Question: Having trouble figuring this out. Please help with explanation. Thank you! 3. Welfare effects of a tariff in a small country Suppose Bolivia is open

 Having trouble figuring this out. Please help with explanation. Thank you!3. Welfare effects of a tariff in a small country Suppose Bolivia

Having trouble figuring this out. Please help with explanation. Thank you!

is open to free trade in the world market for wheat. Becauseof Bolivia's small size, the demand for and supply of wheat inBolivia do not affect the world price. The following graph shows thedomestic wheat market in Bolivia. The world price of wheat is Pw

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). 460 Domestic Demand Domestic Supply 430 CS 400 370 PS PRICE (Dollars per ton) 340 310 280 P. 250 220 190 160 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Tons of wheat)400 370 340 PS PRICE (Dollars per ton) 310 280 P 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 Bolivian 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. 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.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. (?) 460 Domestic Demand Domestic Supply + 430 400 World Price Plus Tariff 370 340 CS PRICE (Dollars per ton) 310 280 PS P W 250 220 Government Revenue 190 160 25 50 75 100 125 150 175 200 225 250 DWL QUANTITY (Tons of wheat)PRICE (Dollar 280 PS P W 250 220 Government Revenue 190 160 0 25 50 75 100 125 150 175 200 225 250 DWL QUANTITY (Tons of wheat) Complete the following table to summarize your results from the previous two graphs. Under Free Trade Under a Tariff (Dollars) (Dollars) Consumer Surplus Producer Surplus Government Revenue Based on your analysis, as a result of the tariff, Bolivia's consumer surplus by $ , producer surplus by $ and the government collects $ in revenue. Therefore, the net welfare effect is a of $

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!