A small country has a straight-line, upward-sloping domestic supply curve and a straight-line, downward-sloping domestic demand curve

Question:

A small country has a straight-line, upward-sloping domestic supply curve and a straight-line, downward-sloping domestic demand curve for one of its key export products. The world price for this product is \($150\) per ton. The country currently has an export tax of \($10\) per unit, and it exports 10 million tons per year.

The country’s government is considering reducing its export tax to \($5\) per ton , and it asks you to determine if this will reduce by half the inefficiency caused by the export tax. Use a graph to conduct your analysis and provide your response.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  answer-question
Question Posted: