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. Suppose Jordan is open to free trade in the world market for...
Image transcription text
Suppose Jordan is open to free trade in the world market for oranges. Because of Jordan's small size, the demand for and supply of oranges in Jordan do not affect the world price. The following graph shows the domestic oranges market in Jordan. The world price of oranges is PW = $800 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). 1280 - Domestic Demand Domestic Supply
1220 — 1150 — CS
1100 — $0
1040 — PS
980 — 920 — PRICE (Dollars perton) 860 — euo -—lflh 740 — 680 1—l—l—l—l—l—l—l—l—l—i
0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Tons of oranges)
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If Jordan allows international trade in the market for oranges, it will import tons of oranges. Now suppose the Jordanian government decides to impose a tariff of $120 on each imported ton of oranges. After the tariff, the price Jordanian consumers pay for a ton of oranges is , and Jordan will import tons of oranges. Show the effects of the $120 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. Last/y, 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 (D WL) caused by the tariff.
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1280
Domestic Demand
Domestic Supply
+
1220
World Price Plus Tariff
1160
1100
1040
CS
980
PRICE (Dollars per ton)
920
PS
860
PW
800
Government Revenue
740
680
0
25
50
75 100 125 150 175 200 225 250
DWL
QUANTITY (Tons of oranges)
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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 0
Based on your analysis, as a result of the tariff, Jordan's consumer surplus V by , producer surplus V by , and the government collects in revenue. Therefore, the net welfare effect is a V of
Answer & Explanation
Solved by verified expertAnswered by SargentNeutron15740 on coursehero.com
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