Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 35, Problem 9E
To determine
To explain:
The ways in which the effects of international trade on the domestic market of orangeschange if the price of oranges rises above the domestic
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The graph above is the U.S. market for some imported good. Supply is a flat curve. The U.S. can import the Chinese good for $40 and the Mexican good for $48. Assume the U.S. imposes $10 tariffs on each unit of the imported good. What will be the quantity imported? From which country? How your answer will change if the U.S. keep the $10 tariffs but join a trade bloc with Mexico? Will the country’s wellbeing increase or decrease? By how much (hint find the change in consumer surplus and the change in government revenue)? Explain your answers.
Suppose that the world price of bananas is 18 U.S. cents a pound and that when Australia does not trade bananas internationally, their equilibrium price in Australia is 12 U.S. cents a pound. If Australia opens up to international trade, does it export or import bananas? Explain how the price of bananas in Australia changes. How does the quantity of bananas consume in Australia change? How does the quantity of bananas grown in Australia change?
The figure below depicts the domestic market for a particular good. The curve labeled S represents domestic supply. The curve
labeled D represents domestic demand. The line labeled Pw is the world price of the good. If the figure does not show, you may
view it by clicking the following link: Market with Trade PDF.pdf.
Price
50
45
40
35
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25
20
15
10
5
0
0
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The quantity of domestic consumption is
Assume that international trade HAS been established.
The quantity of domestic production is
The quantity of imports is
The new value of consumer surplus is $
70
The new value of producer surplus is $
The government revenue from the tariff is $
80
units.
90 100
Quantity
units.
110
units.
Assume now that the home country has imposed a $10 tariff on imports of the good.
120
U₂₁
S
Pw
O
130 140 150 160 170 180 190 200
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- I asked this question in an earlier assignment; It was a bonus question about price floors and tariffs. I’m curious if your answers have changed. Would tariffs on imported wine be a price floor?arrow_forwardSuppose Zambia is open to free trade in the world market for soybeans. Since Zambia is small relative to the international market, the demand for and supply of soybeans in Zambia have no impact on the world price. The following graph shows the domestic market for soybeans in Zambia. The world price of a ton of soybeans is PW = $250. Use the following graph to show the effects of the $ 10 tariff. 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.arrow_forwardThe following graph shows the market for wheat in the European Union (EU). The world price of wheat is $4.00 per bushel, so Sworld represents the world supply assuming that the EU cannot affect the world price of wheat. To support the agricultural sector, the EU guarantees a certain price for the farmers by imposing a variable levy of $4.00 per bushel to limit the import of wheat. On the graph, use the purple line (diamond symbol) to show the support price the farmers receive due to the variable $4.00 levy. Note: Select and drag the line segment from the palette to the graph. Then select a point on the line segment and drag it to its desired position. PRICE (Dollars per bushel) 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0 DEU SEU SWorld 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 WHEAT (Bushels) Before the levy After the levy Support Price SWorld New Fill in the following table by entering the quantities for production, consumption, and imports of wheat in the EU…arrow_forward
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