Question

Aplia Homework: International Trade 3. Welfare effects of a tariff in a small country Suppose Zambia is open to free trade in the world market for soybeans. Because of Zambia's small size, the demand for and supply of soybeans in Zambia do not affect the world price. The following graph shows the domestic soybeans market in Zambia. 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). 1300 Domestic Demand Domestic Supply 1200 1100 CS 1000 000 PS PRICE (Dallars perton) 300 700 000 450 300 12 10 20 24 28 32 30 QUANTITY (Thousands of tons of soybeans) If Zambia allows international trade in the market for soybeans, it will import tons of soybeans

Answer 1

13002A with Without 1300, A CS World. cuoo +200- PS c uoo =book price All Reuernuye owl plus taria Pw @crows) D 40o 300 4 28 36 0 12 300 O 4 Pw -)PS Oc1000s) 3G Import 36,000 -4,000 - 32,000 with tariff $600 and import 28,000 - 12,000 T16,000 tons consumers & pay free bade Tarift area ABC= £ x 6C X AC Š x 36,000 x C1300-4002 18,000 x 900 area ABC = £x BC X AC Ż X28,000 * (1300-600 ) = 14,000 x 700 [16, 200,000 =9,800,000 PS area CED £ x CD X CE = {x4,000 XC 400 - 300 ) T 200,000 7 ona CED = 호 CD X CE * (2,000 X (Goo - 300 ) = 6,000 X 300 1,800, 00 01 £ = 200 X 100 Revenue 0 Tariff x imposts = 200 x 16,000 T 3,200,000 7 es decreases by 16,200,000 9,800,000 (6) 400,000 1,600,000 by to PS increase 1,800,000 200,000 Gour collects $ 3,200,000 Met effect is I noss CS_sdansaobooth CamScanner 1,600,000 a 6,400,000 3,200,000 of