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. ecause 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

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Chapter1: Making Economics Decisions
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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.

ecause 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 (increases or Decreases)
 
. As a result, total surplus    .(remians Unchanged, Increases or Decreases)
Demand
Supply
100
90
Triangle
80
P2
70
60
Polygon
50
40
30
20
10
0 100 200 300 400 500 600
700 800 900 1000
Quantity of Steel (Tons)
Price of Steel (Dollars per ton)
Transcribed Image Text:Demand Supply 100 90 Triangle 80 P2 70 60 Polygon 50 40 30 20 10 0 100 200 300 400 500 600 700 800 900 1000 Quantity of Steel (Tons) Price of Steel (Dollars per ton)
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