Suppose Zambia is open to free trade in the world market for oranges. Because of Zambia's small size, the demand for and supply of oranges in Zambia do not affect the world price. The following graph shows the domestic oranges market in Zambia. The world price of oranges is Pw=$80 ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is a free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). PRICE (Dollars perton) 1280 Domestic Demand Domestic Supply 1220 1160 1100 1040 980 920 860 800 740 680 + 0 36 P W 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of oranges) CS 3 PS If Zambia allows international trade in the market for oranges, it will import tons of oranges. Now suppose the Zambian government decides to impose a tariff of $120 on each imported ton of oranges. After the tariff, the price Zambian consumers pay for a ton of oranges is S and Zambia will import Show the effects of the $120 tariff on the following graph. tons of oranges.
Suppose Zambia is open to free trade in the world market for oranges. Because of Zambia's small size, the demand for and supply of oranges in Zambia do not affect the world price. The following graph shows the domestic oranges market in Zambia. The world price of oranges is Pw=$80 ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is a free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). PRICE (Dollars perton) 1280 Domestic Demand Domestic Supply 1220 1160 1100 1040 980 920 860 800 740 680 + 0 36 P W 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons of oranges) CS 3 PS If Zambia allows international trade in the market for oranges, it will import tons of oranges. Now suppose the Zambian government decides to impose a tariff of $120 on each imported ton of oranges. After the tariff, the price Zambian consumers pay for a ton of oranges is S and Zambia will import Show the effects of the $120 tariff on the following graph. tons of oranges.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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