld supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for thefarmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat.On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy.Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position.PRICE (Dollars per bushel)10.009.008.007.006.005.004.003.002.001.0000DEUSEUSworld2000 4000 6000 8000 10000 12000 14000 16000 18000 20000WHEAT (Bushels)Support PriceSWorld New(?) Fill in the following table by entering the quantities for production, consumption, and imports of wheat in the EU before and after the $2.00 levy.Before the levyAfter the levyProduction Consumption(Bushels)(Bushels)Imports(Bushels)Suppose that the world price of wheat rises to $3.00 per bushel, but the EU keeps the same support price for the farmers.On the previous graph, use the grey line (star symbol) to draw the new world supply curve (Sworld,New).Given the change in the world price, the variable levy adjusts to $per bushel of wheat in order to maintain the support price.Which of the following describe the effects of the variable levy on international trade? Check all that apply.Foreign producers have an incentive to cut prices to maintain export sales.Foreign producers have no incentive to subsidize their exports.Foreign producers are discouraged from reducing prices to maintain export sales.

Supply refers to the quantity of a good or service that producers are willing and able to sell at a…

The following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents the world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the farmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat. On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy. Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position. (? PRICE (Dollars per bushel) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 DEU SEU SWorld 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 WHEAT (Bushels) Support Price SWorld New

The following graph shows the market for wheat in the European Union (EU). The world price of wheat is $2.00 per bushel, so Sworld represents the world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the farmers by imposing a variable levy of $2.00 per bushel to limit the import of wheat. On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $2.00 levy. Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position. (? PRICE (Dollars per bushel) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0 DEU SEU SWorld 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 WHEAT (Bushels) Support Price SWorld New

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 2SQP

See similar textbooks

Similar questions

A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat screen televisions. Using the four-step analysis, how do you think the tariff reduction will affect the equilibrium price and quantity of flat screen TVS?
Table 4.6 shows the amount of savings and barrowing in a market for loans lo purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate and quantity in the capital financial market? How can you tell? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be 10 million less supplied at every interest rate. Calculate the new equilibrium interest rate and quantity, and explain why the direction of the interest tale shift makes intuitive sense.
Assume a perfectly competitive market and the exporting country is small. Using a demand and supply diagram, show the impact of increasing standards on a low-income exporter of toys. Show the tariffs impact. Is the effect on toy prices the same or different? Why is a standards policy preferred to tariffs?
Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.
6 a) What will be the price of solar panels in the U.S. if the U.S. has free trade in solar panels? Diagrammatically show the gains from trade in solar panels. (Change in welfare as a result of free trade in solar panels compared to the situation of no trade. Show how the different components of welfare such as consumer surplus and producer surplus change.) b) Now suppose the Trump administration imposes a quota. That is, it says that it will allow the import of only 10 million panels a year (With free trade the imports would have been more than 10 million). Will the price of solar panels rise or fall in the US? Who will gain from the quota? Who will lose? Diagrammatically show the welfare impact of the quota compared to the free trade situation. (Again show the change in welfare in terms of consumer surplus, producer surplus, government revenue etc. You can assume that the government auctions quota licenses.) c) Now suppose that instead of imposing a quota, the Trump administration…
Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world's sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption. (i)Discuss the effect on the markets for each of the three products if thegovernment implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers and whiskey producers?
27. Suppose IP is the international trade price and this country's government imposes a $3 tariff on imports of this good, what will be the loss to consumers? 28. Suppose IP is the international trade price and this country's government imposes a $3 tariff on imports of this good, what will be the net loss to this econom? 29. Suppose IP is the international trade price and this country's government imposes a $3 tariff on imports of this good, how much revenue will the government collect? 30. Suppose IP is the international trade price and this country's government imposes a 6 unit quota on imports of this good, what will be the net loss to this econom?
Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium(i.e., supply equals demand in each case). Assume further that a good harvest impactsthe world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption. (b) Discuss the effect on the markets for each of the three products if thegovernment implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers, and whiskey producers?
Part F. If home country imposes a specific tariff of $15 per unit of good Y imported, what is the tariff revenue? Show your work. Part G. Assume that instead of a specific tariff, an import quota will be used on good Y. What is the amount of the quota that will have identical effects (in terms of amount of good Y imports and the domestic price of good Y) as the specific tariff of $15? Explain your reasoning. Part H. Consider the use of import tariff vs. import quota in Home country that will result in the same amount of good Y imports and the domestic price of good Y. If quota rents are given to Foreign country, which policy, i.e., import tariff vs. import quota, is preferable by Home country on the basis of its effect on social welfare? Explain your reasoning.