Question

 4. Tariffs

 Suppose Bangladesh is open to free trade in the world market for oranges. Because of Bangladesh's small size, the demand for and supply of oranges in Bangladesh do not affect the world price. The following graph shows the domestic oranges market in Bangladesh. The world price of oranges is Pw=$800 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).

 If Bangladesh allows international trade in the market for oranges, it will import _______  tons of oranges.

 Now suppose the Bangladeshi government decides to impose a tariff of $50 on each imported ton of oranges. After the tariff, the price Bangladeshi consumers pay for a ton of oranges is _______  , and Bangladesh will import _______  tons of oranges.

 Show the effects of the $50 tariff on the following graph.

 Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green triangle (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 triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff.

 Complete the following table to summarize your results from the previous two graphs.

 Based on your analysis, as a result of the tariff, Bangladesh's consumer surplus _______  by _______ ,  , producer surplus s _______  by _______ , and the government collects _______  in revenue. Therefore, the net welfare effect is a _______ of _______ .

Answer 1

At the current world market price of $ 800 the domestic supply is 9,000 tons of oranges and domestic demand is 21,000 tons of oranges.

Import at world price = 12,000 tons of oranges

I can't access the interactive tool so I have used drawing to show the CS and PS. Refer the picture below

When the government imposes a tariff of $ 50 then new price is $ 850 per ton. The quantity imported will be equal 6,000 tons.

Price = $ 850

Quantity imported = 6,000 tons

Refer the attached picture below

	Under free trade($)	Under a Tariff
Consumer Surplus	3,675,000	2,700,000
Producer Surplus	675,000	1,200,000
Government Revenue	0	300,00

Consumer surplus decreases from $ 3675000 to $ 2,700,000

CS decreases by = $ 975,000

Producer surplus increases from $675,000 to $ 1,200,000 by $ 525,00

PS increases by $ 525,000.

The governent revenue = $ 300,000

Net welfare effect is a Dead weight Loss will increase and DWL is equal to =2* 0.5*(850-800) *3000 =\$ 150,000

DWl = $ 150,000

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