Welfare effects of a tariff in a small country ppose Bolivia is open to free trade in the world market for wheat. Because of Bolivia's small size, the demand for and supply of wheat in Bolivia do t affect the world price. The following graph shows the domestic wheat market in Bolivia. The world price of wheat is Pw = $250 per ton. the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the e-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). Domestic Supply 460 Domestic Demand 430 CS 400 370 340 PS 310 280 250 220 190 160 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Tons of wheat) Bolivia allows international trade in the market for wheat, it will import tons of wheat. w suppose the Bolivian government decides to impose a tariff of $30 on each imported ton of wheat. After the tariff, the price Bollvian consumers y for a ton of wheat is $ ], and Bolivia will import tons of wheat. ow the effects of the $30 tariff on the following graph.
Welfare effects of a tariff in a small country ppose Bolivia is open to free trade in the world market for wheat. Because of Bolivia's small size, the demand for and supply of wheat in Bolivia do t affect the world price. The following graph shows the domestic wheat market in Bolivia. The world price of wheat is Pw = $250 per ton. the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the e-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). Domestic Supply 460 Domestic Demand 430 CS 400 370 340 PS 310 280 250 220 190 160 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Tons of wheat) Bolivia allows international trade in the market for wheat, it will import tons of wheat. w suppose the Bolivian government decides to impose a tariff of $30 on each imported ton of wheat. After the tariff, the price Bollvian consumers y for a ton of wheat is $ ], and Bolivia will import tons of wheat. ow the effects of the $30 tariff on the following graph.
Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 8PA
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Transcribed Image Text:3. Welfare effects of a tariff in a small country
Suppose Bolivia is open to free trade in the world market for wheat. Because of Bolivia's small size, the demand for and supply of wheat in Bolivia do
not affect the world price. The following graph shows the domestic wheat market in Bolivia. The world price of wheat is Pw = $250 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).
Domestic Supply
460
Domestic Demand
430
cs
400
370
340
PS
310
280
250
220
190
160
0 25
50
75
100
125 150 175
200
225
250
QUANTITY (Tons of wheat)
If Bolivia allows international trade in the market for wheat, it will import
tons of wheat.
Now suppose the Bolivian government decides to impose a tariff of $30 on each imported ton of wheat. After the tariff, the price Bollvian consumers
pay for a ton of wheat is $
, and Bolivia will import
tons of wheat.
Show the effects of the $30 tariff on the following graph.
PRICE (Dollars per ton)
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