Question

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.

Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph.

Because this country exports steel, the world price is represented byP2" role="presentation" style="display: inline; font-weight: normal; line-height: normal; text-align: left; word-spacing: normal; overflow-wrap: normal; float: none; direction: ltr; max-width: none; max-height: none; min-width: 0px; min-height: 0px; border: 0px; padding: 0px; margin: 0px; position: relative;">P .

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 not sell any steel to domestic consumers. TRUE OR FALSE

Under the export subsidy, consumer surplus is $___ and producer surplus is $___. Government revenue   by $____. As a result, total surplus  .

Answer 1

In the given diagram given, since the country is exporting steel, it means that the supply of steel is more than the demand in the country. This is possible when the world prices are more than the equilibrium level of the prices or the home price. In addition to that, this is possible when the world price of $60, where the producer  is producing 500 tones of steel

$onr=ee.png$