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Homework answers / question archive / Suppose Colombia is open to free trade in the world market for soybeans
Suppose Colombia is open to free trade in the world market for soybeans. Because of Colombia's small size, the demand for and supply of soybeans in Colombia do not affect the world price. The following graph shows the domestic soybeans market in Colombia. 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). 680 Domestic Demand Domestic Supply 640 600 CS 500 520 PS PRICE (Dollars per ton) 480 440 P 400 360 280 + 015 135 150 30 45 60 75 90 105 120 QUANTITY (Tons of soybeans
Homework (Ch 09) If Colombia allows international trade in the market for soybeans, it will import tons of soybeans. Now suppose the Colombian government decides to impose a tariff of $40 on each imported ton of soybeans. After the tariff, the price Colombian consumers pay for a ton of soybeans iss ], and Colombia will import tons of soybeans. Show the effects of the $40 tariff on the following graph. 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.
Homework (Ch 09) Show the effects of the $40 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green polnts (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. 680 Domestic Demand Domestic Supply 640 600 Word Price Plus Tarif 560 520 PRICE (Dolars perton) 480 440 PS P 400 300 Government Revenue 320 280 120 935 OWL OLIANTITY
Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) Consumer Surplus Producer Surplus Government Revenue 0 Based on your analysis, as a result of the tariff, Colombia's consumer surplus by S ], and the government collects S by S producer surplus in revenue. Therefore, the net welfare effect is a
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