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3. Welfare effects of a tariff in a small country Suppose Zambia is open to free trade in the world market for oranges. Because of Zambia's small size, the demand for and supply of oranges in Zambia do not affect the world price. The following graph shows the domestic oranges market in Zambia. 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 (AS) 1280 Domestic Demand Domestic Supply 1220 1150 CS 1100 1040 PS PRICE (Dollars per ton) 980 920 Boo 745 GO 0 12 TH 21 24 QUANTITY(Thousands of tons of cranges
Aplia Homework: International Trade Q Search this 740 V. 60 0 3 a 9 12 15 1 21 24 27 QUANTITY (Thousands of tons of orange) 30 if Zambia allows international trade in the market for oranges, it will import tons of oranges. Now suppose the Zambian government decides to impose a tariff of $120 on each imported ton of oranges. After the tariff, the price Zambian consumers pay for a ton of oranges is 5 J. and Zambia 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 triangle (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the producer surplus with the tari. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (dash symbols) to shade the areas representing the net loss or deadweight loss (DWL) caused by the tariff Domestic DAN
(square symbols) to shade the area representing government revenue received from the tariff and the tan triangles (das representing the net loss or deadweight loss (DWL) caused by the tariff. ? 1280 Domestic Demand Domestic Supply 1220 1160 World Price Plus Tariff 1100 x 1040 CS PRICE (Dollars per ton) 980 920 PS 880 PW 800 Government Revenue 740 680 0 3 9 18 30 DWL 6 12 15 21 24 27 QUANTITY (Thousands of tons of oranges)
B00 w 740 Government Revenue 4 630 3 12 15 19 24 QUANTITY (Thousands of tons of oranges) 21 27 30 OWL Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) Consumer Surplus Producer Surplus Government Revenue 0 Based on your analysis, as a result of the tariff, Zambia's consumer surplus by s and the government collects $ by producer surplus in revenue. Therefore, the net welfare effect is a of Grade it Now Save & Continue Ce without