1. The world price of rice is currently $450 per metric ton. Assume that South Korea is currently charging a $100 per metric ton tariff on imported rice. Assume that currently South Korean rice consumption is three million metric tons, South Korean rice production is 2.9 million metric tons, and South Korean rice imports are 100,000 metric tons. Economic analysts predict that if South Korea eliminates the $100 per metric ton tariff, then South Korean consumption of rice will rise to four million metric tons, and South Korean rice production will fall to two million metric tons. Analysts also believe that if South Korea removes the tariff, that will cause the world price of rice to rise from $450 per metric ton to $475 per metric ton. Use this information to answer the first seven questions. First, what is the current price of rice (per metric ton) in South Korea?

2. What would change in producer surplus be in South Korea if it eliminated the tariff? Again, use a minus sign if it goes down. Also, express the answer in millions of dollars.

3. What is the change in tariff revenue? Express in millions of dollars and use a negative if it goes down.

4. What is the net effect on welfare in South Korea if it should remove the tariff? Express in millions of dollars and use a negative sign if it goes down.

5. Based the information in this problem, do analysts believe that South Korea is a "small country" or "large country" insofar as its relationship to the world rice market.

• Large
• Small
• Uncertain

Answer rating: 100% (QA)

1 Current price of rice in South Korea 550 45010055... View the full answer