Question

Suppose Sudan is a "small country" In the world market for corn. The following graph shows the demand and supply curves for the domestic market for com. The world price is $125 per ton of corn. Throughout the question, assume that changes in trade polkdles in other countries do not significantly affect the world market for corn and that there are no transportation or transaction costs assoclated with international trade in corn. Also assume that domestic suppliers will satisty domestic demand as much as possible before any exporting or Importing takes place. tons of com. On the following graph, use the Now suppose Sudan allows free trade in the market for com. Sudan will Import green triangle (triangle symbols) to shade the area representing consumer surplus (CS) in (dlamond symbols) to shade the area representing producer surplus (PS) in free-trade equllibrium. e equillbrium. Then use the purple triangle PRICE IDollars per tonl 425 160 200 120 40 80 QUANTITY IThousands of tons of cornl Suppose the Sudanese govemment decldes to Impose a tarlff of $75 on each ton of com. With the tariff, the domestic price of a ton of corn will be and Sudan will Import tons of con. Show the effects of the $75 tartf on the following graph. In particular, use the green triangle (trlangle symbols) to show the consumer surplus with the tarff, the purple triangle (dlamond symbols) to show the producer surplus with the tariff, and the red quadrilateral (cross symbols) to shade the area representing government revenue recelved from the tariff. Finally, use the tan triangle (dash symbols) to shade the areas representing deadweight loss (DL) caused by the tarlff. (Hint: Hover your mouse over any area you shaded to display its value In thousands of dollars.) PRICE IDollars per tonl 725 Demand 650 575 350 0 40 12160 00 Summarize your results from the two graphs by selecting the appropriate values in the following table With Tariff With Free Trade Consumer Surplus 125 0 40 80 120 160 200 Summarize your results from the two graphs by selecting the appropriate values in the following table: With Free Trade With Tariff Consumer Surplus Producer Surplus Government Revenue byproducer surplus by of Tool 1.55

Answer 1

Rott 125 75 25 = x675 x180 = PS 2 Cs Scanned Tsha CamScanner

with TariF 2 2 Cs Scanned with CamScanner

with Taiff C. S Revenue o A5 a esult )2750 . PS OveTnment ca anel hue at uw ST tall ot $ 150t wenoasa b 2250 /.tu e Gover s Scanned with CamScanner