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 triangie (diamond symbols) to show the producer surplus with the tarift. Lastly, use the orange quadriateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangie symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. 710 Domestic Demand Domestic Supply 670 World Price Plus Tariff 630 590 550 510 470 430 390 Govermment Revenue 350 310 O 15 30 45 e0 75 90 105 120 135 150 DWL QUANTITY (Tons of maize) Compiete the following table to summarize your resuits from the previous two graphs. Under Free Trade Under a Tariff (Dollars) (Dollars) Consumer Surplus Producer Surplus Government Revenue producer surplus in revenue. Therefore, the net welfare effect is a Based on your analysis, as a result of the tariff, Bangladesh's consumer surplus by by S , and the government collects S of PRICE (Dollars per ton)
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 triangie (diamond symbols) to show the producer surplus with the tarift. Lastly, use the orange quadriateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangie symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. 710 Domestic Demand Domestic Supply 670 World Price Plus Tariff 630 590 550 510 470 430 390 Govermment Revenue 350 310 O 15 30 45 e0 75 90 105 120 135 150 DWL QUANTITY (Tons of maize) Compiete the following table to summarize your resuits from the previous two graphs. Under Free Trade Under a Tariff (Dollars) (Dollars) Consumer Surplus Producer Surplus Government Revenue producer surplus in revenue. Therefore, the net welfare effect is a Based on your analysis, as a result of the tariff, Bangladesh's consumer surplus by by S , and the government collects S of PRICE (Dollars per ton)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:**Effects of a $40 Tariff on Maize**
**Description:**
The graph illustrates the impact of a $40 tariff on the maize market, showcasing changes in price, quantity, and welfare effects.
**Graph Details:**
- **Axes:**
- X-axis: Quantity (Tons of maize)
- Y-axis: Price (Dollars per ton)
- **Lines:**
- **Domestic Demand**: A downward-sloping blue line.
- **Domestic Supply**: An upward-sloping orange line.
- **World Price Plus Tariff (Pw + Tariff):**
- Represented by the black plus symbol line.
**Areas and Symbols:**
1. **Consumer Surplus (CS)**:
- Shaded with green triangles.
- Represents the area where consumers benefit from lower prices before the tariff.
2. **Producer Surplus (PS)**:
- Shaded with purple diamonds.
- Represents the increased benefit to producers from higher prices due to the tariff.
3. **Government Revenue**:
- Shaded with orange quadrilateral (square symbols).
- Represents the revenue collected from the tariff.
4. **Deadweight Loss (DWL)**:
- Shaded with tan rectangles.
- Shows the loss in total welfare due to the tariff, indicating inefficiencies.
**Table for Summary:**
- **Under Free Trade vs. Under a Tariff:**
| | Under Free Trade (Dollars) | Under a Tariff (Dollars) |
|-----------------------------------|---------------------------|---------------------------|
| Consumer Surplus | | |
| Producer Surplus | | |
| Government Revenue | 0 | |
**Analysis:**
Based on the graph:
- Bangladesh’s consumer surplus decreases by $___.
- Producer surplus increases by $___.
- Government collects $___ in tariff revenue.
- The net welfare effect is a decrease of $___ due to the deadweight loss.
This information helps analyze the redistribution of welfare between consumers, producers, and the government due to the tariff, and highlights the inefficiencies introduced in the market.
Transcribed Image Text:**Welfare Effects of a Tariff in a Small Country**
Suppose Bangladesh is open to free trade in the world market for maize. Because of Bangladesh's small size, the demand for and supply of maize in Bangladesh do not affect the world price. The following graph shows the domestic maize market in Bangladesh. The world price of maize is \( P_w = \$350 \) 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).
**Graph Explanation:**
- The graph displays a supply and demand model for the domestic maize market in Bangladesh.
- The y-axis represents the price in dollars per ton, ranging from 310 to 710.
- The x-axis represents the quantity in tons of maize, ranging from 0 to 150.
- The blue line labeled 'Domestic Demand' slopes downward from left to right.
- The orange line labeled 'Domestic Supply' slopes upward from left to right.
- \( P_w = \$350 \) is the horizontal black line indicating the world price.
**Key Points:**
- Green triangle: Indicates the consumer surplus (CS) at free-trade equilibrium.
- Purple triangle: Indicates the producer surplus (PS) at free-trade equilibrium.
**Scenario:**
If Bangladesh allows international trade in the market for maize, it will import _______ tons of maize.
Now suppose the Bangladeshi government decides to impose a tariff of $40 on each imported ton of maize. After the tariff, the price Bangladeshi consumers pay for a ton of maize is $ _______, and Bangladesh will import _______ tons of maize.
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