Question: US and Canada are two large countries in a cotton market. Assume that demand and supply curves are linear in both countries. With free trade

US and Canada are two large countries in a cotton market. Assume that demand and supply curves are linear in both countries. With free trade the US exports 50 bales of cotton to Canada at a price of $400/bale. Under pressure from cotton farmers, US introduces an export subsidy of $80/bale. As a result, exports rise by 20 bales and the world price of cotton falls to $360/bale.

(a) What impact does the export subsidy have on the price of cotton in the U.S. market?

(b) What is the cost of the export subsidy to the U.S. government?

(d) How large is the overall gain or loss for the US economy from the subsidy?

(e) How large is the overall gain or loss for Canada? (f) How large is the gain or loss for the world?

3 Export Subsidies for a Large Country US and Canada are two large countries in a cotton market. Assume that demand and supply curves are linear in both countries. With free trade the US exports 50 bales of cotton to Canada at a price of $400/bale. Under pressure from cotton farmers, US introduces an export subsidy of $80/bale. As a result, exports rise by 20 bales and the world price of cotton falls to $360/bale. (a) What impact does the export subsidy have on the price of cotton in the U.S. market? (b What is the cost of the export subsidy to the U.S. government? ) (c) What is the total deadweight loss caused by the subsidy in the US? (d) How large is the overall gain or loss for the US economy from the subsidy? ) (e How large is the overall gain or loss for Canada? (f) How large is the gain or loss for the world

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!

Forensic Accounting Case Study Series - sponsored by Deloitte FAS LLP and the Deloitte Foundation Asset Misappropriation Fraud - Darpa Company Case No. 2-6 Company Overview: Darpa Company ("Darpa" or...

Export Subsidies for a Large Country US and Canada are two large countries in a cotton market. Assume that demand and supply curves are linear in both countries. With free trade the US exports 50...

Suppose US and China are two large countries in a steel market. Assume the U.S. import demand and China's export supply curves are linear. With free trade the US imports 30 tonnes of steel from China...

Question 2 (20 marks) 2.1 Suppose that Home is a small exporter of wheat. At the world price of $50 per ton, Home exports 40 tons. Now suppose that the Home government decides to support its domestic...

Can you please help me solve these 10 Econ questions? I also attached the chapter just in case. Thanks so much!! :) MARKETS AND HOW THEY WORK 177 9.0 CHAPTER 9 LEARNING GOALS After reading this...

Chapter 11: "Government Intervention in Agriculture" Textbook Questions: Using a graph, show how an inelastic demand affects farm revenue (prices) when there is a "bumper crop" (page 203). Explain...

These are the questions. Thank you for all your help. Questions 27 and 28 are connected. 27. These questions were motivated by the articles about the U.S. government's raisin program designed to...

Help me get the correct answer... explanation on every quiz needed... EXERCISE Question 1 (Procyclicality and Countercyclicality) Identify the following variables as being procyclical or...

1. How has CSPub changed its business model? 2. Identify the positive and negative effects of the change in the business model on the foreign exchange exposure of the firm? 3. Identify and quantify...

At what quoted annual interest rate must $190,000 be invested so that it will grow to be $850,000 in 15 years if interest is compounded monthly?

Broken DNA can be repaired by DNA ligase (single-strand breaks) or nonhomologous end-joining (double-strand breaks). Explain why the cell's set of repair enzymes also includes tyrosyl-DNA...

Current Attempt in Progress When creating a budget for a university, the budget process is the same as any other entity with budgets for revenues and expenditures. the budget process begins with...

A market analyst wants to know if the new website he designed is showing increased page views per visit. A customer is randomly sent to one of two different websites, offering the same products, but...

A freshly brewed shot of espresso has three distinct components: the heart, body, and crema. The separation of these three components typically lasts only 10 to 20 seconds. To use the espresso shot...

The following information pertains to James Hardwares ending inventory for the current year: ending inventory for"> Required a. Determine the value of the ending inventory using the...

Compute the price of a 5.6 percent coupon bond with 10 years left to maturity and a market interest rate of 7.0 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?

What is the present value of a $900 annuity payment over five years if interest rates are 8 percent?

Question 7 (1 point) A risk identification team should include input from which of the following individuals or groups Customers, Project Team, Competitors and schedulers Subcontractors, Accountants....

The permanence rule: We tend to have more confidence in information that is of a more permanent nature than information that is of a temporary nature.

The official stamp rule: We tend to have more confidence in information that is exempt from the Freedom of Information Act than if the same information was made readily available.

4. Based on a message you have recently received, analyse it in relation to its three components: a. the information component, b. its relational component and c. its hierarchical component.