The Government of Canada recently signed new preferential trade agreement, and has agreed to pay subsidies to turkey farmers to compensate for increased competition they may face from imports. You are employed as an analyst by AAFC. In order to determine the dollar value of compensation, AAFC requires an estimate of how the Canadian price of turkeys and the quantity of imported turkeys will change as a result of the new trade agreement. You are provided with the following information about the Canadian turkey market: 1. The world price of turkey is $5. 2. The Canadian turkey market is currently (before the new trade agreement) protected by a tariff rate quota (TRQ) of the following format: a) the in-quota tariff is $1 per unit b) the import quota volume is 100 units c) the over-quota tariff is $10 per unit. 3. An excess demand (ED) (for imports) function for turkey has been estimated as ? = 28 − 0.14?. Note: Canada is a small importing country in the world market for turkeys. Note: The data given above (1, 2a,2b,2c and 3) is what you need to solve the question below. Solve the question below (b): b) The Canadian government is considering reducing the over-quota tariff to $6. Modify the diagram for this market, and solve for the Canadian turkey price and the volume of imports. Label all relevant
The Government of Canada recently signed new preferential trade agreement, and has agreed to pay
subsidies to turkey farmers to compensate for increased competition they may face from imports. You
are employed as an analyst by AAFC. In order to determine the dollar value of compensation, AAFC
requires an estimate of how the Canadian
change as a result of the new trade agreement.
You are provided with the following information about the Canadian turkey market:
1. The world price of turkey is $5.
2. The Canadian turkey market is currently (before the new trade agreement) protected by a tariff
rate quota (TRQ) of the following format:
a) the in-quota tariff is $1 per unit
b) the import quota volume is 100 units
c) the over-quota tariff is $10 per unit.
3. An excess demand (ED) (for imports) function for turkey has been estimated as
? = 28 − 0.14?.
Note: Canada is a small importing country in the world market for turkeys.
Note: The data given above (1, 2a,2b,2c and 3) is what you need to solve the question below.
Solve the question below (b):
b) The Canadian government is considering reducing the over-quota tariff to $6. Modify the diagram
for this market, and solve for the Canadian turkey price and the volume of imports. Label all relevant
functions, axes, etc
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