Suppose Guatemala is open to free trade in the world market for maize. Since Guatemala is...

 

  

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Suppose Guatemala is open to free trade in the world market for maize. Since Guatemala is small relative to the international market, the demand for and supply of maize in Guatemala have no impact on the world price. The following graph shows the domestic market for maize in Guatemala. The world price of a ton of maize is Pw = $800. 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). PRICE (Dollars per ton) 1280 1220 1160 1100 1040 980 920 860 800 740 680 0 Domestic Demand 25 50 Domestic Supply 75 100 125 150 175 QUANTITY (Tons of maize) Pw 200 225 250 CS PS Because Guatemala participates in international trade in the market for maize, it will import Now suppose the Guatemalan government decides to impose a tariff of $60 on each imported ton of maize. Under the tariff, the price Guatemalan consumers pay for a ton of maize becomes $ and Guatemala will import tons of maize. Use the following graph to show the effects of the $60 tariff. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (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 points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. PRICE (Dollars per ton) 1280 Domestic Demand X 1220 1160 1100 1040 980 920 860 800 740 680 0 25 I 50 75 Domestic Supply QUANTITY (Tons of maize) P W 100 125 150 175 200 225 250 World Price Plus Tariff CS PS tons of maize. Government Revenue DWL Complete the following table to summarize your results from the previous two graphs. With a Tariff (Dollars) Consumer Surplus Producer Surplus Government Revenue With Free Trade (Dollars) of $ 0 Based on your analysis, as a result of the tariff, Guatemala's consumer surplus by $ and the government collects $ by $ producer surplus in revenue. Therefore, the net welfare effect is a I Suppose Guatemala is open to free trade in the world market for maize. Since Guatemala is small relative to the international market, the demand for and supply of maize in Guatemala have no impact on the world price. The following graph shows the domestic market for maize in Guatemala. The world price of a ton of maize is Pw = $800. 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). PRICE (Dollars per ton) 1280 1220 1160 1100 1040 980 920 860 800 740 680 0 Domestic Demand 25 50 Domestic Supply 75 100 125 150 175 QUANTITY (Tons of maize) Pw 200 225 250 CS PS Because Guatemala participates in international trade in the market for maize, it will import Now suppose the Guatemalan government decides to impose a tariff of $60 on each imported ton of maize. Under the tariff, the price Guatemalan consumers pay for a ton of maize becomes $ and Guatemala will import tons of maize. Use the following graph to show the effects of the $60 tariff. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (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 points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. PRICE (Dollars per ton) 1280 Domestic Demand X 1220 1160 1100 1040 980 920 860 800 740 680 0 25 I 50 75 Domestic Supply QUANTITY (Tons of maize) P W 100 125 150 175 200 225 250 World Price Plus Tariff CS PS tons of maize. Government Revenue DWL Complete the following table to summarize your results from the previous two graphs. With a Tariff (Dollars) Consumer Surplus Producer Surplus Government Revenue With Free Trade (Dollars) of $ 0 Based on your analysis, as a result of the tariff, Guatemala's consumer surplus by $ and the government collects $ by $ producer surplus in revenue. Therefore, the net welfare effect is a I